Battle lines are being drawn once again in the telecom sector with the mobile operators digging trenches to fight for supremacy in the new, fifth generation (5G) mobile services. On one side is Reliance Jio, under the newly ordained Chairman, Akash Ambani, who has created a war chest of ₹2 lakh crore to roll out pan-India 5G services starting this Diwali, and on the other side is India’s telecom czar, Sunil Mittal, who is making strategic bets to ensure that Airtel is ready to offer 5G by October.
At stake is a $9 billion revenue opportunity. According to India Mobile Broadband Index 2022 report released by telecom gear maker Nokia, 5G services will account for 38 per cent of India’s total mobile services revenues by 2026.
The battle for 5G
The first salvo was fired by Reliance Jio when it acquired nearly 60 per cent of the spectrum in the recently-concluded auction for ₹88,100 crore. Jio is the only operator to acquire spectrum in the all-important 700MHz which was priced so high that no other player could acquire it. This gives them a massive advantage over other players because, 700 MHz is considered to be the best for indoor coverage. Jio has also amassed the highest amount in 3.3GHz and 26GHz segments. Its nearest rival, Bharti Airtel, bought spectrum worth ₹43,100 crore. While Jio will offer standalone 5G services, other players including Airtel, will build a 5G network on top of their 4G services.
At Reliance Industries' 45th annual address, Mukesh Ambani, Chairman of Reliance Industries, glibly styled Jio’s upcoming 5G network as “True 5G services”. Ambani laid out the two pillars for Jio’s 5G age – a commitment to offering an unparalleled standalone 5G network and diversification from the telco’s core consumer business, to more revenue accretive ventures in the long run, higher-end 5G use cases, and network solutions.
Mittal on the other hand is going for a more calibrated approach based on partnerships. From demonstrating India’s first 5G experience over a live 4G network in Hyderabad to India’s first rural 5G trial, to the first cloud gaming experience on 5G, to successful deployment of India’s first captive private network on the trial spectrum, Airtel has created an ecosystem of partners and start-ups to support faster adoption of next-generation technologies.
Airtel now plans to launch 5G services in every part of the country starting with key cities. The company is convinced that its higher-quality customer base will adopt 5G devices at a rapid pace in the country. In addition, Airtel’s strong presence in the enterprise segment will allow for a slew of industrial use cases ahead of Jio.
Ambani vs Mittal
The battle between Ambani and Mittal is not new. In 2002, Mukesh’s father, Dhirubhai Ambani disrupted the 2G market with cheap CDMA-based 2G services. But by 2008, it was clear that Airtel had managed to win that battle. Round two of the rivalry came in 2016 when Mukesh launched the Reliance Jio juggernaut with 4G services.
While Jio essentially floored its competitors with its 2016 entry through heavily discounted pricing, experts note that it cannot adopt its old playbook when it comes to the rollout of 5G services. Jio’s network largely comprises of low-paying data-guzzling subscribers. “Unlike its competitor Airtel, which is able to generate approximately 20 per cent of its revenue from a high-end post-paid subscriber base of 18 million, Jio likely has less than a million post-paid subscribers out of its total 400 million plus subscriber base,” a top analyst told BusinessLine.
In a market, where the telecom tariffs an average Joe is willing to pay are equivalent to the cost of a cup of tea and a samosa, premium phone plans of the urban elite often carry the largest burden when it comes to filling the operator’s coffers.
Jio will have to get the top-tier consumers on its 5G network because, while the industry promises the moon when discussing the use cases on a 5G network, none besides faster data speeds, improved voice quality, and a better network truly exist in the immediate term. “In fact, Indian operators are still reckoning with the monetisation problem of an expensive 5G capex, and no one has come up with a fool proof solution,” said an expert.
While the battle for 5G will be essentially fought between Reliance Jio and Airtel, there is also the possibility of Asia’s richest man, Gautam Adani, jumping into the fray. As of now, Adani has said that his interest in telecom is limited to providing 5G services to enterprises. But market speculators say that Adani could move into the consumer space by acquiring the struggling Vodafone Idea. If that happens, then both Jio and Airtel will have a formidable player to worry about.
By being the sole operator to own 700MHz in the 5G spectrum, Jio has the right tools to attract the premium subscriber base. While other operators will be offering a 5G layer onto their existing 4G network, Reliance’s portfolio will allow the operator to set up a greenfield 5G network from scratch, which will indeed have, as Mukesh Ambani noted in his annual address, “zero dependencies on a 4G network”.
Analysts, however, hesitate to give Reliance Jio an assured victory in accruing a high-end subscriber base, a top executive explained to BusinessLine, “From an execution perspective as well, Jio will have to change its operational attitude, move away from the top-down approach in management to truly foster an environment to drive these network changes, improve marketing, operations, sales, to onboard the premium subscriber base.”
Home grown advantage
Jio has also hinted at diversification outside the consumer telephony vertical in the 5G space. This includes its indigenously developed end-to-end 5G stack which, according to Jio, is already deployed in its network, and uniquely positioned to offer private 5G solutions to enterprises. “Here, there is an opportunity to take on the larger global vendors such as Nokia and Ericsson that focus on the deployment and innovation of larger high power base stations and have not paid much attention to small cells,” the executive said.
However, a report by IIFL securities had the following comment to make, “Jio has developed its 100 per cent home grown 5G stack that is cloud-native, software-defined and digitally-managed. Though it has also talked about selling its 5G stack to global telcos, this may require a change in mindset from that of a telco, to that of an equipment maker.”