Reliance Jio Reports Positive Growth in India, but Is It Enough to Justify 5G Investments?

In April 2024, Indian Communication Service Provider (CSP) Reliance Jio Infocomm reported its financial performance for the financial year ended March 31, 2024. This marks the first full year review of the CSP’s business performance since its launch of commercial 5G services back in October 2022, and provides significant insight into the Indian market’s receptiveness toward 5G services. Some of the key performance indicators for Reliance Jio are listed below:

• Revenue from Operations: US$12.0 billion/INR 1,00,119 crore (Year-over-Year (YoY) growth of 10.3%)
• Net Profit: US$2.4 billion/INR 20,466 crore (YoY growth of 12.8%)
• Total Subscriber Base: 460 million (end of December 2023)
• 5G Subscriber Base: 108 million (as compared to 50 million in August 2023)
• Average Revenue per User (ARPU): US$2.2/INR 181.7 (YoY growth of 1.6%)

Bharti Airtel also announced positive results as of the end of 2023. The Indian CSP reported that it had more than 50 million unique 5G users on its network as of September 2023, signaling strong growth in its 5G subscription base, which amounted to 10 million only 7 months ago in February 2023. The Indian CSP also saw increases in ARPU to US$2.50 (IDR 208), a YoY increase of 7.7%.

On the other hand, the latest developments surrounding Vodafone Idea were less than ideal. The CSP is largely behind its competitors in terms of its 5G rollout, having yet to commercially launch 5G services. According to the company, it intends to roll out its 5G network over the next 6 to 9 months, with the longer-term objective of having 5G services account for 40% of its total revenue within 24 to 30 months. However, the slow rollout of 5G services does seem to have hurt the company, with Vodafone Idea having to deal with a consistently shrinking subscriber base.

Despite the extensive rollout of 5G services, it should be noted that this has only resulted in a marginal increase in both the ARPUs of Reliance Jio and Bharti Airtel. While Reliance Jio attributed this muted increase in ARPU to existing promotional offers for 5G services—where 5G data are offered on a complimentary basis to subscribers and are not yet charged separately—it is unclear if 5G services will remain attractive to customers if they are charged at a premium. This is echoed by Vodafone Idea’s Chief Executive Officer (CEO) Akshaya Moondra who commented in the company’s earnings call that the 5G monetization opportunity still remains uncertain.

Nevertheless, the incumbent CSPs are bullish on the opportunities offered by the Indian market, and rightly so. According to data published by the Telecom Regulatory Authority of India (TRAI), overall wireless data consumption has been on a steady increase over the past few quarters, reaching 47,000 Petabytes1 (PB) in 3Q 2023 (2Q: 45,000 PB; 1Q: 41,000 PB). A recent report from Nokia also supports this trend, highlighting that mobile data consumption for an average individual in India had reached a high of 24.1 Gigabyte (GB) per month in 2023, representing a 24% YoY increase from the 19.5 GB per month usage in 2022.

To this end, one key 5G application that is emerging as a promising use case for Indian CSPs is 5G Fixed Wireless Access (FWA) services. Reliance Jio is bullish about the FWA opportunity and targets providing its wireless broadband service, JioAirFiber, to more than 100 million households. Initial reports on the uptake of JioAirFiber have been positive. Similarly, Bharti Airtel launched its own 5G FWA service, Xstream AirFiber, in its attempt to capture market share. Vodafone Idea also announced its own 5G FWA service, Vi AirFiber, which will be launched in conjunction with its 5G network rollout.

To ensure quick monetization of their 5G networks, it is crucial that the Indian government and CSPs work together and learn from other first-mover CSPs around the world. In the consumer domain, various consumer-specific 5G use cases are emerging, such as 5G New Calling, Network Slicing for Priority Network Access, and Security-Based Network Slicing services.

Beyond consumer applications, many CSPs (particularly Chinese ones) have also begun to focus on 5G enterprise use cases, such as physical and private 5G networks, and the Indian government has set the necessary ecosystem in place for this to happen. In January 2024, India’s Department of Telecom (DoT) announced that it will allow enterprises in India to lease spectrum from Indian CSPs to set up their own enterprise private networks. This presents Indian CSPs with an exciting opportunity to further monetize their networks and provide more value-added services (e.g., managed network services). The GSMA’s Open Gateway Initiative is another new monetization opportunity that CSPs must consider.

To this end, ABI Research recommends that Indian CSPs consider the following:

• Understand the Needs of Consumers: This allows CSPs to introduce the right value-added services that are suitable and desired by the market beyond basic 5G connectivity.
• Establish Close Partnerships with the Enterprise Ecosystem: Develop strong and flexible business models and frameworks to help enterprises seamlessly deploy their private networks, whether managed or unmanaged.
• Implement New Technologies: For example, with increasing adoption of cashless and digital payment technologies, Indian CSPs stand to benefit by offering advanced fraud detection solutions based on the use of telco data through Open Application Programming Interfaces (APIs).
• Continuously Innovate: Indian CSPs should continue to innovate—using their strong expertise on connectivity as a baseline—to deliver solutions that can best address the needs of the market. As CSPs around the world transition to “techcos,” Indian CSPs need to follow suit and offer end-to-end digital solutions.

All in all, ABI Research foresees strong potential for the Indian telecoms market. Moreover, with Vodafone Idea’s recent Follow-On Public Offering (FPO), which is intended to help the company raise funds to support its 5G network rollout and enhance its 4G services, successfully accumulating bids amounting to more than US$10 billion, ABI Research believes that India is well poised to become one of the leading countries in 5G adoption in the near future.

1 1 Petabyte = 1 million Gigabytes