Handset affordability lags 5G network rollouts in telecom sector: IIFL Capital Services

20 Jul 2023 , 10:44 AM

In this note, analysts of IIFL Capital Services take a closer look at the 5G handset market. Their industry interactions suggest that 5G handsets crossed 50% of smartphone shipments for the first time in 2Q2023 and that installed base crossed 100mn (~13% of 4G). However, they estimate that Average Selling Price (ASP) of 5G phones (ex iPhones) is still high around US$300. With no 5G handsets priced below Rs10k yet, JIO’s possible 5G phone launch around Diwali will be keenly watched. Separately, analysts of IIFL Capital Services survey of 80 5G models in the market indicates that 70 support 700MHz; handset ecosystem in this band is no longer a constraint for JIO. While JIO and Bharti cumulatively have nearly doubled 5G BTS count in the June quarter, the uptake of 5G will be determined by handset affordability and retail use cases.

5G BTS count nearly doubled in Q1FY24; handset uptake more gradual: 

DoT data suggests that JIO and Bharti have deployed 275k BTS as of 2nd July, a near doubling from 2nd April. 5G handsets rose from 31% as of proportion of total smartphone shipments in Q1-2022 to 45% in Q1-2023. Industry sources suggest that this crossed 50% in Q2-2023 and that installed 5G base recently crossed 100mn (~13% of 4G user base). 

5G handsets still relatively expensive: 

While US$435 ASP for a 5G handset reported by IDC looks very high, this also includes iPhones (~15% of 5G shipments but at substantially higher ASPs). Excluding iPhones, analysts of IIFL Capital Services estimate that ASP is still relatively high around ~US$300.

Analysts of IIFL Capital Services handset survey corroborates the above; also indicates that 700MHz support no longer a constraint: 

Key takeaways from analysts of IIFL Capital Services survey of 80 5G handset models available in India are: 1) None of them are priced below Rs10k. 2) 5G handsets start at Rs10,690. 3) Only 17 models are priced below Rs15k. 4) The largest concentration is in the Rs20k-30k price band with 24 models. In late 2022, 700MHz band (used by JIO) had a less-developed handset ecosystem; this is no longer a constraint with 70 out of 80 handsets now supporting this band. Decent support for 900MHz 5G (67 out of 80) augurs well for Bharti whenever it deploys SA 5G on this band.