Economy benefits/impact of 5G and worldwide activities on 5G

Manoj Misra
Sr. Public Policy Director, India
3rd October ’2019
 THE GSMA
15 OFFICES Connecting everyone
WORLDWIDE and everything to a
#betterfuture
SHANGHAI SAN FRANCISCO BEIJING SAO PAULO NAIROBI NEW DELHI
9bn+
The mobile industry is
the first to formally
MOBILE
commit to the UN CONNECTIONS
Sustainable Development WORLDWIDE
LONDON DUBAI ATLANTA BRUSSELS BARCELONA HONG KONG BRASILIA BUENOS AIRES Goals

Almost
The GSMA UNITING Driving industry
represents the NEARLY
programmes that
interests of
mobile 750 400 add value to the
digital economy
COMPANIES
operators MOBILE in the broader mobile
worldwide OPERATORS
ecosystem
The world’s leading mobile industry
The GSMA works to deliver a regulatory environment that events: Mobile World Congress,
creates value for consumers by engaging regularly with: Mobile World Congress Shanghai and
Mobile World Congress Americas,
together attract nearly
MINISTRIES TELECOMS INTERNATIONAL &
OF REGULATORY NON-GOVERNMENTAL
TELECOMS AUTHORITIES ORGANISATIONS

people from across the globe each year

 The Global Mobile Economy 2019

Source: GSMA Intelligence

3
 Indian Industry’s latest performance (QE Jun’19)
Particular KPI
Total Subs 1,186 mn (Urban – 675.58 mn, Private share – 88.75%
Rural – 511.05 mn) PSU share – 11.25%
Wireless subs 1,165.46 mn (urban – 657mn, rural
– 508.19 mn)
Teledensity (%) 90.11%
(Urban-160.78%, Rural – 56.99%)
Total wireline subs 21.17 mn Wireline Teledensity =
(Urban – 18.31 mn, Rural 2.85 mn) 1.61%
Total wireless data usage during quarter 17,940,576 TB TB = Tera Bytes
Internet subs (Total) 665.31 mn (Wireless – 643.64 mn, Narrowband – 70.72mn
wired – 21.67 mn) Broadband – 594.38mn
Internet Teledensity (%) Total – 50.52%, (Urban – 101.63%,
Rural – 26.57%)
Source: TRAI QPMR QE Jun-19

4
 Indian Industry’s latest performance (QE Jun’19)
Particular KPI
Gross Revenue (GR) for Quarter INR 61,535 Cr Up 5.34% QoQ
(Access services – 43,793 Cr)
AGR during quarter INR 39,124 Cr Up 8.88% QoQ
(Access services – 28,650 Cr)
Share of PSUs in Access AGR 10.49%
Monthly ARPU for access services INR 80.65
Monthly ARPU for wireless (GSM + LTE) INR 74.30
MoU/sub/month for wireless (GSMA+LTE) 701 minutes
Avg wireless data usage /wireless data sub /month 9.77GB
Avg cost /sub / GB wireless data during quarter INR 7.70

Source: TRAI QPMR QE Jun-19

5
 Indian Industry’s Other Parameters
Particular KPI (% Share in Total)
2G BTSs 4.79 lakh (23%) As of Jun’19
3G BTSs 3.43 lakh (17%) As of Jun’19
4G BTSs 12.55 lakh (60%) As of Jun’19
Total BTSs/NodeB/eNodeB 20.77 lakh (100%) As of Jun’19
Total e-NodeB installed 12.48 lakh As of Jun’19
- of which Jio’s share 59.8% (746147)
- of which Airtel’s share 26.2% (326744)
- of which VIL’s share 14.1% (175881)
Average outgo (INR) per minute 0.13 (was INR 0.23 in Sep-17) As of Mar’19
4G subscribers vs Total wireless subs (mn) 517.50 mn (Total 1165.46 mn) As of Jun’19

Source: TRAI CP on IUC(Sep-19)

6
 Mobile is a powerful tool for achieving the UN’s SDGs:
since 2015, impact has increased across all 17 SDGs

For more information see:

2018 Mobile Industry Impact Report:
Sustainable Development Goals

7 Source: GSMA Intelligence

Global mobile connections by technology - 4G will continue to
grow in coverage, capacity and customer adoption
Region wise Mobile Connections by generation: a 2025 view

Source: GSMA Intelligence, excluding cellular IoT

5G at a Glance: Global Outlook
 INTRODUCTION TO 5G

10
 5G: A Massive Transformation

1 Boundless Connectivity for All

2 Innovation and Network Economics

GSMA
Goals for the 3 Transformation of Vertical Industries
5G Era

4 Revolutionize the Mobile Broadband Experience

5 Help to Grow New Use Cases

11
 10 insights that will shape the 5G era

Source: GSMA Intelligence

12
 5G: New Technologies and Innovations
Capacity/Latency Flexibility
Radio innovations bring… Virtualisation Stronger, better &
e.g. SDN/NFV, network faster next generation
slicing mobile technology
Better vs 4G/LTE*
Spectral Efficiency

Higher
+ 1000x
Faster
download
Spectral Capacity speed 45x
Quicker
More flexible response
Spectral Reuse (latency)

13 Source: GSMA, IEEE, 5G.co.uk; Note: 4G comparison based on 5G theoretical speed and latency
 Some services will need 5G

14
The 5G Opportunity

15
 The 5G Opportunity
 The 5G opportunity is clear. It will support a wider set of use cases, with varying
requirements in terms of speed, latency, number of connections and mobility.

 The potential economic contribution of 5G to society is clear. A TMG/GSMA study

estimates it at $2.2 trillion contribution to global GDP and $588 billion in worldwide
tax revenue by 2034.

 Operators have a clear opportunity to benefit from 5G and the 5G use cases will
enable a broader set of monetisation opportunities for operators and the wider
ecosystem.

 Given the aspiration to support enterprises using 5G, operators’ share of the 5G
value will depend on their ability to support the digital transformation of other
industries.

16
 The 5G opportunity framework
 5G is inevitable and with the right
conditions, it will flourish and create
opportunities across society In that
sense, 5G is a matter of when and how,
and not if, it will happen.
 5G opportunities range from the known
knowns of enhanced mobile broadband
(eMBB) and fixed wireless access
(FWA) to known unknown opportunities
(e.g. in IoT) in many different enterprise
markets.
 Given the course of technological
development, 5G is also set to underpin
revolutionary market opportunities, such
as those based on artificial intelligence
and cloud-based services.

17
 Economic benefits of 5G

 5G will yield $2.2 trillion in GDP and $588

billion in tax revenue during 2020 – 2034

 Millimetre Wave 5G use cases will make

up an increasing proportion of the overall
5G contribution to global GDP, achieving
around 25% of the cumulative total by
2034, which amounts to $565 billion in
GDP and $152 billion in tax revenue.

18
 The incremental 5G opportunity is in digital
transformation of industries
5G BUSINESS POTENTIAL PER CLUSTER (SOURCE: ERICSSON)
5G revenue projections
 A major question for operators and industry
stakeholders is how much of the $2.2 trillion
5G economic contribution to GDP is
addressable by operators.

 An Ericsson study in 2017 suggested that

operators have the ability to address an
additional revenue opportunity of $204
billion to $619 billion by 2026 from ten
industries

 “>$400 billion” is used throughout this study

as a reference for the enterprise
opportunity.

19
 Entrepreneurship and job creation through new Digital Skills
IMMERSIVE EDUCATION AND TRAINING

 In many cases, digital education and training

courses will borrow techniques from video gaming to
keep students engaged. Indeed, so-called serious
games could be widely applied in fields, such as
healthcare, engineering and the armed forces,
where people need to learn hands-on skills.
 At the same time, highly reliable and responsive
wireless connectivity will enable new forms of
hands-on learning by enabling the haptic overlay of
the learner and teacher.
 The teacher will be able to feel the learner’s
movements when they undertake a task involving
fine motor skills, and correct as necessary. The
learner will be able to see, hear and feel the exact
movements their trainer has made, be they an
engineer, pilot or surgeon.

20
India: A Market in Transition

21
 Key Mobile Market Milestones in India

22 Source: GSMA Intelligence

 India driving growth in the global mobile industry
2025:India top contributor to new subscribers

23 Source: GSMA Intelligence

India - A Smartphone Nation

Source: GSMA Intelligence

 More and more digital services and content consumed on mobile

25 Source: GSMA Intelligence

 Data Usage in India

26 Source: GSMA Intelligence

 India-the most improved nation on GSMA’s Mobile Connectivity
index between 2014-17

27 Source: GSMA Intelligence

 Smartphone adoption leading to rapid migration to 4G

28 Source: GSMA Intelligence

 Projected 5G connections

29 Source: GSMA Intelligence

 Opportunity to Migrate Featurephone Users and Unconnected
Population to Mobile Internet Users

Source: GSMA Intelligence

30
 The impact of consolidation: margins now key for investments

Source: GSMA Intelligence

31
 Market structure improved but leverage remains a concern

32
 Mobile Market Revenue Trends in India

However, recent quarters are showing signs of a stabilisation in market trends.

33 Source: GSMA Intelligence

 India Mobile Market Revenue Outlook
GSMA Intelligence Forecasts

The Indian mobile market will return to revenue

growth in the second half of 2019.

However, by 2025 market revenues will still be

below the level of 2016.

Market repair will be a slow and challenging

process.

Source: GSMA Intelligence

34
 India CAPEX will remain intensive compared to APAC

Source: GSMA Intelligence

35
 ARPU per subscriber ($, 2018)

36 Source: GSMA Intelligence

 India and Asia Pacific mobile EBITDA margins: India
trailing regional peers

37 Source: GSMA Intelligence

 Return on invested capital for Indian and selected regional operators,
2018

Source: Operator data, Thomson Reuters, HSBC

38
 Costs: Operating and finance putting extreme pressure
Table No.5
Statement of Operating Expenditure and its cost items ( as % of Revenue)
Particulars QE-Sep-18 QE-Dec-18
As a % of Revenue
Network Operating Expenses 33.4% 36.1%
Access Charges 12.5% 11.5%
License Fee/Spectrum Charges 10.1% 10.4%
Employee Benefits Expenses 4.6% 4.4%
Selling & Distribution and SGA Exp 10.9% 9.8%
Other Expenses 2.8% 2.6%
Total Opex 74.3% 74.8%

Table No.6
QE-Dec-18
Particulars Bharti Vodafone-Idea Rjio
Industry
As a % of Revenue
Network Operating Expenses 30.2% 48.2% 30.7% 36.1%
• Industry’s cost structure – specially the operating costsAccess
areCharges
leaving no room for13.9% industry to make
10.2% 9.7% qualitative
11.5%
sustainable investments License Fee/Spectrum Charges 9.5% 10.9% 10.9% 10.4%
Employee Benefits Expenses 3.6% 5.8% 4.1% 4.4%
• While the price competition has been good for the consumer, the profitability
Selling & Distribution and SGA Exp (now14.6% in negative) for operators
10.0% 2.9% 9.8%
Other Expenses 0.4% 5.4% 2.7% 2.6%
are weakening competition elsewhere (on QoS, Networks rollouts
Total Opex etc.) 72.1% 90.3% 61.0% 74.8%
Source: TSPs Quarterly Results and GRA-India Analysis
Table No.7
39 QE-Sep-18
 Profitability: Industry’s health needs closes attention

Statement of Profitability of Indian Telecom

Particulars QE Dec-18 QE Sep-18
EBITDA Margin 25.20% 26.00%
EBIT Margin -4.80% -2.40%
EBT/PBT Margin -18.20% -20.20%

• Industry’s EBITDA margin of 25% indicates that operating profit insufficient to repay the interest cost and
depreciation recovery for future investment or network upgradation. Profit margin in negative at -18%.
• Industry’s ROCE well below one percent i.e. 0.15% for QE Sep-18, whereas TRAI specifies WACC of 15%.
• As per some GSMA studies and also thumb rule industry must/may on an average, invest 15%-20% of revenue
into CAPEX (excluding spectrum costs). But does the cost structure and profitability leaves such room?
• This substantial gap between Cost of Capital and RoCE requires urgent attention of the stakeholders including
policymakers

40
 The road to 5G

41
 The 5G Opportunity :Cost and Revenue Considerations

5G is an inevitable network evolution and will create significant opportunities

(If the right conditions are in place)

42 Source: GSMA
 5G Deployment Models
Two 5G deployment models have been standardised to meet initial market
requirements: non-standalone access (NSA) and standalone access (SA):
Suitable for providing more broadband capacity, since 5G NR can
NSA act as a supplementary capacity overlay to the 4G network
allows operators to fully exploit the features of NR as well as the
SA capabilities of the new core network architecture
India likely to go with NSA:
• Allows lower overall investment levels
and an initial focus on eMBB services
• Operators able to use existing macro sites
& LTE spectrum as an anchor connection,
with a densified network of small cells and
use of mid-band and upper-band spectrum
• 4G networks will continue to service a
significant share of mobile data traffic,
leaving 5G with dual remit of absorbing
increasing demand for capacity and
underpinning consumer and enterprise
services that require higher speeds and/or
lower latencies
 5G Market Readiness

44 Source: GSMA
 BECOMING 5G READY

45
 5G Policy Framework
To achieve the potential of the 5G era for consumers and industry, three critical
elements are required:

Digital Environment Substantial Investment Modernised Policy and

that inspires trust largely from private sources Regulatory Framework
to enable 5G era

46
GSMA Recommendations for India

Enabling network deployment and densification

The importance of spectrum to 5G

Modernizing legacy regulatory structures

The need for a supportive investment and taxation policy

 Learn more about 5G

https://www.gsma.com/asia-pacific/resources/india-5g/
https://www.gsma.com/futurenetworks/technology/understanding-5g/
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Thank You!

mmisra@gsma.com