Sri Lanka, the land of Ceylon tea, is among the top South Asian nations in various demographic and economic indicators. It maintains a high literacy rate of more than 90 per cent, and an impressive GDP per capita: $4,102 in 2018. The country’s telecom industry is also on a good footing with the presence of various established groups like Axiata, Bharti Airtel and CK Hutchison contributing to mobile subscriber penetration of almost 150 per cent, and 4G coverage of 95 per cent of the population.
This makes the country a prime candidate for 5G, right?
Maybe. But, two key realities on the ground suggest a most complicated story.
Limited 4G Network Options
While Dialog and Mobitel launched 4G in 2012, in line with players in other countries, Hutchison was a late entrant in the space (launched as late as Q1 2020). Airtel, meanwhile, has not even forayed into the 4G market.
Limited 4G Penetration
Eight years post-launch, 4G services have barely scratched the surface. Subscriber penetration remains at 14.66 per cent as of Q1 2020 and is expected to reach 33.1 per cent by 2025. That’s strong growth, sure. But it compares poorly to other South Asian nations including Bangladesh, where penetration is expected to outperform Sri Lanka to reach 46 per cent by 2025 (see chart, below, click to enlarge).
But, if Sri Lanka benefits from solid fundamentals, we must ask why 4G uptake is so low. Let’s look at a few key factors.
- High Taxes: Taxes (such as service and telecom levies) make mobile internet usage an expensive affair. For 1GB of data, the poorest 20 per cent of the country’s population spends approximately 5.3 per cent of their monthly income. This figure increases to more than 7 per cent for a 5GB data
- Low digital literacy: At the end of June 2019, digital literacy (id est, can people use a computer, laptop, tablet or smartphone on their own) in Sri Lanka stood at only 44.3 per cent.
- Affordability (or lack thereof): While launching Hutchison’s 4G services, its CEO acknowledged affordability and limited business usage as uptake inhibitors: “Although 4G network services have already been launched in Sri Lanka by other operators several years ago, its mass adoption till recently has been limited due to several factors including the availability and affordability of 4G phones, and the requirement of applications that really needed 4G (instead of 3G) bandwidth.”
- Stagnant smartphone penetration: 4G without smartphones doesn’t really make sense. Smartphone penetration being flat in the range of 40 per cent to 50 per cent since Q3 2017 hasn’t helped 4G’s prospects.
So, what is the industry doing to make mobile internet and 4G space more attractive?
To create a healthy, competitive 4G environment for operators and make 4G more accessible to the masses, the government has been taking various initiatives.
In late 2018, it removed floor rates for voice calls to improve the health of telecoms. The move was aimed at promoting cost optimisation and allowing more competition. In October 2019, the National Digital Policy was released, setting targets of at least 70 per cent internet penetration, more than 95 per cent indoor and outdoor high-speed broadband, 4G and 5G coverage, and various other development parameters.
Towards the end of 2019, we saw a reduction in Telecommunication Levy, a direct tax, by 25 per cent, bringing it down to 11.25 per cent. And this year? Already in 2020 we’ve seen the Telecoms Regulatory Commission re-initiate trials with all major operators to encourage the launch of 5G services which further connect with Smart Nation vision.
What does the future hold?
Well, that’s pretty much the most important question. Right?
Clearly, Sri Lanka could be a successful 5G market. But, first, fundamentals need to be addressed and 4G’s potential needs to be fully tapped. Better awareness and marketing for smartphones will help. Improved connectivity would too, especially in suburban and rural areas. Fixed wireless offers could help to move the market along.
How will we know if this is working? What are we watching? CAPEX and new product offers. Operators have announced network investment plans and we’ve seen those support 4G expansion. As we move into a post-pandemic world, we need to see how these continue.
Yes, as much as network investments are important, they are meaningless without solid product offerings. Here, too, we’ve seen progress, particularly as new 4G launches spur competitive offerings. Think Hutchison introducing new product offerings across data, voice and other services targeting specific customer segments soon after moving into 4G, along with launching post-paid packages for consumers for the first time in 20 years.
5G in Sri Lanka may not seem sensible today, but continued execution on these fundamentals will set the stage for its success.
– Ankit Sawhney – research manager; Charu Paliwal – team lead, GSMA Intelligence
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.