Standalone 5G may give Jio edge over rivals, JioPhone Next brand may be extended to 5G phones

Reliance Jio is expected to get payback by way of market share wins, increased ARPU from higher data packs and more fixed wireless access or FWA customers, as standalone 5G may provide a differentiated experience from Airtel or Vodafone Idea, said analysts, while industry insiders said that Jio may launch 5G devices under its JioPhone Next brand at market prices.  

Substantial contribution from spectrum usage charge savings will also give an upside to the No 1 carrier which has announced capex of Rs 2 trillion over the next few years, which was likely to include the recent Rs 0.9 trillion spent on acquiring spectrum through the airwaves auction.

“The payback for 5G will come from – 1) market share win. It expects 5G SA to help differentiate data experience from existing peers; 2) user upgrading to higher data allowance packs, and pay for incremental ARPU; 3) more FWA customers and 4) largest contribution from SUC savings,” said Sanjesh Jain, vice president at ICICI Securities in a note.

About Rs 1.1 trillion is expected to be spent on infrastructure, of which 60% would be targeted towards mobile and 40% for hardware for fixed broadband. Since the Mukesh Ambani promoted carrier would begin 5G roll outs from October and cover pan-India by December 2023, the mobile capex will be fully front loaded and deployed over the next 18-24 months.  

“Monetization of this capex will require higher revenues in JioFiber, market share gains in mobile, revenues from enterprise clients and tariff hikes,” said analysts at Jeffries in a note. India’s No 1 carrier by subscribers and revenue will be able to provide up to 1 Gbps speed on the go to consumers at affordable prices, but it did not indicate the tariffs at which it will launch 5G services.  

Reliance Jio is set to launch 5G services in several cities including the metros of Delhi, Mumbai, Chennai and Kolkata by Diwali this year, and will go head to head with Bharti Airtel which has said that it will launch 5G services in 5,000 cities and towns by March 2024. Jio will use 5G SA or standalone technology, which will work independent of its 4G network, on top of its indigenous end-to-end 5G stack for providing affordable services to consumers, it said in its annual general meeting on Monday. No 2 carrier Airtel will use NSA or non-standalone technology, which will work in tandem with its 4G network.

“We believe competitors like Bharti will be forced to respond with own aggressive 5G,” said Sachin Salgaonkar at Bank of America Global Research in a note.  

“This is likely to bring forward industry capex and crimp industry ROICs (return on invested capital) as telcos may get more competitive even before price repair has completed,” said analysts at JP Morgan.

Salgaonkar added that RIL was likely to subsidize its consumer premises equipment on fixed and wireless broadband which could also keep capex higher but help tap a big market. Jio plans to connect 100 million households through fiber and/or through its fixed wireless access (FWA) service, Jio AirFiber. He however cautioned risks of rollout being pushed beyond 2023 for Jio, given supply constraints.  

“Jio's approach to 5G has striking similarities to its approach to 4G with the company investing aggressively-potentially ahead of time- to create a state-of the-art network,” analysts at Jeffries noted. It raised revenue to Ebitda estimates by up to 3-5% but lowered PAT estimates by 2-4%, adding that leverage was comfortable despite capex increase.

Device plans  

“RJio is working on 5G SA (standalone) handset, but roll out is some time away. It expects to have 5G SA handset at Rs 11,000-12,000 at the time of launch,” Jain added.  

Queries sent to Jio on its device and tariff plans did not elicit a response as of Tuesday evening, but industry insiders said that Jio was likely to push its JioPhone Next brand of devices under its partnership with Google, for 5G, on similar lines as it did during its 4G services launch back in 2016.  

Ambani said on Monday that Jio was also working with all leading global smartphone equipment makers or OEMs, which have committed to support Jio's standalone 5G. “The brands that will bring in 5G smartphones that work on standalone 5G will test their phones on the frequencies with Jio, especially, the 700 Mhz band,” said a senior industry executive asking not to be named.  

Jio is unlikely to undercut prices of the 5G devices and introduce them at a reduced rate since 5G services are likely to be adopted by premium users who will be willing to pay higher tariffs and buy expensive smartphones, the executive added. “JioPhone Next phones will be at market prices and global brands will be free to price their devices as per their strategies,” he said.  

India currently has 50 million 5G devices in the market, and experts suggest that at least 20-30 million of them would support 5G SA. Phone makers including Chinese players have begun collaborating with carriers to test out 5G NSA and SA devices, insiders said.  

“We have been working with operators in India to test the 5G experience on different OPPO devices, including 5G calling, network speeds, and VoNR calling, all of which have showcased outstanding results. The announcement by Jio is the development that will bring all our efforts to fruition,” said Tasleem Arif, vice president and R&D head at OPPO India said.