Retrospect

Telecom sector has lurched from one crisis to another, aided and abetted by inappropriate and inconsistent policies by the government, inept operators with vacuous business models, grandiose judiciary that punished the operators for suspect policies pursued by the government, regulator who was a mute spectator to the collapse of the sector  and butterfly customers who cheered every new flower that brought new nectar.  In all this chaos, miraculously and inexplicably the penetration of mobile phone has grown spectacularly to 117 crore connections and has contributed to business and personal productivity. Telecom had its stern test during covid times and acquitted itself magnificently.

Telecom is truly a success story built on the graveyard of several telecom companies. Of the surviving few, the public sector enterprise has lost the plot and relevance long time back., Vodafone-Idea requires a miracle to survive and Airtel is just hoping that Reliance Jio will provide some respite when their appetite for market share is sated. Jio is the only operator that can justifiably gloat on winning the competitive war and gaining enviable valuation of its Jio platform. Even Jio cannot claim the business is making money proportionate to the investment and risk

The current debt of the sector is just about Rs. 4.9 lakh Crores ( 5 times the current operating EBIDTA) and this does not include the losses written off by the dozen plus companies that exited telecom including the  likes of Tata, Reliance ADA, Aircel, Telenor in the last few years.

The government or the regulator do not admit to any responsibility and have been mute spectators to the inglorious exit of operators leaving behind trail of financial mess. If anything, the government and statutory bodies have only been salivating at the possibility of raking in AGR money from the legal case they won and potential auction money by bidding 4G and 5G spectrum

Prospect of 5G

Most technology upgrades provide a qualitatively superior experience, and the growth is not linear.

In part the transformation is not about just data speeds or better capacity but derives significantly from emerging ecosystem such as better handsets, bigger screen and  internet experience, mobile applications, user expertise in deriving productivity and user adoption due to affordable handset prices and dropping data tariff.

Launched in 2019-20, operators and consumers are just in early adoption mode. Sure,it holds promise of use cases in several emerging applications but it is more hype than reality now

What does 5G really offer

• 5G is expected to offer 10 times faster download but for the average consumer surfing net or downloading or streaming video, the experience may not be substantially different from 4G.
  • The speed difference may become compelling for live streaming or Virtual reality. But even today those who seek such high data can access it through a broadband connection.
  • More importantly the speed difference will provide a quantum jump in network capacity but that is another matter altogether to be weighed against the additional upfront investment.
• 5G is expected to cut latency (response time) by half from 20-30 milliseconds to less than 10 milliseconds and is expected to usher IOT and accelerate machine to machine connectivity
• 5G is expected to create and connect smart cities and make autonomous vehicles a reality
• 5G with enabling digital ecosystem is poised to transform our lives. Some use-cases
  • Create sensor networks to track patients and share information faster than ever before.
  • Roll out blockchain
  • Governance: Interconnected networks for faster processing of information, quicker decision making, reduce wastage

Evolution of Mobile technology worldwide

* Actual download speeds could be significantly lower due to variety of factors. Relative speed may be a better indicator

**Source: https://www.acma.gov.au/t

Should India fast track 5G

India has followed every new generation of technology 6 to 8 years behind global leaders. In a sense therefore with 5G hitting the global market in 2019-20, we can wait for the technology to stabilize, the ecosystem to bloom and electronics equipment rates to drop. There is a good case to wait and learn from the 5G experience of other operators and  make a more informed choice on spectrum frequency to adopt, business case  and then take a plunge

Are the operators ready for 5G?

Airtel and Vodafone-Idea have just invested into 4G network at a time when their revenue has taken a serious hit. They are in complete financial disarray desperately catching up with Jio In their current debilitated state 2 of 3 private sector operators—Vodafone-idea and Airtel are in no position to invest further in spectrum or towers.  They cannot raise more funds and cannot add to the deferred payout plan assuming that is offered by the government for spectrum and equipment manufacturers for electronics.

It is also not clear whether 5G will generate incremental ARPU  in the immediate future that justifies the investment.

Surya Mahadevan

Prof. Surya Mahadevan has 30 years of work experience in FMCG and Telecom sectors. He played leadership roles managing large brands such as Tata, Reliance, Aircel, Loop, Maltova, Viva and Amul.

He has worked across Sales, Marketing, Retail and Customer Service functional areas and in his last assignment before joining TAPMI, he was responsible for Mumbai Circle Telecom operations as Chief Operating Officer at Loop Mobile.