Airtel's multi-pronged 4G strategy: Bharti steps up spending, to shut 3G

With 4G service increasingly defining the mobile ecosystem across the country, telecom major Bharti Airtel is likely to bring down the curtains on its 3G service in the next 3-4 years. The company also raised its estimate of capital expenditure for FY18 to Rs 25,000 crore, from the earlier Rs 20,000 crore to expand and strengthen its 4G network. Besides that Airtel would also transfer the optical fibre business to its wholly-owned subsidiary Telesonic Networks for a valuation of up to Rs 5,650 crore, according to a regulatory filing on Wednesday.

Nilanjan Roy, its global finance head, said as there was an explosion of data traffic in India, the company had decided it should hasten the roll-out of fourth-generation (4G) technology, beside the building of additional capacity and fibre connectivity. 

Another top company official told PTI that Airtel will reframe the spectrum linked with 3G for 4G services in the next three-four years. 

Analysts say despite a 76 per cent drop in net profit for the September quarter, the Sunil Bharti Mittal-led company has shown strong defences against Reliance Jio. 

Here are the key developments so far:

1. Capex estimate: As Airtel raised its estimate of capital expenditure for this financial year to Rs 25,000 crore, from the earlier Rs 20,000 crore, Roy said a lot of the capex was going into investing in the radio networks, primarily 4G, in transmission and fibre backhaul.

Airtel added data subscribers, with data volumes growing 66 per cent from the June quarter and average usage reaching 4 GB per subscriber. However, JP Morgan says despite data volumes rising 440 per cent year-on-year and voice minutes going up 40 per cent, Airtel’s India wireless revenues are down 17 per cent over a year, showing the need for monetising the rising usage. 

Ebitda margins from Africa were 32.4 per cent, the highest ever; these had never crossed 30 per cent prior to this quarter. Africa has also registered impressive revenue performance, of nearly seven per cent growth from the earlier quarter. Read more 

2. 3G shut down: Airtel will use 2100 megahertz band, which is used for 3G services, for 4G services. Gopal Vittal, MD and CEO, India and South Asia, Bharti Airtel said that in some telecom circles the company has installed modern 3G equipment which can support 4G services but the initially deployed equipment for 3G services will need to be replaced. "Where we have the second carrier of 3G or third carrier then through the flip of software you get incremental capacity on 3G. Most of that spectrum will finally go towards 4G for which we will need to have radio units," Vittal said. Read more 

3. Optical fibre business transfer: Airtel will transfer the optical fibre business to its wholly-owned subsidiary Telesonic Networks for a valuation of up to Rs 5,650 crore. The optical fibre business of Bharti Airtel includes both underground and overground fibres. Bharti Airtel said it is transferring the cable business based on cash consideration of Rs 4,564.7 crore. It would be subject to upward adjustment on account of incremental capital expenditure, working capital and the like incurred by the transferor company up to the date the deal is signed. Read more 

4. Markets: The Bharti Airtel stock opened at Rs 544, 1.1 per cent higher than Wednesday's close of Rs 538. 

The  stock on Wednesday surged as much as 4.8 per cent to hit a decadal high of Rs 517.45 in early trading on the BSE, despite the company reporting its smallest quarterly net profit in 19 quarters. This was the stock’s highest trading level since December 2007. Read more