Attractive Pricing Key For 5G Adoption In India, Says Jefferies
India’s 5G services will have to be priced similarly to 4G services to drive adoption, thus limiting ARPU upside: Jefferies.
Pricing will be the key towards 5G adoption in India and for driving the next leg of market share gains for Bharti Airtel Ltd. and Reliance’s Jio Infocomm Ltd., according to Jefferies.
"In absence of specific use case, Indian operators may have to price 5G similar to 4G to boost adoption,” Jefferies said in a Sept. 26 note, citing South Korea and China where attractive pricing helped drive 5G penetration to 33% and 55%, respectively.
Average revenue per user is unlikely to rise in India just because of 5G services, the brokerage said, again citing South Korea and China experience. The sector “will need an all-round tariff hike across 4G and 5G”.
Jefferies retained 'Buy' calls on Bharti Airtel and Reliance Industries, the parent of Jio, with a price target of Rs 855 and Rs 3,080, respectively.
Higher Capex
The capital expenditure by Indian telecom will rise "significantly" on the back of an aggressive 5G rollout, Jefferies said. The brokerage forecasts capex spends to remain elevated over fiscals 2023 and 2024, with a 35-46% capex-sales ratio for Reliance Jio and 21-26% for Bharti Airtel.
Telecom players would have to hike tariff given the higher capex and limited near-term ARPU upside in order to sustain return ratios, it said.
Jefferies, however, expects Bharti and Jio to gain market shares on back of 5G services.
5G Smartphones To Lead
5G smartphones will form 90% of overall smartphone shipments and over 50% of total smartphone devices by the December end, according to Jefferies' estimates.
"While 5G shipments form 32% of overall smartphone shipments, lower prices and network rollouts will boost their adoption," the brokerage said, adding that more than 50 million 5G smartphones have been shipped to India over the past six quarters, constitution over 10% of the overall unique smartphones devices in the country.
While 5G smartphones, costing $380 (nearly Rs 31,000), are two to three times pricier than non-5G smartphones, the average selling price for 5G devices has fallen by about 6% over the last three quarters, it said.
"Moreover, recent launches are 5G compatible even at $150 (around Rs 12,000) price point."