A new year, new possibilities and obligatory predictions

Here’s wishing everyone a very Happy New Year and welcome to the 21st edition of the Beyond the Next Billion newsletter. The first edition of a new year must be accompanied by an obligatory set of predictions, which we offer with a focus on the India telecoms market. But this is also done with a view to the launch of our new research program focused on the rapidly evolving “India Digital Infrastructure” sector. Hit us up for details but we look forward to sharing insights throughout the year about the state of telecoms, networking, and enterprise digital transformation in India.

India in 2024: 3 Predictions

Predictions are part and parcel of the analyst world. The more specific the prediction, the greater the risk for missing the mark and greater the rewards for a correct call. 2023 was without a doubt the year that India made a lot of headlines with a 5G rollout that was impressive both in speed and scale. Both Reliance Jio and Bharti Airtel have spent heavily on CAPEX for 5G network rollouts and achieved impressive early coverage and healthy subscriber adoption. Of course, this is tempered by the initial promotional period but nonetheless, nothing to sniff at. 2024 promises to be another benchmark year for India, with the passing of the Telecommunications Bill of 2023 in December. The new law breaks decisively away from the previous policy regime, which was rooted in the Indian Telegraph Act of 1885. Yes, you read that right. To be fair, multiple revisions were made to the Act over the next 120 odd years but the new Act creates a new foundation. We will cover some of the nuances of this new legislation in a future post but for now, we leave you with three predictions that we expect to see in India in 2024.

India’s Digital Divide will contract significantly in 2024

India is the world’s most populous nation, with a little over 1.4 billion people and counting. As of October 2023, India had 1.15 billion mobile connections which translates to a penetration rate of roughly 82.5%. The headline connections and penetration rate figures typically mask some of the nuances within a market. For example, the connections number includes phone, dongle and M2M/IOT connections. They also include both prepaid (still over 80% of total) and postpaid connections. They also cover connections across 2G, 4G and 5G access technologies.

Bottom line, there is still significant room for growth in connections with potential for nearly 300 million new connections just to cover the entire populace, not including new connections from M2M/IOT. But where will this growth come from? India’s mobile operators, specifically Jio and Airtel, continue to set the pace with a near duopolistic stranglehold on market and revenue share. Vodafone-IDEA, or Vi, has fallen long and hard from its brief post-merger heyday as the market leader and will not invest in network expansion in the near future without a significant injection of capital. While Jio and Airtel do continue to invest in network expansion and a broader footprint, they do not have true nationwide coverage. In some cases, they don’t have sites in a specific area, or if they do, not enough capacity. The revival of BSNL, with a 4G network that is expected late 2024, will do a lot to address these gaps in rural and remote areas. Beyond voice communications, the really big dent on the Digital Divide will come from the deployment and availability of 5G fixed wireless access (FWA) services for broadband. Mandala Insights has projected this market to rise from an initial 308,000 in 2023 to 36.6 million by the end of 2028. The majority of these connections will be on the sub-6 GHz 5G spectrum frequencies, with mmWave getting traction from 2025 onwards.

But an expansion of the access network is also primed for launch in 2024, and this will come through the increasing momentum behind satellite connectivity. The prospects for satellite connectivity received a major boost when the Department of Telecom chose to make spectrum available for these services through administrative allocation, as opposed to an auction mechanism. This was necessary as satellite spectrum is essentially a shared frequency range as opposed to spectrum for terrestrial networks which is licensed for use by one operator. Much of the early focus will be on low earth orbit (LEO) constellations of the kind being promoted by Eutelsat’s OneWeb (Bharti Airtel remains a stakeholder) and the Elon Musk-backed Starlink constellation. ?Jio’s SpaceFiber (in collaboration with SES) service is a medium earth orbit (MEO) constellation and is also in the running for an early launch in 2024. To be clear, in the short term, satellite connectivity will be all about data as opposed to voice communications, as direct to device (D2D) connectivity is not yet primetime. In terms of segmentation, we expect a degree of consumer adoption in rural and remote areas, but the biggest appeal will be for enterprises trying to stitch a digital connectivity fabric for their branch locations and supply chains. ?

Monetization will be the key mantra, across consumer and enterprise segments

Since Reliance Jio’s entry into the Indian market in 2016, the market has seen its fair share of highs and lows, depending on one’s perspective. India has seen a dramatic rise in usage of smartphones and mobile data, which has underpinned the rise of popular streaming content, ride sharing and commerce applications. At the same time, much of this growth in mobile Internet use was not “monetized” as Jio’s strategy of bundling large amounts of data into their plans drained significant value away from the competition and depressed ARPUs. Many of the smaller players saw the writing on the wall and exited the market, including DoCoMo and Telenor. Vodafone and IDEA were compelled to merge and today, remain on the fringes with existential problems.

Over the last two years, India has seen modest increases in mobile tariffs, as operators like Airtel used the window of opportunity afforded by pandemic related lockdowns to nudge tariffs upward. Despite recent increases, India still has some of the most affordable tariffs in the world, especially for mobile data, with monthly ARPUs still below INR 200 (US$ 2.4). These monthly ARPUs support average monthly per capita GB consumption of 20 GB and higher. In other words, an absolute bargain. 2024 will see a shift away from these rock bottom prices as operators, led by Airtel, continue to push and probe with new packages that will aim to raise ARPUs by up to INR 100 per month on average. This is especially crucial for Indian operators looking to monetize their massive investments into 5G network deployment.

But monetization of network investments will not come only from the consumer segments. Rather, 2024 will see a lot of focus and investments into the enterprise segment in India. There are a number of areas where operators can drive revenue growth, including:

• Private 5G – the deployment of private networks in India has been held back by the lack of availability of spectrum for enterprises, with significant positioning and lobbying behind the scenes. Ultimately, it seems most likely that enterprises will be allowed to “lease” spectrum from operators with the freedom to choose their own systems integrators or opt for a fully managed service through operators. With official guidelines expected to be announced in the first quarter, 2024 should see momentum toward private 5G deployments, with a host of new use cases supported.
• SD-WAN and dedicated connectivity – the digital transformation of Indian enterprises is gaining momentum, with many of them embracing cloud solutions, public and private, as well as emerging technologies like GenAI and more. But as they look to create new workflows for their branches and locations spread across a less than homogenous regional landscape, enterprises will need flexible and cost-effective and secured connectivity to the Cloud. Another layer of complexity is being added with the increasingly multi-cloud mix of applications and workflows. To address this rising complexity, SD-WAN is a key piece of the puzzle, but enterprises are looking for dedicated connectivity to public cloud, so operators must be in a position to offer both. ?
• IOT – a third area where Indian operators are investing is the Internet of Things (IOT). A large and highly fragmented market like India is not a fertile ground for sub-scale IOT providers. Airtel is currently the market leader in this space, with recent large deals on smart meters for the utility sector being a good example of their traction. Jio also making large investments on their enterprise solution suite. Vi was arguably the market leader in this space and they still command significant in IOT and enterprise solutions but their ability to scale this to new heights is challenged by their inability to deploy 5G nationwide. ?

Digital transformation will create opportunities for new digital infrastructure players

Much of the attention and spotlight in the Indian telecom market is usually shone on mobility and regulatory issues. Not enough has been said and done to enable the digital infrastructure that would underpin growth in connectivity and services. This is changing now as India sees headline economic growth, a slew of groundbreaking digital services for public and private use cases, and steady growth in logistics and connectivity. Two recent examples of Government-led initiatives are a case in point. India has rolled out its “FastTag” system for automated toll payments across India. It took a while to implement but the now mandatory service has led to the creation of a national digital network for payments for tolls and now even parking payments and more. Similarly, India’s newest initiative is the Open Network for Digital Commerce, which is being set up as a “middleware” platform along the lines of the Unified Payments Interface (UPI), that will help to create an national marketplace that incorporates both large stores like Amazon and Flipkart, as well as ecommerce offerings from smaller players and even SMEs.

In practice, the implications of a rapidly digitizing economy has meant a surge of investments in data centers, public cloud and edge computing. There are a number of underlying trends that are driving these changes. The first of these trends is related to the continued retreat of telecoms operators from the infrastructure space. Indus Towers was formed in 2006 in a momentous move by India’s incumbent operators to spin out a new company that would be responsible for the deployment of mobile towers and related passive infrastructure. Despite significant successes, in recent years, Indus and other tower companies have been hamstrung by the continued exit of market players from India, as well as the ongoing challenges faced by the likes of Vi which have resulted in lower tenancies and revenues. American Tower Corp (ATC) has recently exited the market through a sale of its India assets to Data Infrastructure Trust (DIT), which is a collaboration between Brookfield Asset Management and Reliance Industries. This is a significant development that validates the rise of a new category of stakeholder focused on the creation of digital infrastructure. These former “tower companies” are actively exploring new opportunities including investments in indoor coverage solutions, as well as edge computing locations.

At the same time, this new category of digital infrastructure providers is also seeing interest from more traditional cloud providers, with the likes of Google Cloud and Amazon Web Services investing heavily in India and adding more “regions”. With rising subsea connectivity through major hubs like Mumbai and Chennai, India is likely to see more investments in data centers and public cloud in 2024. With the increase in enterprise deployment of private 5G and IOT networks, India will also an increase in investments into edge computing, with hyperscalers increasingly vested in enabling digital workflows from the enterprise premise to the public cloud locations. At the same time, India is also seeing the rise of new players like Cloud Extel, a neutral host provider based in Mumbai. Neutral hosts can provide vital connectivity and capacity in high traffic areas like airports, train stations, malls and more that would not normally see the required level of investments from incumbents who would be compelled to serve demand through their macro networks. ?????

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As with every edition of the Beyond the Next Billion newsletter, we also include a selection of news and updates from across the entire Indo-Pacific region in the next section.

India and South Asia

Brookfield Assets Management acquired American Tower Company’s (ATC) India business. Link

HFCL launches an FWA CPE, with support for sub-6 GHz as well as mmWave frequencies. Link

Axiata sets up an enterprise subsidiary in Bangladesh. Link

South-East Asia

Malaysia achieves its target of 80% 5G coverage through DNB. Link . With the successful completion of DNB’s coverage targets, Malaysia will now finalize plans of the deployment of the second 5G network. Link

SingTel renews its commitment to carbon reductions, “aiming for a 55% reduction in Scope 1 and 2 direct and indirect greenhouse gas emissions, and a 40% reduction in Scope 3 emissions by 2030, with 2023 as the base year.”? Link

SingTel successfully trials 5G RedCap for IoT in Singapore, with Ericsson and Mediatek. Link

Malaysia’s National Digital ID program gains momentum and industry support. Link

North Asia

South Korea to invest $130 million into 5G and 6G research in 2024. Link

NTT DoCoMo taps EVs to power base stations. Link

Nvidia partners DoCoMo to deploy the world’s first GPU-accelerated 5G network. Link

KDDI and Samsung Electronics sign an MOU to form the 5G Global Network Slicing Alliance. Link