India Boosts Telecom Infrastructure

TRAI recommends more spectrum and resource sharing to meet rising data needs and prepare for future technologies.

TRAI Pushes for Spectrum and Sharing

India's telecom regulator, TRAI, is recommending significant changes to boost the nation's digital infrastructure. These include making more spectrum available for auction and allowing broader sharing of network resources. The aim is to clear network bottlenecks, support the move towards technologies like 6G, and require telecom operators to rethink their strategies and financial planning.

TRAI's latest proposals target key areas for improvement. The regulator suggests auctioning additional spectrum across various bands and extending the validity of important bands like 600 MHz to meet growing data demands. TRAI also wants to allow more spectrum sharing, leasing, and comprehensive sharing of both active and passive network infrastructure between service providers. This includes sharing core network elements, a notable relaxation of previous rules. These steps are designed to encourage efficiency and competition, potentially lowering entry barriers. For major players like Bharti Airtel (NSE:BHARTIARTL), which recently traded around ₹1,840-₹1,860 with a market cap over ₹11.2 lakh crore, the focus will be on optimizing current assets and capital spending. However, Vodafone Idea (NSE:IDEA), with a market cap near ₹1.04 lakh crore and ongoing financial struggles, faces a difficult path to capitalize on these changes.

Industry Shifts: Efficiency, Broadband, and 5G/6G

Encouraging spectrum sharing and leasing aims to get more use out of limited radio frequencies. While this could reduce the need for operators to buy expensive spectrum licenses, the costs to set up and run these shared systems are still high. Bharti Airtel, with a trailing twelve-month P/E ratio between 30.55-36.62, seems better equipped for these investments than Vodafone Idea. Reliance Industries' Jio, backed by a parent company with a market cap exceeding ₹16.3 lakh crore, likely has ample funds for expansion. Overall, the Indian telecom sector's market cap is around ₹15.58 lakh crore, with an average P/E ratio of about 33.0x.

The sector is also seeing a major shift towards fixed broadband. In the last fiscal year, a record 17 million new users joined, using a mix of fiber and fixed wireless access (FWA). This signals a strategic move beyond mobile-only services. Analysts expect the Average Revenue Per User (ARPU) for the sector to reach ₹200-₹220, with another tariff increase possible by July 2026, highlighting efforts to boost revenue across all services.

India is also preparing for 6G technology, with measures like extending the 600 MHz band's validity. Additionally, TRAI has provided guidelines for private networks, aiming to open up opportunities for enterprise 5G. However, this segment is still in its early stages and needs greater effort from all parties to become commercially successful.

Challenges Ahead for Operators

While TRAI's recommendations offer ways to optimize infrastructure, the main hurdle for operators, especially Vodafone Idea, is their ability to execute these plans while facing financial difficulties. Vodafone Idea continues to lose subscribers, reportedly by about a million each quarter, and its financial losses are evident. Its future heavily depends on securing new funding and successfully managing capital expenditures. Bharti Airtel, though financially stronger, has recently seen a short-term dip in performance despite long-term gains.

The shift to 5G and future 6G requires massive investment. Although much of the 5G capital expenditure has already been spent, the industry's total debt is expected to reach about ₹6.6 lakh crore by March 2025. Concerns exist about the return on these investments, partly due to the lack of clearly profitable retail-focused 5G uses and the cost of customer devices. Profitability will depend on increasing ARPU and developing new revenue streams, but competition remains fierce.

A common customer complaint persists: poor indoor signal quality. TRAI's suggestions to incorporate indoor digital infrastructure during building design have been accepted by the government. However, widespread implementation will take time, leaving many users with inconsistent connectivity.

Outlook for India's Telecom Sector

India's telecom sector is expected to grow significantly, with revenues projected to reach USD 72.32 billion by 2034, growing at an annual rate of 7.48%. Key growth factors include the expansion of 5G networks, a growing subscriber base expected to surpass 1 billion 5G users by 2031, and increased adoption of fixed wireless access and broadband services. Analysts generally view the sector's long-term potential positively. Bharti Airtel is often cited for its leadership and financial strength, while Vodafone Idea's path forward relies on securing funding and turning operations around. The focus will remain on increasing revenue per user, investing capital wisely, and finding profitable ways to use new network capabilities.