The emergence of 5G is set to accelerate digitalisation opportunities in India, by unlocking monumental economic and technological benefits. The uptake of these services has been phenomenal in the country. Around 50 million 5G customers were registered in India within the first six months of the launch of 5G services. Further, the cumulative 5G sm­a­rtph­one shipments reached 100 million by the second quarter of 2023. There was a significant increase in monthly data usage per smartphone from 26 GB in 2022 to 62 GB after the launch.

India’s 5G growth story

The pace of 5G deployment in India has been record-breaking and it is being hailed as the fastest in the world. Over 270,000 5G sites have been installed within the first nine months of the launch of 5G services. This means that one tower was installed per minute, which  allowed Indian telecom op­e­rators to reach their three-year 5G goals within the first six months.

The overall cost for 5G roll-out in In­dia has now reached $75 billion. Mean­while, different government policies, such as Gati Shakti, have paved the way for an accelerated digital infrastructure roll-out in the country. The download speed has also witnessed a massive overhaul with the 5G download speed being around 26.2 ti­mes higher than its 4G counterpart. With this, one can concur that India is set for growth in the 5G space.

Monetising fibre assets

The monetisation of existing and upcoming assets is considered one of the major gro­wth drivers for further escalating the de­mand for 5G networks in India. By fib­e­rising towers, introducing intercity fi­bre, using microwaves, and increasing the deployment of fibre-to-the-curb, as well as fibre op­erations and management, telcos will create a revenue opportunity of Rs 190 billion-Rs 285 billion by 2025-27. This is also the best way to monetise the country’s fi­bre assets to its highest potential. Even the deployment of outdoor small cells will pr­o­vide a revenue opportunity of Rs 70 billion-Rs 85 billion by 2025-27. India can al­so monetise edge data centres, which of­fer a revenue-generating potential of Rs 15 billion-Rs 29 billion by 2025-27. Similarly, building and operating more data centres and providing stronger Wi-Fi coverage will help in increasing revenue generating opportunities.

Augmenting OFC presents lucrative opportunity for towercos

Augmenting optical fibre cable (OFC) presents significant monetisation opportunities for tower companies. However, in order to achieve this, towercos need to fi­berise all their towers. Towercos that are deploying small cells as part of their 5G network expansion also need fibre backhaul. They are focusing on connecting end-to-end networks, in order to address the last-mile challenges. Meanwhile, there is an underlying focus on catering to the fibre-to-the-X market, as it represents the fibre requirements in commercial and residential markets.

NetCo business model

Adopting the NetCo business model can enable towercos to reduce cost and facilitate faster time-to-market. The four key value propositions that comprise the model are:

  • Revenue diversification: Under this mo­del, towercos can upsell to existing tenants, attract tenancies from operators planning to expand their coverage and become network partners to aspiring new entrants;
  • Economies of scope: The mo­del allows equipment to be shared across multiple telcos since they tend to follow similar spectrum strategies in the same geographies;
  • Flexible and scalable pricing: It has a pricing mechanism based on te­c­hnology (4G vs 5G) and frequency (1800 MHz vs 700 MHz), which is better aligned with changing network configurations.
  • Lower cost of capital: The model off­ers longer contracts (about 10-15 years) and higher switching costs that lead to predictable cash flows and enable access to cheaper capital.

Key recommendations

Going forward, a few key recommendations can be looked at for laying a strong foundation for the next digital frontier for the 5G era. These include enhancing the scope of infrastructure providers (IP-1s); legal enforcement of right-of-way rules; mitigating impediments in OFC deployment and infrastructure sharing; encouraging the involvement of discoms in small cell deployments; subsidising fibre deployment through viability gap funding; and securitisation of telecom infrastructure. These would help in easing the headwinds for overall digital infrastructure deployment in India.

Based on a presentation by Swapnil Srivastava, Global TMT Analyst Leader, EY