Fixed wireless access best bet for Jio, Airtel for 5G monetization: Analysts

India’s top two telcos, Reliance Jio and Bharti Airtel are likely to focus on bolstering their fixed wireless access (FWA) service offerings to boost 5G revenues in absence of any mass killer apps on the 5G mobile broadband front, say analysts and senior industry executives.

They, though, said mass uptake of FWA services won’t happen unless the cost of a key router device (read: customer premise equipment or CPE) drops to $100 from around $200 now.

They expect Jio to subsidise these CPE devices to drive adoption in the near term, especially since the Mukesh Ambani-led telco is looking to initially connect some 100 million households through its FWA broadband service, Jio AirFiber.

Bharti Airtel MD Gopal Vittal had recently cautioned that high CPE costs remained a key challenge to mass adoption of 5G-based FWA services, even though the Sunil Mittal-led telco has been running trials and pilots.

“The key for FWA uptake is CPE cost (and) Jio may subsidise these devices as it’s focusing on FWA to see 5G revenue traction,” BofA research analyst Sachin Salgaonkar said. He added that since telcos would piggyback on their 5G networks, the incremental investments to target these users would be low.

But at Airtel’s December quarter earnings call, Vittal had said a CPE required for 5G-based FWA services still costs around $180-200 apiece, potentially making the service expensive compared to fibre broadband. “The cost per connected home for FWA, given the CPE that you need, is almost double that of a fiber (connection) that is rolled straight to the home today.”

Going forward, though, analysts see 5G-based FWA services emerging as an alternative for fiber broadband in India’s tier 3/4 cities once CPE prices drop, especially as fibre broadband is unlikely to cross 50-70 million households anytime soon.

Latest data collated by the telecom regulator shows the country’s wired broadband user base has barely grown to 33.1 million in January 2023 from 26.7 million a year ago.

Brokerage CLSA estimates 5G-based FWA services can be a potential $5 to 9 billion revenue opportunity annually since India’s wired broadband penetration is among the lowest worldwide. “The 5G FWA service business case is highly relevant in India and Bharti and Jio have been ramping up household broadband (coverage), and with Jio also setting an ambitious target of 100 million 5G FWA users.”

Experts added that Jio and Airtel’s countrywide 5G push is aimed at cornering a higher chunk of customer market and wallet share even as India’s broadband speeds and home broadband penetration continue to improve.

Airtel and Jio are rapidly rolling out 5G networks nationally, having already covered more than 500 cities and towns. Airtel is targeting a roll out of 5G services in all urban areas by September 2023, while Jio expects to do the same by May and a pan-India rollout by December.