CHIC - India's 5G Revolution

2023-04-28 03:22:00 ET

Summary

• Today, we believe India’s accelerating digital transformation could bode well for leading technology-infrastructure providers and their investors.
• The Indian government concluded its largest spectrum auction in August 2022, and 5G services are now available in 13 cities.
• But India’s 5G rollout cannot proceed at full pace without the capital infrastructure to support it.
• We believe supplying all that equipment represents a potentially substantial revenue opportunity.

By Rachel Tan

The country’s rollout of fifth-generation cellular networks is opening potentially attractive investment opportunities for technology-infrastructure providers.

When India was just rolling out fourth-generation broadband cellular-network technology (4G) in 2014, plenty of other countries already had their sights set on 5G. Five years later, in 2019, after watching the U.S., China and others feverishly build out their own 5G infrastructure, Prime Minister Narendra Modi finally awoke to the realization that “data is the new oil.” Today, we believe India’s accelerating digital transformation could bode well for leading technology-infrastructure providers and their investors.

India—which is just about to overtake China as world’s most populous country, according to United Nations—is keen to join the 5G revolution. The Indian government concluded its largest spectrum auction in August 2022, and 5G services are now available in 13 cities. Lawmakers also announced plans to set up 100 labs in top engineering institutions to spur development of apps and services optimized for 5G networks.

We believe India’s more than 800-million internet users will require faster and more reliable internet access to keep pace with the proliferation of disruptive technologies, such as AI, VR/AR and IoT. But India’s 5G rollout cannot proceed at full pace without the capital infrastructure to support it—including base stations with edge-computing capabilities, Radio Access Network (RAN) towers, 5G small cells and MIMO antennas. We believe supplying all that equipment represents a potentially substantial revenue opportunity: Between 2022 and 2031, India’s 5G market is expected to grow nearly 44% a year, to $180 billion. ¹

In fact, leading global infrastructure providers have already started to beef up their presence in India. Both Nokia ( NOK ) and Ericsson ( ERIC ) recently announced plans to scale up production to support network deployments of telecom service providers. Samsung ( SSNLF ) also reportedly invested around 4 billion Indian rupees (about $48 million) to set up 4G and 5G networks in the country. ² (Meanwhile, geopolitical tensions have kept Chinese vendors including Huawei and ZTE on the sidelines.) And while India was arguably a latecomer to the 5G party, we think learning lessons from other countries could help it make the transition more efficient.

If data is, indeed, the new oil, we believe India’s 5G transformation could be a gusher for technology-infrastructure providers.

Source: (1) Astute Analytica, January 2023; (2) Light Reading, February 2023

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