For 5G to become reality in India, telecom companies back home may need investments of up to around `1 lakh crore only in laying fibre networks over the next 2-3 years. Higher land cost and right of way approvals make fiberisation cost per km as high as nearly Rs 1 crore per kilometre in metros. […]
For 5G to become reality in India, telecom companies back home may need investments of up to around `1 lakh crore only in laying fibre networks over the next 2-3 years.
Higher land cost and right of way approvals make fiberisation cost per km as high as nearly Rs 1 crore per kilometre in metros.
At present, India has about 25-30% level of fiberisation versus 70% that is required for 5G technology roll-out. Add to this, the spectrum purchase costs in the upcoming auctions to shell out.
According to ratings firm Crisil, already, the reserve price recommended by the Telecom Regulatory Authority of India (Trai) for 5G spectrum bands is much higher than in countries like the UK or South Korea.
Telcos, which are saddled with a staggering debt of about Rs 4.3 lakh crore as of March 2019, will have how much money for investment is crucially linked to the price-setting at the auctions, the ratings firm said.
According to Crisil, India could witness tectonic shifts in the fiberisation landscape and the birth of new business models among telcos and tower companies around the launch of 5G.
“Players could restrict 5G launch in the initial years to metros and select A circles that show high data consumption appetite. Or, they could evolve business models for sharing fibre infrastructure. Globally, various business models are in vogue to meet high bandwidth demand, such as hiving off assets, diversification of businesses, and sharing them with the third parties,” it noted.
Hiving off fibre (and tower) imparts flexibility to the hived off entity for providing services to third parties in the industry, and thus enables them to pursue topline growth opportunities.
For instance, telcos such as Bharti Airtel and Reliance Jio have hived off their tower (and fibre) businesses. Large incumbents are in talks to form a joint venture for sharing fibre and in order to reduce capex.
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Tower companies are also looking to diversify their business from being merely pure play tower service providers, to managed service providers and areas such as in-building solution (IBS) small cells, fibre backhaul and others, given limited space for constructing additional towers in order to maintain top line.
Core revenue streams (tower rentals) of towercos have been hit by massive tenancies losses, led by recent structural changes in the telecom industry.
“Deployment of fibre and small cells by towercos, and then leasing it to telcos, could be a win-win business case for both telcos and towercos. It would add to the top line of towercos and benefit telcos as their capital expenditure reduces significantly,” analysts at CRISIL said in a note.