BackAirtel to invest Rs60,000 crore over 3 years to upgrade network
Airtel will use the money to double the number of base stations and increase its ability to offer high-speed data
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Photo: Pradeep Gaur/Mint
New Delhi: Bharti Airtel Ltd on Monday said that it will invest ₹ 60,000 crore over the next three years to significantly increase its network capacity and ability to offer voice and high-speed data services in what some analysts see as a move to address a data-intensive future, prepare for competition from Reliance Jio, and show it is doing something to address the issue of call drops.
As part of the programme, labelled Project Leap, Bharti expects to replace its legacy networks with compact and efficient technologies, double the number of its base stations to around 3.2 lakh, connect 5 lakh villages (that account for 95% of India’s GDP) with mobile broadband, deploy more than one lakh combination solutions including small cells and Wi-Fi hotspots to decongest cities and deploy new technologies like vectoring to increase home broadband speeds to 50mbps, from the current 16mbps. The project will also see the addition of 5.5 lakh km of international and domestic optical fibre to augment back-end data capacity.
One analyst said the company is just making a virtue out of a necessity.
“Airtel would have had to do this anyway. At the rate that data is growing and being consumed in the country, the back-end of networks would have had to be upgraded to handle this much capacity," a senior executive with a technology company said on condition of anonymity.
“After the 2G networks started in 1994, there was some network transformation done when 3G came in 2010. With the capacity and speed needed for 4G operations, Airtel would have needed to upgrade the back-end and add more towers and other solutions," he said.
Echoing the same sentiment, a Mumbai-based telecom analyst added that the company and its peers have been facing a lot of flak for poor networks and services. “While the fault of that may also be with the slack place to put up towers, packaging this network transformation in such a way also helps fix perception issues that the company has been facing—for call drops among others," he said.
“You also have to keep in mind the amount of money that Jio (Reliance Jio Infocomm Ltd) is putting in. That will also lead to an increase in data consumption," this person added, asking not to be identified.
A recent report from Fitch ratings said that the 2016 credit profiles of the top four Indian telcos would come under pressure amid tougher competition, larger capex requirements and debt-funded mergers and acquisitions.
“The intensified competition will stem largely from the entry of Reliance Jio. We see the industry blended tariff falling by 5-6% as Jio’s entry will arrest the rise in data average revenue per user (ARPU) despite rising data usage, and as voice ARPU continues to fall due to cannibalisation by data," the 20 November Fitch report said.
Bharti expects to fund the project completely through internal accruals and cash flows. Bharti’s capex guidance for the current fiscal is the highest so far, at around ₹ 16,000 crore.
“We spent around ₹ 1.6 trillion on our network since 1995. Of this, ₹ 1.1 trillion came in the last five years," said Gopal Vittal, chief executive, Bharti Airtel Ltd (India and South Asia).
To be sure, as much as 21.5% of Bharti’s second-quarter revenue in India came from data, driven mainly by a 70% increase in data traffic. In the same quarter last year, this number was just 14.5%.
The 10-point Project Leap is already underway, Vittal said. Networks in Kolkata have already been swapped and the company expects to complete 70,000 base stations and connect 2.5 lakh villages with mobile broadband by March 2016.
Another key part of the project is the deployment of lower power-consuming equipment and newer battery technologies, to reduce Bharti’s carbon footprint by as much as 70%, the company announced on Monday.
The telco will also enable its subscribers to understand and monitor the real-time progress of Project Leap in their area, as part of the project.
The upgrade is necessary, said an analyst. “The industry is aware of the poor quality of services and has been taking steps to improve it," said Hemant Joshi, partner with Deloitte Haskins & Sells LLP. “There is continuous upgrade happening as they would need to be able to handle the capacity of data as it grows.
“Data growth has been phenomenal in the last few years, but we are still far behind the curve. In India, we are still using 2.5G and 3G data while the rest of the world has moved to 4G and beyond. The telcos have to be ready to handle that kind of capacity," he added.
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