Indian telcos are rolling out 5G Networks at a faster pace. Whether 5G in the near term has any use case for end consumers apart from performing speed tests or not is a different case, but for a meaningful 5G rollout, there needs to be a lot of digital infrastructure deployment. ICRA, in its report, says that for a full-scale 5G deployment across the country, network densification is required, and the industry needs to invest in fiberisation.
Current level of Fiberisation
India currently has around 35% of its towers fiberised, and ICRA expects that the CAPEX required to fiberise the number of towers needed to provide a full-scale 5G Network experience would be close to Rs 3 lakh crore over the next 4-5 years.
The rating agency further said that the Telecom Industry has continued to report improvement in operating metrics as reflected in ARPU levels. ARPU has already crossed Rs 170 mark in H1 and is likely to touch Rs 180 by the end of the fiscal.
This comes at a time when telcos are trying to increase their ARPU by raising tariffs. Bharti Airtel took an Industry initiative to hike entry-level tariffs in nine circles, and such a move is still awaited from the struggling telco Vodafone Idea.
Also Read: Airtel Hiking Base Tariffs to Rs 155 in 9 Circles is a Positive Move for Industry
Debt Levels Remain High
However, despite the positive ARPU metrics, the rating agency said that the debt levels remain high and further increased after the conclusion of the last round of spectrum auctions. As a result, the industry is expected to close the year with a debt of around Rs. 6.3 lakh crore as on March 31, 2023.
Commenting on the 5G rollouts in India, Mr. Ankit Jain, Vice President and Sector Head, Corporate Ratings, ICRA Ltd, said, "Over the last few months, the telcos have been rolling out 5G services across various cities. While the rollouts have started and customers are being upgraded to 5G network, the same is being done at no additional costs as 5G-specific plans have not been launched yet. Moreover, 5G deployment will entail densification of network and close placement of radio antennas, with possible collocation on street furniture."
"While small cells are likely to be the first option to start with, these need to be connected with fibre for efficient network coverage and delivery. With relatively low penetration of fiber in India, expected capex of around Rs. 3 lakh crore would be needed over the next 4-5 years."
"Moreover, as several use cases are under development, it will take some time for 5G to reach adequate level of penetration. To begin with, it will be more focused towards enterprise-based use cases. Thus, unlike 4G, ICRA expects the 5G rollout to be more phased out and pockets specific."
Also Read: How Tariff Hikes Can Help Improve the Telecom Industry
As we already discussed in one of our earlier stories, Tariff Hike is required for the ARPU to go up, which indirectly helps the telcos with CAPEX involved in infrastructure deployment required for full-scale 5G services in India.