According to India Ratings and Research (Ind-Ra), there are certain unknown variables that needs to be addressed before successful implementation of 5G. These include high price of 5G airwaves in India, willingness of users to migrate from 2G or 4G to 5G and the telco’s capital expenditure to deploy full-scale commercial 5G network.
Further, it added that the reserve prices for 5G auctions are too high. Although the 5G auctions are not yet announced, the reserve price could yield a return on capital employed of only 7 per cent. With the current average revenue per user (ARPU) ranging between Rs 121-166 per user per month, and more than 350 million subscribers still using voice only or 2G services with significantly lower ARPU, the viability of 5G for the telcos remains to be seen. Although the financial credit profile of Reliance Jio (‘IND AAA’/Stable), Bharti Airtel (debt rated at ‘IND A1+’) is comfortable, the extent of capex these telcos will incur on 5G over the coming years will also be a key monitorable, the report added.
The move will also help determine the viability of this new technology across the nation, since the telcos are required to conduct trials not only in the urban areas but also in the rural and semi urban areas, Ind-Ra said.
