Indian telecom operators are expected to charge a premium for their high-speed 5G services during the initial phase of launch in the country, industry analysts said, adding that telcos may bring parity between 4G and 5G prices over time for mass adoption.
According to a report by the Economic Times, Indian telcos like Reliance Jio, Bharti Airtel, and Vodafone Idea may initial price their 5G services at around a 10-20% premium over 4G rates to life their ARPU or average revenue per user and to get returns on their investment towards spectrum acquisition and network deployment.
Indian telcos will initially target high-value mobile consumers in urban areas with mid-range 5G smartphones. Telcos will use spectrum in the C-band (3.3-3.67 GHz) to offer 5G services in the initial phase, with 5G rollouts staying limited to metros and larger cities initially.
As per market research, only 7% of India’s overall smartphone base is 5G-enabled and is centred around urban areas.
Notably, operators didn’t charge a premium when they offered 4G services in the country due to dirt cheap prices introduced by Reliance Jio. Nomura Research said that since 5G will provide better speeds, telcos will look at charging a premium for 5G services, targeting top-end users that are looking for a better experience.
“5G tariff plans 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,” Nomura said.
A telecom executive told the publication that with niche offerings that are currently impossible on 4G, telcos could justify charging a premium for 5G services. However, the long-term goal is to drive mass adoption, so 5G prices will have to be similar to 4G services.
“5G pricing 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,” he told the publication on the condition of anonymity.
Reliance Jio and Bharti Airtel are expected to bid aggressively to buy sizable chunks of 5G spectrum blocks in the upcoming auction. The move will help them to further widen the gap with Vodafone Idea, which is losing customers every quarter and may not bid aggressively for 5G spectrum.
Vodafone Idea hasn’t been able to raise funds from external investors so far.
“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 in a separate note, adding that Jio and Airtel will predominantly buy spectrum in the upcoming auction for their future 5G rollouts and not to meaningfully augment existing 4G capacity due to sufficient spectrum availability.
However, analysts at Motilal Oswal said that telcos would initially find it challenging to monetise 5G due to lesser use cases and may not see significant gains in their ARPUs.
“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,” it added.