The long-running saga of India’s 5G spectrum auctions has finally seen some closure in 2022. The multi-band auction wrapped on August 1 with 71% of the available spectrum sold – a result that India’s government considers positive, as it will be sufficient to achieve nationwide 5G coverage within two to three years.
Operators are now finally able to turn their attention towards 5G rollouts – although Developing Telecoms readers will note that among developing economies, India is somewhat late to the 5G party. This is a particular issue given the size of the addressable market; with over 1.2 billion people, operators don’t want to be playing catch-up when it comes to extolling the virtues of 5G in the public imagination.
The late advent of 5G means that Indian consumers aren’t necessarily familiar with what the technology can offer them in real terms. It’s therefore easy to imagine some scepticism over operator claims that the new technology is worth a higher price point despite its lack of readily apparent use cases.
However, while India may have been slower than other markets to adopt previous technology generations, they eventually took hold – and it seems that 5G may be breaking the cycle. In particular, market leading operator Jio has announced a raft of 5G agreements aimed at speeding up the expansion of an affordable 5G ecosystem – but this is not to discount the fact that much of the groundwork for 5G adoption in India has already been laid.
“Unlike [the] 4G era, 5G is penetrating the smartphone price segments much faster - even before there has been a sight of 5G rollout”, says Neil Shah VP of research at Counterpoint Research. “Almost a third of the smartphones selling in India are now 5G-capable, and the user base with 5G-capable smartphones should touch close to the 100 million mark in the coming months.”
Among the agreements announced by Jio is a manufacturing partnership with Google that will see the companies collaborate to create an ultra low-cost 5G device for the Indian market. Jio has also announced a partnership with Qualcomm, which indicates that its 5G device could use a Snapdragon chipset, further allowing it to keep costs down. According to India Today, Jio’s 5G smartphone is expected to cost less than INR 15,000 (US$188).
Currently, there are a number of 5G devices available for less than INR 20,000 (around US$250) in the market – but in a market with a low average disposable income, buying a 5G device at this cost is a luxury that many couldn’t afford. Shah notes that sub-6GHz only 5G smartphones – including models such as the Xiaomi Redmi Note 10T 5G and Redmi 11 Prime 5G – have already reached INR 13,999 (US$175). Moreover, he argues that INR10K-INR15K is the ‘sweet spot’ for smartphones in India, and notes that multiple models in this price range are scheduled for launch next year.
Rather than device affordability being the key barrier to mainstream adoption, the real challenge is moving hundreds of millions of 2G feature phone users to 4G and mass-market 4G smartphone users to 5G devices. Shah explains that to tackle this, Jio is going with two-pronged strategy – the 4G JioPhone Next, which retails at around US$50-$80 depending upon offers, and an upcoming 5G Android Jio Phone which would ideally be priced at between US$80-$120 to attract this longer tail of around half a billion 2G/4G users. Shah says that these devices “will be critical for Jio to scale their 4G and 5G networks respectively. So, we believe Jio hitting $120 price points early next year for its 5G smartphone would be critical for attracting mass market smartphone users to its network.”
However, 5G network pricing is also an important consideration. Given that the more affordable US$120 devices have fairly average specs, Counterpoint anticipates that the majority of mass market users would be unwilling to pay a premium for a 5G plan unless Jio improves the device specs and/or subsidises them with bundled 5G subscriptions. That said, the sub-INR 10k (US$120) device segment is dominated by Chinese brands such as Xiaomi, Realme, Transsion (Infinix, Tecno, itel) – given the Indian government’s increasing hostility towards China (and by association Chinese manufacturers), could local firms oust their Chinese rivals and dominate the segment?
Shah reckons it’s doubtful: “Chinese OEMs won’t exit the sub-10K market instantly despite government pressure, and ideally the government wouldn’t want that until the local brands or non-Chinese brands have developed that scale and expertise.”
He notes that Chinese brands are well-positioned in comparison to Indian brands – or even Samsung - to bring 5G capabilities to the sub-$120 segment next year, largely because of the sheer scale of 5G adoption across their portfolios in China. While India’s government may well apply some pressure to control their market share and ensure fair practices, these brands are profitable and pay taxes on billions of dollars of earnings from the world’s second largest smartphone market – so its recent targeting of Chinese brands such as Oppo and Vivo with asset freezes and office raids may be a double-edged sword.
For now at least, Chinese device makers can maintain their presence in India as the market evolves with the advent of 5G, although they can definitely expect more competition as domestic firms seek to capture the vast market of migrating feature phone users. Operators meanwhile can be buoyed by the knowledge that the device market is ready for the long-awaited arrival of 5G.