Another G to 5G! Would it change the game?

Here's why and why not, the advent of Gautam Adani in the 5G tale, can make the play more interesting

Like a well-scripted OTT series, every season of 5G has been full of the thrill, the twists and the pace one watches it for. Specially as new characters get added in each ensuing season. Remember how we witnessed the action-packed transition from 3G to 4G and how the entry of Reliance Jio stirred up the plot? Especially with the disruptive approach, the company poured into the segment? Now, we can prepare for a similar shift while heading towards 5G.

And why not? The reason is simple. The 5G playbook has gained significant interest and excitement, with another new name added to the opening credits. This time, the stakes and thrills will be better than the disruption and competition that the previous technology generation shift brought in for the incumbents. Here the CAPEX required will call for considerable investments in the spectrum. And another name enters the frame. Yes, Adani Group seems to be gunning for a slow entry through the private network lane. The question is – will this new character elbow out the stars of the previous season, slowly inching to become a significant player in the market over time? It looks likely with the way 5G is all set to drive many use cases in the B2B segment. Let's stream some arguments before we jump on the cliff-hanger.

Why 5G is not a 4G sequel?

First, let's not forget the narrative we started with here. 5G is nothing like any other G. It is supposed to usher in a new era, flanked with new use-cases, latency thresholds and speed records. A cautious approach may considerably slow down the inflection point for 5G. And yet, as much as we like to watch a high-speed chase, the 5G scenario could be slightly different compared to previous shifts. And not because of one reason, but many.

The transition speed to the 5G network may not be the same as seen in the 4G landscape. The investors in the fray may vary due to the large scale of investments and CAPEX requirements for a 5G rollout. We can also see that the 5G adoption curve lags 4 G's uptake – when we look at its emergence at a global level.

Also, we cannot ignore how 4G networks are high-capacity sprawl-outs and may reduce the need for an extensive universal 5G network. Baring RJio, most of the new entrants have had a poor record in the last five to ten years. Taking a leaf out of their experiences, telecom service providers, in all possibilities, will be cautious about the high CAPEX requirements for 5G.

Of course, we have witnessed players like Bharti raising their CAPEX to sales ratio above 36 per cent- a notable rise from the 14 per cent level (between 2010 and 2016). But we can also reckon that telecom operators have underinvested in the network during FY10–16. The next spurt in CAPEX over FY17–20 stemmed from the 4G rollout, which was also to catch up with the much higher capacity set-up by RJio along with the faster adoption and maturity levels necessitated by the 4G ecosystem. Earlier, the lack of ecosystem had resulted in a slower adoption rate of 3G. That leaves us to hold our horses and ask - Will that be the case with 5G? Looking at all these dimensions, it's not hard to opine that 5G investments will likely be gradual. Any player testing the waters here may find it worthwhile to invest in a phased manner – and over a period instead of a one-button push. And what happens when that happens?

New Friends, New Enemies

Like a good mystery series, the sector is all slated to unfold a steady but competitive landscape in the next three to four years. There are already industry conjectures brewing that Adani Group may eye for an acquisition in the future. In their statements and media releases, the company has clarified that the group's interest would be limited to private network business, which means a strong B2B player will initially test the waters with business offerings and may steadily and slowly develop the appetite for the big B2C play. The company may eye a merger and acquisition to expand its presence in the segment. It will be a logical and wise move for the Adani Group, whose stronghold has been in the B2B and infrastructure-focused businesses. Any new entrant will avoid the hassles of huge capital investment and a long gestation period to set up a green-field network. That said, meanwhile, with no urgent push to accelerate investments, all operators can build 5G capabilities - prudently and steadily.

As new equations get forged, what will stay unshaken is that stronger incumbents will lead spectrum investments. It is not hard to understand why incumbents like Reliance Jio and Bharti will acquire the pan-India 5G spectrum and invest close to INR520bn and INR345bn in the upcoming spectrum auction. However, Vi might play safe and will prioritize its investments in crucial circles and may acquire the 5G spectrum only in seven circles. The Adani Group will be putting in only INR1bn in EMD, and it could bid for the spectrum range in the 3.3GHz band in 1–2 circles. Moreover, abolishing Spectrum Usage Charge (SUC) will incentivize telecom operators to get cheap 26GHz spectrum. It can unlock ample spectrum availability - that could be available or sold at a reserve price. 

Before the Credits Roll

The entry of any new player has always been a critical turning point in any industry – especially in the Telecom sector. We all have seen the sector's past and current nature. We have also observed the steady curve of maturity that the 5G ecosystem has shown. A new entrant and a fresh G to the 5G space may, thus, add value in the longer horizon. The next five years would be worth watching for that. 

And that's quite a Spoiler-alert from our side! For now.