Telecom products – A way to play 5G, IOT, drones, connected cars, smart transport opportunity

joinjp2003 · January 12, 2024, 7:37am

Part -1 Summary rationale:

50-75% growth over the next 5 to 7 years: Industry growth in India for many of the telecom products is likely to be in 50-75% range from FY23 to FY30 (exhibit 1) and global market size for these products is likely to be over USD 1 trillion during the same period. Indian players have opportunity to play both domestic and global (exports).

Exhibit 1 (Industry size and growth)

Source: https://www.bseindia.com/xml-data/corpfiling/AttachHis/54c5c59d-cd87-417a-9539-9e79eb9a3748.pdf

What is driving this growth -pillars of growth?
- 5G deployment
  - Towers – for 2G/3G/4G/LTE – large towers which had range of few kilometres can not be used due to lower range of 5G as it uses higher frequency vs. 4G. To reach similar number of users industry shall need about 10 times more towers. However, current large towers has its own limitations and cost. So existing network of large towers (about 7.5 lakhs) will be complemented by millions of small cells. My estimate is that India shall need about 40 Lakh small cells as 5G gets deployed through out India. This puts market size of small cells at 1,60,000 crores (assuming each small cell costs USD5000)
  - Customer premise equipment (CPE) – As we use routers today which connects to cable, customers using 5G to meet their broadband needs shall need Fixed Wireless Access (FWA) CPE. Just to give context US telecom companies launched FWA services in 2020. Their customer count in 3 years has grown 200 times from 35K customers to over 7 million in 2023. Just to give a context RJIO alone aims to reach 200 million households in India (though Airtel has contested that market is not that big).
  - Ease and cost of benefit of installation to ramp up quickly – Complete fiberisation is time intensive and costly affair. For laying cables lots of permissions, labours and maintenance is required. Large towers also are almost 20 times costlier than small cells. Small cells can be installed on street lights, poles, advertising hoardings, bus shelters etc.
- Increased use cases – 5G is going to increase the use cases owing to its speed and reachability (through FWA). 5G shall be used for home internet, IOT devices, drones, Industrial usage (automation and remote maintenance), smart city, connected cars, public safety, transport, and logistics.
- Government support: Localisation needs, incentives (PLI) and digitisation.
- 5G and some related use cases are touted to result in energy effciency.

Disclaimer: If you take any inferences from this write-up on stocks, then please note that I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose and my for my own future references. All the names mentioned/infered here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation.

joinjp2003 · January 12, 2024, 9:21am

Part -2 – Deep dive – FWA CPE

Let’s delve into some of the key telecom products:

5G FWA (Fixed Wireless Access) – touted as “killer app” for 5G

Fixed Wireless Access (FWA) uses 4G and 5G radio spectrum (the same as used for mobile phone services) to provide wireless broadband connectivity between two fixed points, for example a mobile network cell tower and a FWA device in a customer’s home. (Source: https://www.nokia.com/about-us/newsroom/articles/fixed-wireless-access-explained/#:~:text=What%20is%20FWA%3F,device%20in%20a%20customer’s%20home)

Market Size:

India: Addressable market size is 70 million households who are in the upper-mid income and high-income segments (over $8,500) which are expected to increase to 200 million households by 2030. Currently only 33 million households are connected to wireline broadband. Source: Jio ahead of competition in preparedness for 5G FWA deployment: Emkay, ET Telecom.

So as of today also there is gap of 50% owing to lack of fiberisation and related issues in many towns and villages in India. My estimate is that India is likely to have 50 million FWA customers by 2030 which means an opportunity size of 40,000 crores for domestic FWA CPE manufacturers.

Global: Ericsson predicts that globally there will be 330 million FWA connections by 2029 from over 130 million in 2023. This puts FWA devices revenue opportunity of 2.6lakh crore (over USD30 billion) globally, including India, by 2029.

Indian players are already exporting some network equipment so they seem competitive.

This is just one product puts overall opportunity of USD30 billion until 2029/30 growing at ~20% globally. While India domestic market shall grow in folds not in %.

Where: This can be used in remote places where fibre network is not available. In my personal opinion the product sounds so convenient (no cables required) this can even be successful in fibre dominated areas.

Why: Being wireless, it can reduce the massive upfront cost and time needed to secure permissions, dig trenches, lay last-mile fiber, and deploy technician-installed equipment at households and businesses. Moreover, operators can often roll out FWA using their existing mobile wireless networks and fiber backhaul infrastructure, further reducing costs. These factors have opened up markets for broadband services in places where it was previously unavailable, as we have seen in the Philippines, South Africa, Sri Lanka, and Turkey. (source: Fixed wireless access market growth | Deloitte Insights)

Growth? What happened when FWA implemented by two large telco players in the USA?

Source: Ookla: T-Mobile and Verizon lead in U.S. 5G FWA – Technology Blog

Verizon and T-Mobile had combined FWA customers at 35K in Q32020 by Q3 2023 it was ~7 million customers. A 200x growth in last 3 years and likely to continue to grow at over 30% until 2030.

In India AirFiber is launched by Jio and Airtel in last quarter of CY2023.

5G FWA is likely to grow at 90% annual growth rate from 2022 to 2025). (Source: #ET5GCongress: 5G FWA a huge opportunity in India as fixed broadband penetration is low: GSMA’s Peter Jarich, ET Telecom)

Beneficiaries:

Equipment makers (Frog Cellsat, HFCL, MNCs like Qualcomm, Ericson Nokia etc.), integrators (HFCL, Kore Digital, and MNCs), Network operators (RJio, Airtel), Tertiary beneficiaries - OTT and content providers/owners (Netflix, Youtube, Saregama, Tips), Digital marketing (Connected TVs, Affle), IOT, drones and maps providing companies.

Who is likely to be disrupted?

Internet service providers, Cable/DTH companies, Satellite networks (Nelco? Though I am not very sure on this), broadcasters (TV channels like Zee, CNBC etc.), traditional advertisers?

I welcome industry experts to share the knolwedge.

Disclosure: invested in HFCL, Tejas and Frog Cellsat. Transacted in these in the last 30 days.

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation.

banskt · January 14, 2024, 6:42pm

I am not an industry expert, but I am enthusiastic about network products. The telecom market is currently undergoing a shift from Cable/DSL to Fiber/5G-FWA. Let’s take a (over)simplified look at the pros and cons of both technologies:

5G Fixed Wireless Access (FWA):

Pros: Easy deployment in 5G-covered areas, no need for aerial or underground cabling, suitable for rural areas lacking broadband infrastructure.
Cons: Limited upload and download performance based on spectrum, capacity and speed limitations due to competition for cellular network bandwidth.

Fiber-Optic Broadband:

Pros: High-speed and reliable performance, symmetrical upload and download speeds, future upgradeability with modular components.
Cons: High deployment cost, particularly in areas with lower population density, leading to longer time for financial breakeven and challenges in achieving positive average revenue per user (ARPU).

Navigating the tech world is inherently challenging when making predictions. The landscape often takes unexpected turns, and hindsight can make even the most informed forecasts seem off. Yet, I believe an equilibrium will emerge once the initial hype settles down, as there are complementary use cases for both technologies. Fiber will remain the optimal choice in areas suitable for cost-effective deployment, while 5G FWA will become a logical choice for challenging areas with lower population densities. The ones to lose in this battle will be the cable/DSL internet companies.

Amidst these developments, another emerging solution is gaining traction: Satellite Internet. Unlike 5G FWA, which relies on fiber-connected cell towers, Satellite Internet stands out as a genuinely wireless solution. It transmits and receives data via satellites. Use case for this service was extremely limited. It was useful only in areas, where there is no other option – deserts, inhabited land, surface affected by some extreme event (war, hurricane, flooding, etc.) – because of poor latency and high cost. Since 2014, new satellite internet constellations are being deployed in low-earth orbit (LEO, below ~2000km) to enable low-latency internet access from space. Today, in 2024, Elon Musk’s Starlink provides slightly better downlink speed and slightly worse latency as compared to 5G network. The future relationship between 5G and Satellite Internet is uncertain – whether they become competitors or collaborators. Examples of collaboration include Omnispace’s vision to build a 5G non-terrestrial network and T-Mobile’s vision to connect with Starlink, while instances of competition involve challenges to 5G access in the 12GHz network. The dynamics of this interplay will likely shape the future of connectivity.

Another crucial aspect of these network technology stacks is this: Fiber and Satellite operate independently, while 5G FWA relies on a backbone, whether it be fiber or satellite. Ultimately, I think everything is better together – a world where a 5G network is seamlessly integrated with the backbone support of both Fiber and Satellite connectivity.

joinjp2003 · January 15, 2024, 2:31am

Thanks Saikat, @banskt, for the insights. I have not delved much into satelite hence, as of now i have limited understanding of its impact of telco products. Also one of the risk I note is the health impact of small cell towers.

Deep dive continues – Small cells - Base Station Antennas BSAs

What?

Base station antenna radiates and receives the signal from user. Small cells boost the signal from macro-cell (traditional large towers). Hence, its worth noting that small-cell is not going to replace traditional large towers.

Source: https://tec.gov.in/pdf/Studypaper/TEC%20Committee%20Report%20on%20Rollout%20of%20small%20cells.pdf

Market size and growth:

BSAs market is USD9 billion dollar and it is likely to grow by 17% CAGR to reach about 28 billion by 2030.

Use cases – Large venues (stadiums, apartments, societies), connected cars, and autonomous cars (vehicle-to-everything (C-V2X), smart cities, smart transport,

Number of small cells required:
India shall need 5 to 10 times of existing large tower network (which stood at ~7.5 lakh towers in 2023). Hence, India will need about 40 to 80 lakh small cells as of today to completely deploy 5G in India. I think by 2023 only 3-4 lakh small cells were deployed. This puts market size of small cells between 1.6 lakh crores to 3 lakh crores (assuming cost per small cell at 5000rs per cell). There shall be a natural growth of the market as well. For small cell to grow India needs increased fiberation of up to 70% which is currently in 30-40% range. Hence, There is a room for growth for fiber (estimated in 11-12% range), large towers (5-15%), and small cells (30%+ for the next 3 to 5 years).

Source: Macrocell vs. Small Cell vs. Femtocell: A 5G introduction.