Eyeing a significant share of the rapidly expanding mobile data market in the country, Bharti Airtel has raised its capex guidance for the current fiscal by around $775 million, to almost $4 billion, a major part of which will be invested on completing its VoLTE expansion by March 2018.
Eyeing a significant share of the rapidly expanding mobile data market in the country, Bharti Airtel has raised its capex guidance for the current fiscal by around $775 million, to almost $4 billion, a major part of which will be invested on completing its VoLTE expansion by March 2018. During the first half of FY18, the company’s capex spend stood at around $2.2 billion. “Considering the explosion in data traffic in India, we believe it is expedient to activate our 4G rollout in terms of coverage and also build additional capacities in existing geographies along with fibre connectivity and backhaul. Consequently, our capex forecast is up from the initial guidance of Rs 20,000 crore to Rs 25,000 crore,” Bharti’s Global CFO Nilanjan Roy said. Speaking at an analyst call on Wednesday, he informed that during the April-September period this fiscal, the company spent Rs 14,000 crore on capex. On the rationale behind increasing the capex, Roy said Bharti’s data consumption in Q2 was a “massive” 780 billion MB, which in itself gives an indication of the opportunities the phenomenon presents. “We believe that practically advancing of these future capex spends to provide the best and widest of broadband data coverage will augment our growth and revenue market share ambition,” he noted saying that data demand will continue to explode led by growth in domestic smartphone penetration. After all, the company believes that smartphones will more than double to over 500 million by 2020.
On capex breakup, Gopal Vittal, MD and CEO, India and South Asia, said, “Lot of the capex is really going behind investing in our radio networks (in India), which is primarily 4G, and investing in transmission and optical fibre backhaul, which is required for heavy data throughput”. On the need for raising the capex, he said that if mobile tariffs continue to remain low, capex will be required for providing a better customer experience. As Bharti has already made the bulk of investments in terms of acquiring spectrum, Vittal said, “Now it’s modular investments that are required as data throughput grows. So we will be putting these modular investments in rolling out more base transreceiver stations (BTS), transmission electronics and backhaul and that is why we worked our guidance (capex) because looking at what’s happening in the rest of the 5-6 months, we feel that the time has come for us to step up those modular investments in order to deliver the right experience”.
Bharti has already launched VoLTE services in Mumbai, Maharashtra, Madhya Pradesh, Chhattisgarh and Gujarat and will cover the rest of the telecom circles by end of FY18. On the response of the entry-level 4G smartphone that it launched in partnership with domestic handset maker, Karbonn, Vittal said the initial response was “very strong”. “Our initial response has been very strong. They (Karbonn) had modest stock in the market, but all that stock has been out. They are ordering more inventory and hopefully that should go through in the coming weeks,” he added. Analysts said the company had released around 1 lakh units in the market after the launch.
On Bharti’s consolidated Arpu declining 6.3% sequentially to Rs 145, Vittal attributed the impact on a combination of three factors – GST of 18%, seasonally weak quarter and some downtrading because of the capped Arpu pricing in the market. Talking about the outlook for bundled offers, he said, “In two years from now, my sense is that 75-80% customers will be on bundled plans. The market is moving in that direction. The advantage from our perspective is that this leads to significant SIM consolidation”. On the stake sale in Bharti Infratel, Roy said that the company board has been authorised to look at whether Airtel can dilute its controlling stake adding that the board will take a call on “how much” and “when”.