Ericsson banks on a high five, all set for the 5G battle in India

Beyond its battle with Reliance Communications over dues, the Swedish multinational is also bracing for a battle against its aggressive competitors Huawei, ZTE, Samsung and Nokia to sell gear for 5G

It’s been a low-profile player, selling telecom gear to most of the Indian telcos for decades. But Ericsson has suddenly been in the arclights for a different reason. It is fighting a bitter public battle in the courts for months with its one-time client Reliance Communications to recover Rs 550 crore, which the telco has not paid for availing its managed services. The Supreme Court this week issued a notice to the Anil Ambani-promoted company and sought a reply within four weeks and also allowed it to deposit in the registry Rs 118 crore by way of two demand drafts.

That controversy will keep the Swedish multinational busy for a while now. But behind the scenes Ericsson is  bracing for another battle against its aggressive competitors Huawei, ZTE, Samsung and Nokia to sell gear for 5G and cornering a larger share of the new 4G deployments being made by service operators. 

After all, telcos together are forking out around $ 7 billion each year to expand network, upgrade to 4G and add in more towers and equipment. Incumbent operators still have only 40-50 per cent of their towers 4G-enabled, so they need more telecom gear to expand their reach.

For Ericsson, India is a key market for its revenues. It is, after all, their second largest market in terms of value behind China. In contrast for Huawei, India is not even the largest market in Asia, a position which is taken by Thailand.

Yet for the European telecom gear manufacturer India is increasingly a tough market with competition becoming even more intense. At one end, consolidation of the industry owing to closures of telcos has reduced the number of players to four. At the other, Reliance Jio, the most aggressive 4G operator which is making huge investments in its network, has locked them out of any deals, preferring to go primarily with Samsung. And while the South Korean major might be a new kid on the block in the global telecom gear sweepstakes, it is already a force to reckon with in India and estimates say has grabbed over 30 per cent of the 4G telecom gear market from both the European (Ericsson and Nokia) as well as the Chinese vendors (Huawei and ZtE) .

To make matters tougher, the Chinese are playing aggressively to get a larger share of business from what have been traditional partners for Ericsson — incumbent operators. They are offering attractive prices, cheap loan credit through their country's banks, as well as free maintenance deals to carve out contracts.

So, for instance, according to sources, the Chinese (Huawei and Zte) have been able to grab contracts in over 11 circles for hardware from the newly merged Vodafone –Idea Ltd which was up for offer. Ericsson has been able to get contracts in nine circles (of which five will be exclusive circles). Ericsson, however, declined to comment on the issue and VIL did not respond to a query. Ericsson also has contracts in a third of the circles of Bharti Airtel to supply hardware, the rest being divided between the Chinese and Nokia.

But the European vendor is betting big on the next battleground — 5G. To begin with, though, the company does not want to divulge this, it is in talks with both VIL and Bharti to conduct live 5G trials .

The not-so-good news is that Reliance Jio, according to sources, has decided to go for live 5G trials in partnership with Samsung. That does not mean it cannot buy gear from others, but analysts say it gives them an edge over others.

But the good news is that the Chinese are under scrutiny on 5G for security concerns across the world and many countries like the US, Australia, New Zealand and UK have banned or put in restrictions on buying their 5G gear. In India, manufacturers have already petitioned the national security advisor to put restrictions on their sale to protect domestic players. But the service providers under the aegis of the Cellular Operators Association of India made it clear that they will defend the Chinese vociferously, and will challenge any action against them not being allowed to sell. Huawei executives, however, say they are in talks with all the telcos for an alliance to undertake the 5G trials.  

Ericsson’s strategy is to push telcos to deploy fixed wireless access through 5G to homes and offices rather than the cumbersome fibre-to-home deployment. That is where Jio is investing big time and plans to connect 50 million homes in the first phase.

With huge amount of spectrum available for 5G in high bands, they say that it is more economical and faster to link homes wirelessly through 5G and then wifi. Says Nitin Bansal, managing director, India: “Globally, 5G is being used all over the world for fixed wireless access which is the early use case for this technology. After all, you don’t have to get right of way to dig fibre till each home which is so cumbersome and also expensive and time consuming, especially when you are looking for faster deployment.”

Bansal adds that because of large availability of spectrum (of over 100 Mhz each ) at the higher bands, it will support very high speeds, low latency and support huge capacity of data usage that 4G with limited spectrum availability won't be able to cater to. Simply, the fibre will be replaced by backend 5G wireless network combined with wifi at home to provide the same services as fibre-to-home.  

But will 5G take a long time to come in India to become a mass-based service? The government has fixed a deadline of 2020 for some 5G services, after the spectrum is auctioned. Ericsson believes that the deployment of 5G will happen in India much faster than it has been anticipated. That is primarily because of the unexpected explosion of data in the country, thanks to the entry of Jio. According to their projections, data usage per month per smartphone in India will more than double from 6.8 GB currently to 15 GB in 2024 and during the same period overall data traffic will go up four times from now. Says Bansal: “With the massive data growth there will not be enough spectrum capacity in 4G left to take this huge load, telcos will have to shift to 5G spectrum much faster.”  Current estimates say about 60 per cent of the current 4G capacity is already being used to power just data.

Ericsson expects the initial deployments of 5G will be in hotspots in densely populated big cities. These will be deployed on the high bands where there is large amount of spectrum available. However, operators will have to make fresh investments to buy both equipment as well as software to deploy 5G (the migration cannot take place through a simple software upgrade because the spectrum will be in different bands).

Despite the initial investments, the cost of producing data would be far cheaper — Ericsson estimates it will be one tenth the cost of producing one GB of data through 4G, primarily because of the efficiency of the spectrum. That is another reason the shift from 4G to 5G would be faster. And the Swedish giant, which has lost its number one position to Huawei in 2012 in global revenues, is surely all set for the 5G battle in India.