Indian telecom companies may need investments of up to ₹1 lakh crore just for laying fibre networks over the next 2-3 years, according to a report by Crisil.
The transformation in the networks comes as a need of the hour as 5G technology requires fibre networks.
Higher land cost and Right of Way (RoW) approvals make fiberisation cost per km as high as ₹1 crore per km in metros, according to the report ‘5G is here, but where’s the fibre?
It added that “fiberisation” is 5G’s clarion call, requiring 70 per cent fiberisation levels compared with 25-30 per cent at present. Investment in fiberised backhaul infrastructure, which provides unlimited capacity and higher speeds, has to gain further traction, if 5G has to become reality, it added.
Fiberisation is expensive and it comes on top of spectrum costs that are “sky-high” at current prices. To boot, telcos are saddled with a staggering debt of about ₹4.3-lakh crore as of March 2019. 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.
Globally, various business models are in vogue to meet high bandwidth demand, such as hiving off of assets, diversification of businesses and sharing them with the third parties.
Hiving off of fibre (and tower) assets into a separate entity is one of the prominent business models. It imparts flexibility to the hived off entity for providing services to third parties in the industry, and thus enables the company to pursue topline growth opportunities.
It also reduces capex requirements, de-leverages the balance sheet and leads to higher valuation of entities as cash flows get predictable.
Diversification of business
Tower companies are also looking to diversify their business from being merely pure play tower service providers to managed service providers and into areas such as in-building solution (IBS) small cells, fibre backhaul and others.
Core revenue streams (tower rentals) of tower companies have been hit by massive tenancy losses, led by recent structural changes in the telecom industry.
The reserve price recommended by the Telecom Regulatory Authority of India (TRAI) for 5G spectrum is much higher than in countries like the UK or South Korea. Players could restrict 5G launch in the initial years to metros and select A circles with high data consumption appetite, it added.