The year 2022 was a watershed year for India as telcos finally started rolling out 5G networks. India got on the 5G bandwagon in October 2022, and since then private telcos Bharti Airtel and Reliance Jio have been on a network expansion spree. While Jio extended its True 5G services to 225 cities, Airtel crossed the 1 million unique 5G user mark within a month of launching services. The two telcos also forged partnerships with telecom equipment vendors such as Ericsson, Nokia and Samsung to enable swift 5G roll-outs.
On the policy front, the settlement of the adjusted gross revenue (AGR) dues remained a top priority for operators. While Jio had refused to opt for the moratorium on AGR dues in October 2021, Airtel opted for a four-year moratorium on the repayment of around Rs 30 billion of AGR dues during 2022. The telco, however, abstained from opting for a conversion of interest on the deferred dues into equity for the government. Owing to its weak financial position, Vodafone Idea Limited (Vi) opted for converting its full amount of interest related to spectrum auction instalments and AGR dues into government equity. Following this, the government is all set to become the single largest shareholder in the telecom firm as it will now hold around 33 per cent of the total outstanding shares of the company, after conversion of the operator’s accrued interest liability (on deferred dues) into equity.
Another significant policy move was the launch of the draft Indian Telecommunication Bill, 2022. A key provision in the draft bill is the expansion of the definition of telecommunication services to include over-the-top (OTT) communication services. This addresses telcos’ long-standing demand for a level playing field with OTT players as this provision will subject OTT players to the same licensing conditions as telcos. Further, the draft bill clears uncertainties around spectrum allocation and facilitates faster right-of-way (RoW) approval processes. With the consultation process currently under way for the draft bill, it remains to be seen what provisions end up being a part of the final bill.
The country also witnessed its first-ever 5G spectrum auctions during the year. The auctions took place in July-August 2022, with the government garnering a record over Rs 1.5 trillion, the highest-ever spend on spectrum auctions in India. A total of 51,236 MHz of spectrum, or around 71 per cent of the total 72,098 MHz on offer, was sold in the auction. Post the auctions, the Department of Telecommunications (DoT) issued demand notices to all participants to make payments and then issued spectrum assignment letters to telcos just 17 days after the conclusion of the 5G spectrum auction, paving the way for the launch of 5G services in October 2022.
The year brought in a cause for cheer for the state-run Bharat Sanchar Nigam Limited (BSNL) with the Union cabinet approving the merger of Bharat Broadband Network Limited (BBNL) and BSNL. The merger is expected to help BSNL gain access to an additional 0.585 million km of optical fibre network laid across 0.19 million gram panchayats under the BharatNet programme. Additionally, the cabinet also approved a Rs 1.64 trillion revival package for BSNL to improve the quality of its services and de-stress its balance sheet. The package consists of cash support of Rs 439.64 billion and non-cash support worth Rs 1.2 trillion.
Reliance Jio too achieved a significant milestone by first taking a lead over Bharti Airtel to become the second-largest fixed line broadband provider in the country in February 2022 and then overtaking BSNL to become the largest fixed line service provider in August 2022. This was the first time since the inception of telecom services in the country that a private operator gained the numero uno position in the fixed line segment. While BSNL has provided fixed line services for 22 years, Jio surpassed it within three years of starting its fixed line services.
As we enter 2023, aggressive 5G expansion is expected to be on the cards for both Airtel and Jio. However, Vi will need to make significant efforts to strengthen its financial position and catch up with the other two telcos in terms of 5G roll-outs while BSNL will need to implement its 4G roll-out plans.
A look at the performance of telecom operators in 2022, and the key initiatives taken by them during the year…
Reliance Jio
The year 2022 proved to be a positive one for Reliance Jio with the operator making giant strides in the 5G domain. The telco grew its 5G network by leaps and bounds within three months of service roll-out.
During the 5G spectrum auctions held in August 2022, the telco emerged as the most aggressive bidder and acquired spectrum in the 700 MHz, 800 MHz, 1800 MHz, 3300 MHz and 26 GHz bands. Through the spectrum acquisition, Jio’s total owned spectrum footprint grew significantly to 26,772 MHz (uplink+downlink), the highest in the country.
Post the auctions and allotment of spectrum, Jio launched its True 5G services in four cities – Mumbai, Delhi, Kolkata and Varanasi. Since then, the telco has been on a massive expansion spree with its 5G services now available in 225 cities across the country.
In addition to pure-play 5G services, Jio launched its True 5G-powered Wi-Fi services. The operator also developed a
5G network slicing platform over its 5G network to enable network-slicing-as-a-service (NSaaS). Further, Jio enabled edge computing on its cloud-native 5G network at more than 50 facilities across India.
To offer connectivity support on smartphones, Jio partnered with various handset players including OnePlus, Samsung and Realme during the year. Handset players like Oppo, iPhone and Motorola also teamed up with the operator to release software updates for Jio’s 5G SA networks. Another notable feat in the handset domain remained Jio’s pact with Google to develop an ultra-affordable 5G smartphone.
Jio also entered India’s burgeoning satcom space as Jio Satellite Communications Limited, its satcom arm, obtained a letter of intent for global mobile personal communication (GMPCS) from DoT. Jio Platforms Limited and SES Luxembourg, a global satellite communications company, formed a joint venture (JV), Jio Space Technology Limited, to deliver broadband services in India through satellites.
In terms of infrastructure expansion, Jio installed five times more 5G base transceiver stations than Bharti Airtel as of November 2022. The telco also strengthened connectivity along the border areas and set up telecom towers in Mana village in Uttarakhand; expanded the reach of its 4G services in the Ladakh region to Spangmik village; and launched its mobile services on the Kedarnath trek route.
Additionally, Jio announced the multi-terabit India-Asia-Xpress undersea cable system connecting Hulhumale, Maldives, with major internet hubs in India and Singapore. Further, Reliance Industries Limited received approval from the Ministry of Environment, Forest and Climate Change to build the world’s largest submarine cable systems for high capacity and high speed internet connectivity from Mumbai to Europe and Asia.
Financially, the operator continued to report a strong performance. The company reported a consolidated net profit of Rs 46.38 billion for the quarter ended December 2022, a year-on-year increase of 28 per cent. Its revenue from operations rose nearly 19 per cent to Rs 229.98 billion compared to Rs 193.47 billion in the same quarter last year.
The telco completed the acquisition of Reliance Infratel Limited (RITL) through its subsidiary Reliance Projects and Property Management Services Limited. Post the deal, Jio acquired 178,000 route km and 43,540 mobile towers owned by RITL across the country. Further, the telco invested $15 million in Two Platforms, Inc. (TWO), a Silicon Valley-based deep tech start-up, for a 25 per cent equity stake on a fully diluted basis and $200 million (about Rs 15 billion) for a roughly 17 per cent stake in Google-backed consumer internet company Glance.
In the enterprise space, Asteria Aerospace, a subsidiary of Jio, launched its end-to-end drone operations platform – SkyDeck, which is a cloud-based software platform to deliver a drone-as-a-service solution for multiple industry verticals such as agriculture, surveying, industrial inspections, and surveillance and security.
In the 6G space, Jio Estonia and University of Oulu entered into an agreement to collaborate on the development of 6G technology.
Moving into 2023, the first target for the operator is to expand its 5G coverage across the entire country by December 2023. Further, Jio plans to launch Jio fixed wireless access device JioAirFiber to add to the growth of its home broadband business. Reportedly, Jio is also planning to launch an initial public offering and undertake a fundraising exercise of $1.5 billion (Rs 123 billion) via external commercial borrowings to fund its 5G capex. These initiatives will help strengthen Jio’s 5G ambitions as the race towards 5G intensifies.
Bharti Airtel
For Airtel, the year kick-started with Bharti Airtel and Hughes Communications India Private Limited forming a JV to provide satellite broadband services in India.
In terms of 5G trials, the operator tested and demonstrated the 5G readiness of its network, and held several use case demonstrations for retail and enterprise customers. In April 2022, Airtel conducted India’s first open radio access network (O-RAN)-based live 5G network validation in partnership with Mavenir. Further, the operator deployed India’s first private 5G network at the Bosch facility with the capability to manage multiple connected devices along with delivering multi-Gbps throughput. The operator also partnered with Apollo Hospitals to demonstrate the future of healthcare with 5G technology.
During the auction, the operator secured 19,800 MHz of spectrum by securing a pan-Indian footprint of 3.5 GHz and 26 GHz bands for a total consideration of Rs 430.84 billion. Airtel accumulated the largest pool of low- and mid-band spectrum (sub-GHz/1800/2100/2300 bands).
In October 2022, the telco launched 5G services. It actively signed agreements with handset brands like Xiaomi to offer support for its 5G Plus network on all Xiaomi and Redmi smartphones. Further, Airtel extended its partnership to OnePlus and Realme to offer 5G connectivity support on their smartphones.
Airtel’s financial results also showed a marked improvement, with the company reporting revenue of Rs 345.27 billion for the quarter ended September 2022, registering a 21.9 per cent year-on-year growth. The company’s net profit rose 89.17 per cent to Rs 21.45 billion, while earnings before interest, taxes, depreciation and amortisation during the quarter increased by 27.85 per cent and reached Rs 177.95 billion.
The year also witnessed Airtel diversifying its portfolio by acquiring stakes in various companies. Key among these remained the acquisition of a 1.2 per cent stake in Airtel by Google for $700 million. Further, Airtel, along with its wholly-owned subsidiary Nettle Infrastructure Investments Limited, acquired about 4.7 per cent stake in Indus Towers from Euro Pacific Securities, an affiliate of the Vodafone Group Plc. In addition, the operator acquired around 25 per cent, 9 per cent and 7 per cent stakes in Lavelle Networks, Avaada Clean TN Project and Avaada KNShorapur, respectively, along with the acquisition of minority stakes in Cnergee Technologies and strategic stakes in Lemnisk (Immensitas Private Limited) and Aqilliz. The operator also acquired the music streaming platform Gaana.
In the enterprise space, Airtel partnered with IBM to provide secured edge cloud services to enterprises in India. The telco also launched the Always On internet of things (IoT) connectivity solution. Further, Tech Mahindra and Airtel entered into a strategic partnership under which they deployed the 5G for Enterprise solution at Mahindra’s Chakan manufacturing facility, making it India’s first 5G-enabled auto manufacturing unit. The operator also launched Xsafe, an end-to-end home surveillance solution.
Meanwhile, Airtel and Meta jointly invested in global connectivity infrastructure and communications platform-as-a-service-based new-age digital solutions to support the growth of India’s digital ecosystem.
The telco took initiatives to extend its network to remote areas. It launched its mobile service in Kaksar, the border village of Kargil district in Ladakh. In addition, it launched its fibre-to-the-home (FTTH) broadband service, Airtel Xstream Fiber, in Ladakh and the Andaman & Nicobar Islands. Airtel was awarded a project by the Government of India to install 1,083 mobile towers with an expenditure of Rs 8.48 billion in uncovered villages of Jharkhand and Maharashtra.
On the network upgradation front, the operator awarded Huawei a telecom infrastructure expansion contract worth Rs 1.5 billion for upgrading and expanding the operator’s national long distance network.
To promote sustainability of operations, Airtel announced the commissioning of a new 21 MW solar power plant in Bhuldana district, Maharashtra, as part of the company’s commitment to progress reduction of its carbon footprint.
As we enter 2023, 5G seems to be the top priority for Airtel as it aims to roll out pan-Indian 5G services by March 2024. The operator is likely to undertake an investment of Rs 270-Rs 280 billion to hasten 5G roll-outs. Airtel also plans to explore new opportunities in the coming year. With OneWeb obtaining the GMPCS licence and deploying nearly 542 satellites in the orbit, satcom is expected to be another area of focus for the operator in 2023.
Vi
Vi continued to lose subscribers and struggle financially during the past year. As 2022 began, the company approved the upfront conversion of the full amount of interest resulting from this deferment into government equity.
A series of announcements were made regarding the company’s funding after this. Following Vi’s approval to raise Rs 45 billion from its promoter entities, the board approved the allotment of 3.38 billion equity shares of Rs 10 each for cash at an issue price of Rs 13.30 per equity share, to three promoter group entities – Euro Pacific Securities, Prime Metals and Oriana Investments – for about Rs 45 billion. Soon after, the Vodafone Group raised its stake in Vi from 44.39 per cent to 47.61 per cent through its subsidiary, Prime Metals. Further, the company raised Rs 33.75 billion from the Vodafone Group and Rs 11.25 billion from the Aditya Birla Group.
Vi’s board also gave a go-ahead for issuing rupee-denominated, optionally convertible, unsecured, unrated and
unlisted debentures (OCDs) to the American Tower Corporation (ATC) to raise Rs 16 billion. However, the preferential bond issue to ATC was subject to conditions, including the conversion of interest from the deferment of the telco’s AGR and spectrum dues into equity by the government. Vi failed to conclude the issuance twice due to delays at the government’s end to convert the telco’s accrued interest on the deferred AGR-related dues into equity. While the Ministry of Finance and the Securities and Exchange Board of India have both cleared the proposal to convert Vi’s accrued interest worth Rs 161.3 billion on the deferred AGR-related dues to equity, the government is yet to take a final decision.
Financially, Vi reported a widening of its consolidated net loss to Rs 75.95 billion in the quarter ended September 2022 from Rs 72.96 billion during the quarter ended June 2022. However, it recorded the fifth consecutive quarter of revenue growth as its revenue increased by 2 per cent on a quarter-on-quarter basis to reach Rs 106.1 billion.
Despite financial struggles, the operator took several initiatives to boost connectivity. For instance, it doubled its voice over long term evolution capacity in Maharashtra and Goa to enhance the voice calling experience for its customers. In addition, the company deployed 900 MHz of spectrum on 3,043 sites in Madhya Pradesh and the 1800 MHz band on 11,772 sites in Chhattisgarh to boost indoor 4G connectivity for its users. To improve the 4G experience for its customers in the National Capital Region (NCR), Vi deployed the highly efficient 900 MHz spectrum as well as 1800 MHz band on approximately 8,400 sites in New Delhi and NCR, during the first half of 2022. Further, the telco launched Vi MiFi, a pocket-sized 4G router that delivers reliable, high speed connectivity.
However, progress on 5G network roll-out has been relatively slower for Vi. Before the 5G spectrum auction, the telco demonstrated several trials on the network. For instance, it achieved a top download speed of 5.92 Gbps while conducting 5G trials in Pune. It also conducted a trial on the use of street furniture for small cell and aerial fibre deployment at Namma Metro, Bengaluru, and demonstrated a 5G download speed of 1.2 Gbps on a mobile handset. In another milestone, Vi demonstrated 5G voice over new radio with Nokia in its 5G trials in Gandhinagar, Gujarat.
During the 5G spectrum auction, Vi acquired spectrum in the 3300 MHz and 26 GHz 5G bands, along with additional 4G spectrum in three circles of Andhra Pradesh, Karnataka and Punjab to improve customer experience. However, contrary to other private telcos in the country, Vi is yet to roll out 5G services.
Meanwhile, the company entered into various partnerships in different segments. In the 5G domain, Vi partnered with OnePlus to make 5G accessible to smartphone users in India. It also collaborated with A5G Networks, Inc. to enable Industry 4.0 and smart mobile edge computing. The telco signed a deal with Energy Efficiency Services Limited to provide fully secured IoT-enabled advanced metering infrastructure to discoms in Uttar Pradesh and Haryana. In the online gaming space, it partnered with Nazara Technologies Limited to launch Vi Games on its app. Vi also partnered with Paris-based CareGame to launch 5G mobile cloud gaming in India, and with Maxamtech Digital Ventures to launch multiplayer and competitive gaming content under Vi Games.
Going forward, 2023 seems to have started on a positive note for Vi as its board has again approved the issue of planned preferential OCDs to ATC after the telco missed the deadline for the same. However, the year seems to be a challenging, make-or-break year for Vi as its promoters are unwilling to infuse adequate capital, making it unviable for the government to carry out the conversion to equity. Further, Vi has not provided a clear roadmap for 5G roll-out, which will be a key differentiator for telco revenues going forward. In light of these circumstances and the mounting debt of the company, it may become difficult for it to survive, thereby leading to the creation of a potential duopoly in India’s telecom space.
BSNL and MTNL
The year 2022 proved to be instrumental for BSNL, while Mahanagar Telephone Nigam Limited’s (MTNL) performance was relatively sluggish. A key highlight was the merger of BBNL with BSNL. Further, the government approved a Rs 1.64 trillion revival package for BSNL to improve the quality of its services and de-stress its balance sheet. The package included a cash support of Rs 439.64 billion for spectrum allocation, capital expenditure and viability gap funding, and a non-cash component of Rs 1.2 trillion. Of the total package, the government released the first tranche worth Rs 50 billion for the operator to clear its dues to vendors. In addition, the government announced that it will fund BSNL’s capital expenditure for the next four years. This is projected to be around Rs 224.71 billion and will include spending on the development and deployment of an Atmanirbhar 4G stack.
On the financial front, BSNL demonstrated a marked improvement in its performance during 2022. The telco reported a decline in net losses from Rs 74.51 billion in 2020-21 to Rs 69.82 billion in 2021-22. The company’s total revenue stood at Rs 190.52 billion in 2021-22, up from Rs 185.95 during the previous year. MTNL’s performance was rather dismal as it posted a widening of losses to Rs 26.16 billion in 2021-22 from Rs 24.54 billion in 2020-21. The company’s revenue from operations declined from Rs 13.03 billion to Rs 10.69 billion during the period.
In terms of infrastructure expansion, BSNL witnessed a fair amount of activity during the past year. The central government approved the installation of 1,202 towers by the telco in Uttarakhand, each of which would cost Rs 10 million. Meanwhile, the Chhattisgarh government signed an MoU with the operator for providing free internet facilities through Wi-Fi in 108 villages of Bastar district.
The operator entered into major strategic agreements as well. It signed a deal worth Rs 262.81 billion with Tata Consultancy Services (TCS) for rolling out its 4G network. In addition, BSNL signed a partnership with Inmarsat to offer its IoT services in India. Further, DoT signed an agreement with ITI Limited and BSNL to fund the pilot projects of E-band, LTE indigenous technologies including the integration of 4G/5G prototypes with the Centre for Development of Telematics (C-DOT) core.
To support BSNL’s 5G plans, the government reserved 10 MHz of paired spectrum in the 600 MHz band, 40 MHz in the 3300 MHz band and 400 MHz in the 26 GHz band in all licence service areas for the telco. The operator plans to roll out its 5G services by 2024. To this end, it has shortlisted a consortium led by TCS and C-DOT for rolling out the 4G network, which will be upgraded to 5G within a year of placing the order under the contract. Furthermore, BSNL is expected to roll out its 4G services in over 24,600 villages, mainly located in remote areas, by December 2023, as communicated by DoT. Therefore, 4G and 5G network expansion seems to be on the agenda for BSNL during 2023.
