(Bloomberg) -- India became the last major Asian economy to kick off a 5G network, marking a new wave of spending by indebted carriers on high-speed wireless technology that’s touted to revolutionize everything from gaming to manufacturing and health care.
Prime Minister Narendra Modi made the first 5G video call on Saturday to school students to demonstrate use of the service in education. “5G is the beginning of an infinite space of opportunities,” especially for the country’s youth, he said.
Though fifth-generation mobile technology -- first introduced in South Korea three years ago -- has been viewed by consumers as underwhelming so far because of a dearth of matching applications, local operators led by billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd. are betting that will change. They are counting on the nation’s 600 million-plus smartphone users to switch to the new network in due course and also on industries gearing for a digital transformation.
Carriers agreed to fork out $19 billion just two months ago for airwaves at a government auction, with Reliance’s $11 billion bid topping the list. The conglomerate proposes to invest 2 trillion rupees ($25 billion) more. Billionaire Sunil Mittal’s Bharti Airtel Ltd. and Vodafone Idea Ltd. haven’t disclosed their spending plans as yet.
While Reliance raised more than $25 billion from marquee investors in 2020 to help fund digital expansion, the need to spend big on 5G could weigh on the finances of rivals. Bharti and unprofitable Idea have a combined net debt of $37 billion, and the latter staved off bankruptcy by giving 36% of its equity to the Indian government earlier this year in lieu of back fees it couldn’t pay.
At the launch event on Saturday, Ambani said Jio’s 5G network will cover the entire country by December next year, while Mittal said Bharti Airtel plans to do so by 2024. Given the scale of spending, some experts said carriers are unlikely to undercut each other on prices once again -- something that was tried in 2016 when Jio entered the market by offering free calls and cheap 4G data plans, which ended up putting some rivals out of business.
“They will likely provide 5G services to those segments of the market that are willing to pay higher and try and recover as much as possible before making it available to others,” said Rajat Kathuria, a senior visiting professor at the Indian Council for Research on International Economic Relations in New Delhi.
5G’s long road to India has been dogged by several controversies. The main one was about how secure Chinese equipment is -- a crucial issue for a country engaged in a border conflict with its northern neighbor. Last year, carriers decided to avoid Chinese vendors such as Huawei Technologies Co. and ZTE Corp., and opted instead to tie up with makers like Ericsson AB, Nokia Oyj and Samsung Electronics Co., potentially adding to their costs.
“India may have started a little late, but we’ll finish first by rolling out 5G services that are of higher quality and more affordable,” Ambani said at the launch event. The technology can bring affordable, superior education and skill development to ordinary Indians and deliver high-quality healthcare to rural and remote areas, he said.
Offering low latency and data speeds about 100 times faster than 4G, the technology has the potential to enable a variety of advanced applications such as holograms, 3D avatars of people in metaverses and telemedicine, in which near-instantaneous transmission of video and data would allow surgeons to operate remotely using a robotic scalpel. So far, such applications have been too slow to evolve. For average users, 5G has mostly meant faster video games and content streaming.
To capitalize on 5G, China has been rolling out smartphone apps and industrial projects such as super high-definition live streaming, remote manufacturing, virtual reality and robotic surgery arms. The country’s three state-owned carriers have introduced more than 25,000 such applications, according to a news article posted by the State Council on its website in August. In South Korea, despite mobile operators’ efforts to come up with killer apps, average revenue per person has only climbed slightly since the 4G era.
In India’s race to roll out 5G, the only winner to emerge so far has been the government: The airwave auction was set to raise a record amount, Telecom Minister Ashwini Vaishnaw said in July.
Proceeds from the spectrum auction could provide a big financial boost to Modi’s administration, which has been seeking to tame inflation and rein in fiscal deficits as economists warn of a looming global recession.
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