India has been one of the fastest adopters of digital technology, backed by robust digital infrastructure. The Covid-19 pandemic accelerated the pace of digital transformation in India, fast-tracking digital consumption by two to three years. There has been a 36 per cent spike in data traffic, with a 1.2 times rise in data traffic per smartphone per month during the pandemic. Moreover, rural data consumption has increased 400 per cent via BharatNet fibre.
India on the cusp of a 5G revolution
5G marks an inflection point for India’s telecommunications sector. The total spectrum outlay in the 5G spectrum auction, which concluded in August 2022, was a whopping Rs 1.5 trillion, the highest ever. Of this, 90 per cent was spent on 5G bands, including 700 MHz, 3300 MHz and 26000 MHz. 5G was commercially launched in India on October 1, 2022. The number of 5G subscribers is expected to reach 500 million by 2027, accounting for 40 per cent of the total connections. Further, the incremental business-to-business revenue for telcos is expected to reach $17 billion by 2030. All of this will necessitate significant investment in the digital infrastructure of the country.
The country has the potential to completely transform into a digital society by 2025. India is set to witness a 2.7 times rise in data traffic per smartphone per month, with 330 million subscribers riding the 5G wave and the digital talent pool to grow to 600,000, the largest in the world. Further, enterprise spend on business and technology will grow 1.4 times, while the e-commerce market and the digital healthcare market will grow at compound annual growth rates of 30 per cent and 27 per cent respectively.
Growth opportunities for digital infracos
Infrastructure companies are well positioned to assume bigger roles in the digital ecosystem as enablers of the entire system of connectivity. The new growth models and opportunity areas for digital infrastructure companies in the telecom domain include strengthening the core, which includes fibre deployment, small cells and Wi-Fi/ in-building solutions (IBS). They can also explore new adjacencies with high opportunity sizes such as data centres or edge data centres, smart cities, electric vehicle charging, power-as-a-service, and field maintenance, as well as those with relatively lower opportunity sizes such as advertising and warehousing.
Tower companies in India can unlock new growth opportunities by monetising existing assets and exploring business adjacencies. A significant focus area for companies is fibre deployment and microwave, with a massive revenue opportunity of Rs 200-320 billion and an estimated cumulative investment of Rs 590 billion-930 billion between 2022 and 2027. Another focus area is outdoor small cell deployment, with a revenue opportunity of Rs 60 billion-Rs 95 billion and a cumulative investment of Rs 195 billion-Rs 280 billion in the same period. Other focus areas include Wi-Fi/IBS, edge data centres and data centres, with revenue opportunities of Rs 18 billion-Rs 24 billion, Rs 16 billion-Rs 21 billion and Rs 10 billion-Rs 20 billion, respectively, between 2022 and 2027. The total investment required in the next five years for building macro towers, fibre networks, small cells, IBS and data centres to support 5G services in India will be around Rs 2.2 trillion.
Policy measures
The government has undertaken proactive policy measures to accelerate digital infrastructure roll-out in the country. For instance, the Gati Shakti National Master Plan embodies India’s infrastructure development vision. It is bridging the gap between macro planning and micro implementation while also enhancing the rate of implementation of projects. It supports the Make in India vision and integrates different modes of transport, thus increasing economic activities and creating large-scale employment. Meanwhile, the Gati Shakti Sanchar portal has brought together all central ministries and states/union territories under one platform. It is a single window for getting all right-of-way (RoW) clearances and faster approvals, enabling faster roll-out of 5G, tower fiberisation and broadband. It also facilitates centralised application tracking. With the portal, the average number of days required to clear RoW applications has decreased to a mere five days as of September 2022, compared to 429 days in 2019. In addition, the RoW Amendment Rules 2022 have abolished the requirement for approval from authorities for passive infrastructure deployment on private properties. The charges for using street furniture for deployment of small cells and optic fibre cable have also been rationalised.
Key recommendations
To accelerate digital infrastructure roll-out, further policy intervention is needed. Category 1 infrastructure providers should be allowed to share active infrastructure. This can facilitate cost sharing and reduce the capex burden of telcos. Moreover, incentivising digital infrastructure roll-out will make the sector more attractive. Utilising viability gap funding models such as the Universal Service Obligation Fund can be a mechanism for incentivisation.
With regard to RoW, several initiatives are already in place. Aligning state RoW rules with the centre and ground-level implementation is crucial. Further, ensuring electricity connections and 24×7 power availability at tower sites and street furniture at industrial tariffs must be prioritised. Last but not least, rationalising the property tax on mobile tower sites will bring uniformity across states and help reduce operational costs.
Based on a presentation by Swapnil Srivastava, Portfolio Leader, Consumer, HSW, TMT and Service Lines, and Global TMT Analyst Leader, EY, at tele.net’s conference on “Telecom Infrastructure in India”
