While 5G telecom service has been touted as a leap forward for consumers offering up to 100 times higher speed, it can also drastically change the way businesses run their day-to-day operations and processes. Telcos are looking to cash in on the enterprise opportunity even as they roll out the new-generation services to the nook and corners of the country.
Last month, Airtel became the first telecom player to announce a partnership for deploying a 5G private network. With Tech Mahindra, the country’s second largest player will deploy a captive private network at Mahindra & Mahindra’s Chakan facility, making it the first 5G-enabled auto manufacturing unit in India. Airtel had earlier announced the successful trial of India’s first 5G private network at the Bosch Automotive Electronics India (RBAI) facility in Bengaluru.
5G private networks could be the next disruption in the Indian telecom industry as telcos eye a huge pie of the enterprise segment. Adani Group has also acquired 5G spectrum for setting up its own private networks and for other enterprises. Reliance Jio is also aggressively focusing on its enterprise suite of services. Though Vodafone Idea has not launched 5G services, it has been eyeing opportunities in the enterprise segment which is still under tapped.
Reliance Jio has been really competitive. They recently won a deal from Indian Oil to deploy an SD-WAN solution across IOCL’s 7,200 retail outlets.
Nishant Bansal, Senior Research Manager Telecom Insights, Asia Pacific at IDC “With Jio having capability for standalone 5G with its 700 MHz spectrum, they will be fiercely competitive to Airtel in the enterprise segment. Vodafone survival is at stake at the moment, they need to sort their funding issues first before everything else.”
With network transformation in centerstage, data communications has assumed critical importance. This is where 5G will fit in to enable enterprises, be it small or large, transform itself with change in times and technology. And Airtel is best positioned to tap on this opportunity, analysts say.
“Airtel, like most other tier one telcos across the world, has been focusing on growing enterprise business,’’ said Amresh Nandan, Vice President, Analyst (CSP Industry) at Gartner. “And the reason is simple. On the consumer side, while it contributes 80% or more at the industry level, the growth potential lies in enterprise and SMB segments. In many markets, consumer revenues have gone down forcing telcos to look at alternate models.”
Airtel has become a key player in the telecom industry despite the aggressive competition unleashed by Reliance Jio with its entry in late 2016. But with a focus on quality customers, new business units for enterprises, the company has managed to create a robust model to script a strong comeback.
Enterprise – A Big Opportunity
Enterprise market is estimated to be at Rs 75,000-Rs 90,000 crore and has doubled in the last few years. For Airtel, enterprise contributes around 19-20% to the overall business and growing rapidly.
“This business (Airtel Business) is a jewel in our portfolio. We have delivered sustained profitable and competitive growth in this business. Based on the results declared by the other players, it is clear we have solidified our position and gained market share,” Gopal Vittal, CEO and MD, Airtel had said in the earnings call for the second quarter.
Airtel currently has about 12 large data centers and 120 edge data centers across 65 cities which are mainly Tier 2 and 3 starting from Jammu to Guwahati to Rajkot etc. Over the years, Airtel has focused on four business units – Nxtra, largest data center business, Internet of Things (IoT) where it has 13 million devices connected, cloud communication platform and cloud and security business. Airtel Business, the B2B arm of Bharti Airtel, serves 1200 customers globally, which are large enterprises coming to India, mainly the internet companies.
“With 5G coming in, there are a lot of use cases which are enterprise driven. We have built the right capabilities based on the infrastructure side, based on digital platforms. The unique part is customer insights…our business is based on their feedback. We have focused on a few segments and expanded the business beyond connectivity based on the customer insight”, Ajay Chitkara, CEO, Airtel Business had told ETTelecom in a recent interview.
Bansal says Airtel’s enterprise business has been growing at a CAGR of 23% and we expect a good growth to continue in the coming years led by 5G.
Private networks will be one of the big opportunities in the enterprise space. The government has also allowed enterprises to acquire spectrum for setting up of their captive private networks but final modalities are yet to be announced.
A private network is a local area network that uses cellular technologies to create a dedicated network with unified connectivity with a specific geographic area. It is intended for non-public use—especially for large manufacturing complexes, enterprises etc. Private networks have the capabilities to unleash the potential for operational transformation, automation and efficiencies for enterprises.
Telcos have the first mover advantage with private networks as the government left a significant loophole in its policy where they will conduct a demand study on the 5G spectrum requirement by private enterprises with no timeframe set for commencement and completion of such study.
CHALLENGES
5G will act as a catalyst for enterprise transformation but right now only few use cases have emerged in some sectors including mining, healthcare, manufacturing etc.
Few telcos have started working with utility companies or mining companies or heavy industry in terms of implementing network solutions on the edge to automate things in a mine on an automobile shop floor.
Experts say there are already existing use cases being implemented at the worldwide level and there have been some more proof of concepts as well. “In the first three years of 5G, it (private networks) will not have a major impact on the enterprise revenues of telcos because 5G itself needs to be stabilized. You need use cases on 5G to be operational. Telcos need to work with enterprises to make some of these practices really immersive and have a return on their investment,” says Purushothaman KG, Partner, KPMG India.
“There are two important things from telco perspective – enterprises may be aware of 5G but whether they are aware of those use cases and what kind of benefits these use cases bring to them is a big question mark. Telcos will need to run a significant 5G use case and its benefits awareness campaign among enterprises in order to convince them to open up their wallets. Secondly, enterprises are going in cost saving/cost cutting mode in 2023 with job cuts/freezes and limiting capex so whether enterprises are going to be willing to invest in 5G use cases is also a question,” Bansal said.
In terms of competition, Jio remains the biggest competition for Airtel in India with Vodafone Idea being a distant third.
“It was important for Airtel to have a complete ecosystem of solutions, along with the fight with Jio. They have mentioned many times that they lost the initial race in 4G to Reliance Jio. And they didn’t want a similar thing to happen in 5G. And, in fact, they wanted to race ahead of Jio for 5g launch, and they announced the 5G launch with more cities initially and they are being very aggressive about it,” Bansal adds.
Most telcos have to do a lot in terms of improving their go to market strategy, doing sales transformation, and being able to sell solutions. So far, they have been selling standardized products. For example, when they are selling voice or data or broadband or even enterprise connectivity services, these are standard products you build once, and you can sell it 1000 times or more. “However, when you move to ICT products with IoT, edge computing, cloud and network slicing – how do you offer solutions for digital transformation of various industry verticals? That’s where we see focus now and that’s where work has started happening,” Nandan adds.
“Airtel has also expanded their partnerships with hyperscalers. These are the right investments considering the enterprise demand. The key point here is the need to change the way they go to the market and the way they sell. Enterprises need a business solution for the problems. And an edge or private mobile network is a component of that business,” he said.
Enterprises will give telcos significant revenue but for enterprises to overshadow consumer revenues is not happening anytime soon as it’s their bread and butter.
Nandan says at the industry level, telcos have been investing in enterprise growth for quite some time, however the overall contribution of enterprise revenue to the industry continues to be flat. “In this composition, standard or traditional network connectivity related services revenue has been going down. The new software-defined and non-connectivity business revenue (such as from IT services) have been going up. And that is what is mostly leading tier 1 to what telcos are now trying to build-on.”
With the launch of 5G, enterprise business is expected to become a huge revenue generator for the telecom industry, especially private networks.
“We are just getting started”, Chitkara added, referring to the massive opportunity in the enterprise segment which will enable businesses across industries to transform.
