Bharti Airtel and Reliance Jio are poised to collectively purchase an additional $2 billion worth of 5G network equipment to enhance their next-generation mobile broadband coverage, catering to a rapidly growing user base amidst rising shipments of 5G-compatible smartphones, according to sources familiar with the matter. Sunil Mittal-led Airtel has issued a fresh request for proposal (RFP) to initiate its second round of 5G gear acquisitions, while Mukesh Ambani-owned Jio is also in talks with global vendors, the sources said.
“Airtel’s RFP is currently being evaluated by 5G vendors. Ericsson and Nokia are expected to be the primary OEMs (original equipment manufacturers) fulfilling the majority of Airtel and Jio’s new 5G base station (BTS) requirements, with a smaller portion of the deals likely going to Samsung,” one source stated.
Jio and Airtel are each anticipated to invest around $1 billion in 5G network equipment, primarily focusing on radio base stations, multiple sources involved in the discussions indicated. “We have previously indicated that our capital expenditure will decrease from last year’s levels, but as part of our regular business operations, we continue to engage with our business partners,” an Airtel spokesperson said. As of press time, Jio, Ericsson, and Samsung had not responded to queries.
Having invested heavily in 5G equipment purchases in 2022 and on 5G deployments since October of the same year, the two telecom giants have slowed their 5G expansion due to a lack of monetization opportunities.
Senior industry executives noted that Jio and Airtel’s current 5G base station coverage is far from reaching 4G levels. Latest network data from the Department of Telecommunications (DoT) shows the total count of 5G base stations at 4.52 lakh, or 15.5% of the nationwide installed base of 29.25 lakh base stations as of July 31, 2024, with the majority being 4G.
However, the 5G user base in India is growing steadily. Airtel had 75 million 5G users by the end of March, while Jio had 130 million by the end of June. “Airtel and Jio are both experiencing high traction in 5G, largely due to unlimited data offerings, enhanced customer experience, and higher shipments of 5G handsets, which now account for 70% of overall smartphone shipments,” Axis Capital noted in a report. Experts also highlight a steady migration of 4G data traffic to 5G.
As authorities push for improved service quality, the two carriers are advancing toward the second wave of expansion, particularly bolstered by recent headline tariff hikes of 11-25%. “Without a comprehensive pan-India network of 5G base stations, similar to 4G, delivering true 5G carpet coverage and the full capability of 5G technology for both voice and data services, including in-building coverage, amidst rising data usage, will be a significant challenge,” said a senior industry executive.
In response to the increasing 5G data traffic, Airtel recently refarmed its mid-band 4G airwaves in the 1800 MHz, 2100 MHz, and 2300 MHz bands to enhance 5G coverage. Experts note that the prospects of new 5G gear supply contracts from India’s top two telecom companies will be especially favorable for Nokia and Ericsson. Both companies saw sharp revenue declines after Jio and Airtel reduced their FY25 network capital expenditures. Airtel, the nation’s second-largest telco, is also preparing to offer 5G services in standalone (SA) mode, initially in a few markets, with plans to eventually go national. This will be achieved through partnerships with handset original equipment manufacturers (OEMs).
Unlike Jio, Airtel has been using the non-standalone (NSA) mode to offer 5G services. The NSA mode utilizes existing 4G infrastructure along with the 3.5 GHz 5G spectrum to deliver 5G speeds. However, Airtel’s decision to also offer 5G on the SA mode is significant as a large portion of its 4G traffic is shifting to 5G due to the increasing demand for next-gen mobile broadband services.
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Axis Capital anticipates Airtel’s capital expenditure intensity to remain higher than Jio’s in the coming years due to the SA transition. Jio had initially opted for the SA mode for 5G, where all its infrastructure and cell sites transmit only 5G signals.
Jio is estimated to have spent over $25 billion on purchasing 5G airwaves and rolling out pan-India 5G networks over the past two years. Airtel, on its part, had initially spent around $10 billion on 5G airwaves and network rollouts. In the recent auction too, Airtel was the biggest 5G spectrum buyer, acquiring airwaves worth Rs 6,856.76 crore.
