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A new report from Moody’s Investors Services shed doubt on India’s plan to start 5G spectrum auctions in 2019, instead targeting them for the second half of 2020, according to ET Telecom.
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A delay in India’s proposed 5G spectrum auctions would set back the country’s 5G deployment timeline and ultimately hinder the government’s goal of leading the race for 5G. Nevertheless, we agree with Moody’s expectation, as holding off on 5G spectrum auctions would help to mature India’s wireless market and result in improved outcomes in the long run.
Here’s why India should postpone 5G spectrum auctions until 2020: The country’s already cash-strapped network operators would be able to delay putting extra weight on their financials from a segment projected to offer limited returns in the next few years.
- Indian telecoms are already suffering from stretched balance sheets. India’s wireless carriers — namely Vodafone Idea and Bharti Airtel — are struggling amid declining average revenue per user (ARPU). For example, last month the two telecoms discontinued their lowest-cost tariffs in an effort to drive up ARPU. Moreover, the country’s telecom operators have a cumulative net debt of 4.3 trillion rupees ($59 billion).
- 5G spectrum pricing is too expensive for India’s operators. The country has the highest unit pricing of 5G spectrum in the 3.4GHz-to-3.8GHz band: Indian operators will have to pay close to four times more than South Korean operators for 100MHz of spectrum. And the Indian government expects to raise as much as 5.83 trillion rupees ($83.8 billion) from the spectrum auction — which is well above the cumulative spectrum spend ($48 billion) by all operators since 2010.
- Long-term investment in 5G is bound to further dent operators’ finances. The Telecom Regulatory Authority of India expects investment for 5G networks could reach $70 billion. This figure is in part due to the country’s lack of widespread fiber backhaul infrastructure for high-capacity networks.
Here’s where Indian operators should prioritize capex spending in the 5G race: Telecoms should utilize the additional time before spectrum auctions to spend on strengthening 4G LTE networks and implementing new technology to help them monetize 5G faster.
- Wireless operators must reinforce and expand the country’s 4G LTE footprint — a move necessary for 5G to reach its potential. Although 4G availability in India is improving, the quality of coverage is deteriorating. That’s because telecoms’ networks are straining to keep up with the increasing number of consumers using their networks. Indian telecoms should therefore prioritize strengthening their 4G networks to ensure they can support the high number of connections and provide a stable foundation for 5G.
- Indian operators should also look to massive MIMO technology to help them accelerate the rollout of 5G services once the standard comes into play. Massive MIMO technology allows operators to offer LTE and 5G simultaneously using the same radio while increasing the capacity of their LTE networks with equipment using software that can be easily upgraded to 5G. This approach would reduce by three to five times the number of radio sites in India, according to ZTE, helping to lower network deployment costs, increase the efficiency and capability of their networks, and speed the rollout of 5G once it’s launched.
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