Kolkata: Mobile phone consumers may need to pay more for faster data speeds<\/a> and smoother streaming experiences in the 5G era<\/a>, with mobile phone companies likely to initially price the services at around a 10-20% premium over 4G rates<\/a> to drive the next wave of average revenue per user (ARPU) growth. But over time, 5G prices will converge with 4G ones to drive mass adoption, say industry<\/a> executives and analysts.
Mobile broadband services on 5G offered on the C-band (3.3-3.67 Ghz) airwaves are set to offer more than 10 times faster data speeds than 4G and likely to be targeted initially at high-value customers in urban markets who can afford pricey 5G handsets<\/a> in the Rs 15,000-Rs 20,000 price range or more.
Indian telcos have, historically, refrained from charging a premium on 4G packs - versus 2G\/3G data plans. But with potentially higher speeds on offer coupled with the initial uptake from top-end customers, telcos could charge a premium for 5G services<\/a> compared with 4G, Nomura Research said in a note.
“5G tariff plans<\/a> would be a key monitorable in the near term and a 5G premium (versus 4G) may provide the next leg of ARPU uptick for the telcos,” the Japanese brokerage said.
An analyst at another global brokerage backed the view, saying a 10-20% premium could be on cards as 5G will initially be launched in urban markets and only 4G users who can afford expensive handsets will upgrade to 5G.
A top executive of a Big 3 telco said some premium pricing of 5G could happen initially if operators unveil niche offerings that are not possible on 4G. He, though, said operators would eventually have to price 5G closer to 4G rates to drive mass adoption and proliferation as the devices ecosystem matures.
“5G pricing<\/a> will be linked to the service proliferation levels that each operator targets as consumers even in urban markets won’t pay extra unless the 5G value-add is significantly higher than the current 4G data offerings,” the executive cited said.
At press time, Reliance Jio, Bharti Airtel and Vodafone Idea did not respond to ET’s queries.
Analysts also expect telcos to ring in premium pricing of 5G services to recover the substantial investments in spectrum and deployments that the rollouts of these next-gen wireless broadband networks would entail. Airtel recently said that ARPUs need to rise to Rs 200 in calendar 2022 and eventually to Rs 300 to provide operators a reasonable return on capital.
Experts see 5G rollouts happening in phases and staying limited to metros and larger cities initially. This is since the 5G devices ecosystem is nascent, in that, only 7% of India’s overall smartphone base is 5G-enabled, coupled with the absence of mass-oriented use cases.
Analysts also expect Reliance Jio and Bharti Airtel to buy sizable chunks of 5G airwaves in the upcoming auction and make strong market share gains at cash-strapped Vodafone Idea’s expense, given the latter’s continuing inability to close its targeted Rs 20,000 crore external fundraise, the gaps in its 4G coverage and capex constraints.
“Bharti and Reliance (Jio), bolstering their 5G spectrum footprint could further aid their market shares relative to Vi, especially in the postpaid and high-end prepaid segments,” Goldman Sachs said.
It also expects the top carriers to predominantly buy spectrum in the upcoming auction for their future 5G rollouts and not to meaningfully augment existing 4G capacity as they (read: Jio and Airtel) already have an adequate 4G spectrum footprint.
Motilal Oswal, though, believe 5G services would offer limited near-term monetisation possibilities for telcos and may not materially move the ARPU and data consumption needles immediately as wireless data users already make up over 70% of India’s mobile user base, especially after the launch of 3G and 4G services<\/a>.
“Players will take reasonable time to ramp-up their networks, (and) thus, 5G may only help in network de-bottlenecking in limited locations and (be used) to offer FWA (fixed wireless access) and enterprise solutions,” the brokerage said.
Around 40% of future 5G revenues are likely to come from enterprise services.
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