5G players get ready for a long road to seamless mobile network

So just how big will the 5G mobile market really be? Mobile operators are not too bullish about the initial numbers. They fear that lack of killer ‘use cases’, even globally, could stymie the speedy conversion of customers to the new service and also keep ARPUs stagnant, despite the large incremental investment required (about Rs 60,000 crore per player).  

They say 5G roll outs will be far slower than of 4G and will be limited to key cities and circles at most. Of course, 4G, will continue to remain the  backbone of revenue generation, as well as subscribers, for a long while. Operators say it could take four to five years at least to build a reasonable sized pan-India 5G network with good coverage.    

But there are some clear plus points. Unlike  4G where the market had to be built from scratch, for 5G there is already a large addressable market of customers with a 5G phone around, even before the network is built and ready to be tapped. These customers are expected to number around 150-170 million by 2023, in the first year of the launch.

What’s more, there will still be over 500 million more smart phones users in other bands who again could be nudged to shift when they upgrade to a 5G phone in the next one to three years.

But if anyone is thinking of a dramatic shift of subscribers and revenue from 2G, 3G and 4G to 5G, they have got it all wrong. In its latest estimates a few days ago, UBS projected that there will be around 50 million 5G subscribers in India by 2024, accounting for only 4 per cent of the total base, although this will grow to around 250 million by  2027, accounting for 20 per cent of the total base.

Research agency OMDIA is slightly more optimistic, saying India can expect to have over 369 million 5G customers by 2026 (30 per cent of total subscribers) while Global Data puts the number at 329 million.

In terms of revenue share, the story is the same. Global Data projects a marginal revenue of $2.3 billion in 2023, which is a mere 7 per cent of the total gross revenue of telecom companies in the calendar year 2021.

But Global Data says this will hit $9 billion in 2026, which will account for 38 per cent of the total mobile revenues.

Globally, telecom operators will generate over 64 per cent of their revenues from 5G by the same year - much higher than in India.     

Many stakeholders including chip makers and telecom gear manufacturers say there are already many ‘use cases’ which can generate money but that telcos have to take a call.

UBS points out that, based on global trends, it believes that 5G will be at a 20 per cent premium over 4G.

Also, with Vodafone Idea unable to launch meaningful 5G services, this would allow Reliance Jio and Airtel to gain market share.

One such ‘use case’, say telecom gear makers is Fixed Wireless Access (FWA) which could accelerate the slow process currently underway of deploying high speed broadband in homes by replacing the last mile fibre with 5G wireless spectrum.

It has already become the most sort after use case for 5G with over 83 5G operators worldwide already offering residential or business FWA.   

It could be a big market in India too. There are over 100-110 million homes which have pay TV as an addressable market to tap for broadband to  home with entertainment built in.

Then there is an even larger market of over 200 million TV homes. The good thing is that ARPUs are high, ranging from Rs 500-1000, much more than generated from mobile.

But the penetration of fibre to the home due to problems of right of way has been pretty slow. The total number of subscribers on Jio and Airtel is only 12 million.

The other big area is services such as augmented reality and virtual reality on the mobile phone for which customers would be ready to pay. It can be used to watch movies, shop, and play games.

For this to happen, 5G mobile phones need to be powered on the millimetre band (most are not) which offers high speeds. If chip makers are to be believed, it is already work in progress, provided customers are prepared to pay a premium on the phone.

Analysts say that, unlike in many other countries, ARPUs will go up in India not by increasing the 5G tariff over 4G, but by increased consumption due to what the new technology can offer.

Estimates by Nokia say that the amount of data usage per consumer will go up from 20 GB to over 50 GB in 2027. If new uses cases are added, it could rise even further. Once again, it’s up to mobile players to seize the opportunity. 

What projections say about users
 

• UBS projects around 50 million 5G subscribers in India by 2024 and 250 million by 2027
• Addressable market of 5G phone users is 150-170 million by the end of 2023 
• The addressable market of FWA services is 110 million pay TV homes, going up to 200 million overall
• Global Data says that by 2026, 5G will account for 38% of the total mobile revenues. In the same year the global average from 5G will be 64%