About a third of wireless data users in India, or around 300 million subscribers, are expected to use 5G services by March 2025, as against an estimated 20-25 million as of March 2023, according to CRISIL Ratings. The balance two-thirds would continue to use 4G.

Subscribers of 5G services will provide a fillip to data consumption because they would uptrade to higher data packs for better speeds, which will drive up overall average revenue per user (ARPU) and return metrics for telecommunication companies (telcos), the ratings agency says.

Telcos are on a 5G roll-out spree across India, having already launched in over 300 cities since October 2022. However, mass adoption would gather pace when retail use-cases get unlocked, says CRISIL. Despite identification of a plethora of 5G-led use cases such as smart classrooms, precision farming and intelligent transport systems, adoption hinges on a significant improvement in network infrastructure, which will happen only gradually over the next few years.

Till then, adoption of 5G services would be largely driven by technology-neutral tariffs being offered by telcos currently. The penetration of 5G device ecosystem among users would also be crucial for uptake of 5G services.

"Currently, about 30-35% of the around 150-170 million smartphones shipped in India annually are 5G enabled. While the share of 5G smartphones shipments will improve gradually, still low initial value proposition and high cost of the gadget versus a 4G phone would restrict overall 5G adoption to around 300 million users by fiscal 2025. Put another way, this would mean only a third of the data users in the country will be plugging into 5G services by fiscal 2025," says Naveen Vaidyanathan, director, CRISIL Ratings.

In contrast, the adoption of 4G services was swift with around 60% data users migrating within two years of launch, helped by better speeds at significantly cheaper tariffs.

"India is already one of the highest data-consuming countries. 5G could accelerate adoption of over-the-top streaming services and online gaming, which would drive data demand further. Consequently, average data usage per subscriber per month is expected to rise to around 28-30 GB by fiscal 2025 from around 20 GB at present," says Rounak Agarwal, team leader, CRISIL Ratings. Agarwal expects customer uptrading because of higher data demand, rising share of post-paid subscriptions and tariff revisions driving up ARPU to around ₹250 over the medium term.

The increase in ARPUs could drive up sector’s return on capital employed (RoCE) to 12-14% amid massive investments of ₹2-2.5 lakh crore planned for 5G networks over the medium term, the ratings agency says.

5G user base

5G user base in India to reach 300 million by fiscal 2025: Report