Airtel takes a leaf out of Jio’s playbook

Bharti Airtel Ltd’s new corporate structure comprising digital, India telecom services, international operations and infrastructure will enable it to sharpen focus on its digital business, even as it reduces statutory levies calculated on total revenues, said analysts.

The telco’s move to merge all digital services with the parent, and hive off the regulated telecom business into a wholly-owned subsidiary is similar to the model adopted by Mukesh Ambani-led Jio Platforms Ltd. The move will also ensure customer stickiness, the analysts said. The shift in strategy could lead to Airtel monetizing its digital businesses, along the lines of what Jio has done, they added.

According to a JM Financial Ltd report, Airtel’s new corporate structure has a long-term view of separately monetizing the digital assets.

“Digital business is growing very fast and market opportunity is rising. Bharti Airtel had digital assets sitting in multiple entities and, thus, it was missing a united push and opportunity to cross-sell services. A separate digital entity is expected to bring focus to business and united efforts are intended at sharpening the execution,” ICICI Securities said in a report.

While licensed connectivity services for mobile, broadband and enterprises will be under a new entity, Airtel Ltd, digital assets such as Wynk Music, Airtel Xstream, Airtel Thanks, Mitra Payments, Airtel Ads, Airtel IQ, Airtel Secure and Airtel Cloud, which were a part of Airtel Digital Ltd, will be merged with the parent. Its wholly-owned DTH subsidiary Bharti Telemedia Ltd will eventually be merged with Airtel Ltd, it said on Wednesday.

Jio Platforms, a Reliance Industries Ltd subsidiary, houses its telecom business and other digital services such as healthcare, payments, online gaming, cloud, over-the-top content, music, video-conferencing and messaging.

“Airtel’s restructuring is similar to that of Jio, which moved its connectivity business to a separate unit, while shifting all its digital assets to the main company under Jio Platforms,” Axis Capital said in a report on Thursday. “Airtel has digital assets that are yet to be valued by the market despite having good traction in recent quarters.”

The restructuring follows a number of announcements on asset monetization by Airtel over the past few months.

The telco’s Africa unit will sell 1,424 towers in Madagascar and Malawi to Helios Towers Plc for $108 million. It has also signed a pact with Helios for a sale of towers in Chad and Gabon. An investment of $100 million by Mastercard in the Africa unit’s mobile money business, sale of spectrum to Reliance Jio in Andhra Pradesh, Delhi and Mumbai, and TPG-owned The Rise Fund’s $200 million capital infusion in Airtel Africa are also part of the company’s asset monetization programme.

The strategy will ensure that Airtel’s digital business is not exposed to government levies, such as spectrum usage charge and licence fee in the future, ICICI Securities said.