Indian 5G needs US$14 billion fiberisation – report

Created June 28, 2019
News and Business

A new report from analytics company CRISIL warns that India’s would-be 5G service providers are facing a serious shortfall in their access to fibre capacity for backhaul infrastructure. The report suggests that Indian telcos may need investments of up to around Rs 1 lakh crore (equivalent to over US$14.4 billion) simply to lay fibre networks over the next 2 to 3 years. CRISIL adds that higher land cost and right of way approvals make fiberisation cost per km as high as Rs 1 crore per km in metro areas.

CRISIL reasons that if switching to 4G from 3G was all about rationalising capacity by Indian telecom operators, 5G’s clarion call is fiberisation…and yet more fiberisation. Investment in fiberised backhaul infra, which provides unlimited capacity and higher speeds, has to gain further traction, if 5G has to become reality. 5G technology dictates fiberisation levels of over 70%, versus 25% to 30% levels at present.

The report notes that fiberisation comes on top of spectrum costs that are sky-high at current prices. 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 United Kingdom or South Korea. How much money there is for investment is crucially linked to price-setting at the auctions.

In the meantime, Indian telcos are saddled with a staggering debt of Rs 4.3 lakh crore as of March 2019. That is why, argues CRISIL, that India is set to witness some tectonic shifts in the fiberisation landscape and the birth of new business models among telcos and tower companies around the launch of 5G.

CRISIL questions what are the feasible options for 5G service providers? The analytics company concludes that players could restrict 5G launch in the initial years to metros and areas that show high data consumption appetite. Or, they could evolve business models for sharing fibre infrastructure. CRISIL says hiving off fibre (and tower) assets into separate entities imparts flexibility in providing services to third parties, reduces CapEx requirements, deleverages balance sheets, and leads to higher valuations of entities. CRISIL reports that large incumbents are in talks about forming a joint venture to share fibre.

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This article was written
by John Williamson

John Williamson is a freelance telecommunications, IT and military communications journalist. He has also written for national and international media, and been a telecoms advisor to the World Bank.