War in West Asia could raise cost of setting up 5G infrastructure in India

If the conflict lasts longer and turns more violent, the Indian rupee will likely dip around 3-4 per cent against the US dollar

An escalation in the ongoing conflict between Hamas and Israel may increase the costs of imported 5G network equipment by Rs 2,000-2,500 crore, according to a report in The Economic Times. The report, citing industry experts, also stated that this escalation may delay the rollout of next-generation network services by India's major telecom operators.

If the conflict prolongs and intensifies, the Indian rupee is likely to depreciate around 3-4 per cent against the US dollar. This could lead to a rise in telecom companies' debt servicing costs, thereby affecting profitability in the upcoming quarters, said those familiar with the subject.

Approximately two-thirds of the telecom equipment used in local phone networks is imported from foreign vendors such as Ericsson, Nokia, and Samsung. Major telecom players in India, such as Reliance Jio, Bharti Airtel, and Vodafone Idea, are collectively expected to spend around $7 billion (more than Rs 58,000 crore) annually on imported networks, as per the report in The Economic Times.

Rohan Dhamija, Head of Analysys Mason for India and West Asia, told The Economic Times, "The Israel-Hamas conflict has not yet caused an alarming fall in the rupee against the US dollar. However, if it escalates into a wider global conflict, there could be some currency volatility, with the rupee potentially falling around 3-4 per cent against the US dollar. This would make telcos' 5G network equipment imports costlier as around two-thirds of the equipment used in domestic networks is still imported."

Reliance Jio has secured more than $4 billion in offshore loans to purchase 5G network equipment. Likewise, Bharti Airtel's annual capital expenditure remains focused on deploying its 5G network, with the company allocating nearly $3.5 billion towards setting up 5G infrastructure.