Trust Jioand airtelare both gearing up to launch 5G services after the 5G spectrum auctions closed earlier this month.
- Mukesh Ambani led
Jiohas bought spectrum worth more than double that of Airtel, spending nearly ₹40,000 crore.
- Here we try to decipher why
Mukesh Ambanicwent all in on 700MHz and what he could use it for.
The 5G spectrum auctions are behind us and India’s leading telecom companies – Reliance Jio and Airtel – are eager to launch their 5G services. But one telco has confused its rival, analysts and even the government with its spectrum bids.
Jio’s 5G spectrum bids are just over ₹88,000 crore – more than double what Airtel spent. However, only one spectrum band is responsible for doubling Jio’s total bid: the Mukesh Ambani-led telco acquired 10 MHz of spectrum in the 700 MHz band, costing it more than ₹40,000 crore alone.
Both Airtel and Vodafone Idea stayed away from this band as it is expensive.
Reliance Jio, whose parent company Reliance Industries sits atop cash reserves and a surplus of nearly 4.65 lakh crore, went all in on 700 MHz and paid almost as much as Airtel, for just one band.
The only question is, why? We try to understand the possible motivating factors that prompted Jio to take a leap that his closest rival failed to do.
Will Jio 5G be faster and better than Airtel 5G?
Jio’s 5G strategy is to combine coverage with high speeds – without one the other is useless. Imagine having access to 5G at low speeds, or a super fast 5G network that loses signal every time you blink.
The 700MHz band gives Jio coverage, the 3.5GHz band gives it capacity, and the 26GHz mmWave band gives it speed. Together, these bands provide a 5G network that is both fast and reliable.
For now, Airtel is relying on its mid-band spectrum acquisitions to offer 5G services. Along with the 3.3GHz band, the telco has enough to get started, but analysts think it may need to acquire spectrum in the 700MHz band at some point.
Why did Jio buy spectrum in the 700MHz band?
The 700MHz band is one of the best when it comes to coverage. The range extends to 8-10 km from tower to tower. This can prove very useful for rapidly expanding coverage in rural and remote parts of the country, and it also provides superior indoor coverage.
“With Jio acquiring 700MHz, we believe the company is well placed to roll out standalone (SA) 5G. The advantage of SA 5G is that the company could offer the true low-latency applications, such as slicing. This is difficult for his colleagues to offer given the lack of spectrum (telcos cannot roll this out on 4G bands),” said a BofA Securities report.
The downside of the 700MHz band is that not many smartphones in India support it yet, which means that Jio will have to help develop the ecosystem in collaboration with smartphone companies.
“While 5G SA still lags behind in handsets, equipment and applications, we believe Jio is better placed than its competitors to offer differentiated services. This could help the company rip off high-end customers from its competitors, likely increasing competition at the high-end,” the report added.
What is the use of the 700MHz band?
The 700MHz band offers low latency, allowing Jio to use the 5G network for things like remote operations, drone applications, robotics and other machine-to-machine functions.
This puts the telco in a good place to offer its services to the corporate segment, which experts believe will bring in the most money.
Also, the 700 MHz band offers a drastically greater range of 8-10 KM compared to the 3.5 GHz band which offers a range of 1-3 KM, and the 26 GHz band with a range of up to 200 meters. This will allow Jio to roll out its 5G network much faster as it needs fewer towers to start with, giving it a competitive advantage over Airtel and Vodafone Idea.
What do the analysts say?
A report from Kotak Institutional Equities states that Airtel will have to acquire 700 MHz spectrum in the future if coverage and network quality lag behind Jio. This could work for the Sunil Mittal-led telco as it frees up cash reserves in the present.
“From a purchasing power parity (PPP) perspective, the price of 700MHz looks expensive for India, but it gives Jio a huge first-mover advantage in the rollout of SA 5G, which could help high-end customers of peers stripping it off,” says BofA Securities. report added.
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