Home >companies >news >Bharti Airtel to invest $2.5 billion in FY18, with focus on building 4G capacity
Bharti Airtel CEO Gopal Vittal. Photo: HT
Bharti Airtel CEO Gopal Vittal. Photo: HT

Bharti Airtel to invest $2.5 billion in FY18, with focus on building 4G capacity

Bharti Airtel CEO Gopal Vittal says will invest $2.5 billion in India in FY18, the biggest chunk of which will be used to build 4G capacity, even at the cost of ARPU

New Delhi: India’s largest telecom company Bharti Airtel Ltd will strive to acquire more market share even if this means continuing to take a hit on average revenue per user (ARPU) in the near term, a top executive at the firm said in an investor call on Wednesday.

Airtel will invest $2.5 billion in India in 2017-18, with the biggest chunk of this being used to build the telco’s 4G capacity. Another $500 million will be invested in Airtel’s Africa businesses, the company said.

“In the short-term, we are seeing ARPU compression. In a world of data, what happens is, when a customer gets habituated to data, then moving pricing at a time when there is equilibrium in the market will actually lead to all of that pricing coming back in the form of revenue," said Gopal Vittal, chief executive of New Delhi-based Bharti Airtel.

“So, in the short term, one of the major metrics that we are tracking is... we are going relentlessly after market share," Vittal said.

He added that the move has triggered the decline of “value players" or so-called small operators and a merger between Airtel’s old rivals Vodafone India Ltd and Idea Cellular Ltd.

“We feel that there is an opportunity for us to accelerate our market share even as tariffs come down, which is what happened in the quarter, leading to some revenue pressure," Vittal said.

The merged Idea and Vodafone entity will exceed the 50% subscriber and revenue market limit in at least six licence areas (or circles) and will have to cede share to rivals such as Bharti Airtel to secure regulatory approvals.

Telecom regulations in India that limit maximum market share and overlapping spectrum holdings are among hurdles that Vodafone India, the country’s No. 2 carrier, and No. 3 Idea Cellular will have to deal with as they look to create the country’s largest cellular network with more than 380 million users. The combined market share of the merged entity will be 42%.

Airtel has acquired Telenor India, taking its subscriber base to 307 million and revenue market share to 35.6%.

Airtel reported a 72% drop in quarterly profit on Tuesday, missing analysts’ estimates, as free voice and data services offered by Reliance Jio Infocomm Ltd until 31 March undercut rivals and forced them to slash tariffs.

Its net profit fell to Rs373.4 crore in the three months ended 31 March from Rs1,319.2 crore in the previous year.

Vittal said that India’s smartphone penetration will double in the next three years to up to 700 million.

“That, in effect, has a real big impact on data growth," he added.

In the call, Airtel continued to blame it on Jio, and said that in the short to medium term, predatory pricing is impacting all stakeholders, including lenders with a debt exposure of over Rs4.5 trillion to the industry, customers and telcos.

It is also hurting the government’s share of revenue of telcos.

Bharti Airtel’s average monthly revenue per user fell sharply to Rs158 in the March quarter from Rs194 in the year ago period. Average data revenue per user declined to Rs162 from Rs196.

Data ARPU fell by 4.5% to Rs185 in the year ended 31 March from Rs194 a year ago. The number of minutes spent on calls on its network, however, grew 13.4% in the full year.

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