CHENNAI : The Department of Telecommunications (DoT) has given the go-ahead for telcos to begin their 5G network trials. But analysts note that many unknown variables remain to be addressed when it comes to the successful rollout of 5G — from capital expenditure required for the projects to the number of users willing to switch into higher-speed networks.
According to India Ratings and Research, “a lot of variables and unknowns need to be addressed for successful implementation”. First the agency has flagged the return on capital for 5G-related investments that telcos have to make, not the least of which is the current recommended price of 5G spectrum.
“The reserve prices for 5G auctions are too high. Although the 5G auctions are not yet announced, the reserve price could yield a return on capital employed of only 7 per cent,” it said in a note published this week. “With the current ARPU ranging between `121-166/user/month, and more than 350 million subscribers still using voice only/ 2G services with significantly lower ARPU, the viability of 5G for the telcos remains to be seen,” it further added.
Aside from the return on capital, the scale of investments needed are also an issue, “although the financial credit profile of Reliance Jio Infocomm Limited (‘IND AAA’/Stable), Bharti Airtel Limited (debt rated at ‘IND A1+’) is comfortable”, it noted. Telcos, however, have already begun work on their 5G related solutions, which will only pick up pace with the 5G trial approvals.