It said that while the structure announced was different from what was anticipated earlier, "nevertheless in our view this would not be a hindrance to separate listing of digital assets in the long term".
The corporate structure rejig announced by Bharti Airtel to sharpen focus on digital may lead to potential savings on statutory levies for the company and make the organisation AGR-tax efficient, analysts said on Thursday.
The comments came as Bharti Airtel announced a new corporate structure to sharpen the company’s focus on rapidly unfolding digital opportunities while enabling it to unlock value.
The new structure involves Airtel Digital Limited folding into the listed entity Bharti Airtel. Moreover, all the telecom business will be housed in a newly created entity — Airtel Limited, a wholly-owned subsidiary of Bharti Airtel Limited.
It is aimed at bringing all digital assets under one entity and focusing on growing it fast and “by pushing telecom business at the bottom, it will make the entire organisation AGR (Adjusted Gross Revenue) tax-efficient”, ICICI Securities said.
“Clearly, the new structure indicates no immediate monetisation plans of digital assets, and rightfully so, as it is yet to exploit the potential from the business. However, in future, when business becomes large, it can always restructure efficiently to monetise the digital asset,” ICICI Securities added.
The company may benefit from a potential reduction in levies upon the appropriate bifurcation of licensed and digital revenues, Kotak Institutional Equities said a note.
Bharti Airtel announced a new corporate structure, “similar to Jio Platforms”, Kotak said while adding that there could be “modest potential savings” on statutory levies from an appropriate bifurcation of revenues.
“In our view, Bharti’s new corporate structure will enable it to recognise a portion of revenues at the parent entity in lieu of the digital services provided to mobile, broadband and enterprise customers, while transferring the remaining amount pertaining to the licensed connectivity business to Airtel Ltd on an arms-length basis, in a way similar to Jio,” it explained.
This will reduce payment of statutory levies, licensing fees and spectrum usage charges, pertaining only to connectivity business revenues, Kotak concluded.
Telcos have been both partnerings with other digital providers as well as developing in-house Digital assets to enhance customer stickiness as well as upsell and cross-sell solutions, JM Financial observed in its report.
“The separation of the telecom assets into a separate legal entity would enable Bharti to reduce statutory dues (which are calculated based on total revenues), and in the long term enable separate monetisation of the digital assets,” JM Financial pointed out.
It said that while the structure announced was different from what was anticipated earlier, “nevertheless in our view this would not be a hindrance to separate listing of digital assets in the long term”.
As part of the new corporate structure outlined on Wednesday, Bharti Telemedia, the 100 per cent arm operating DTH services will sit alongside Airtel Limited for now. It is intended to eventually fold the DTH business into Airtel Limited to move towards the vision of converged services.
The company has approached the government to seek clarity on licensing policy given that carriage that is telecom and DTH is currently being regulated and managed under two separate ministries of communications and I&B, respectively.
Airtel Payments Bank will remain a separate entity under Bharti Airtel. All of the company’s infrastructure businesses such as Nxtra and Indus Towers would continue to remain in separate entities as they are currently. The same would be the case with international subsidiaries and affiliates.