India's second-largest service provider, Bharti Airtel, has fundraising on its mind.

The company was in the news over a possible investment from Google – and it has now announced plans to raise INR210 billion (US$2.86 billion) through a rights issue to prepare a war chest for 5G.

Earlier this week, the company's board approved a rights issue of $2.86 billion at a price of INR535 ($7.3) per share to raise funds for expansion.

Figure 1: Money makes the world go round: Bharti Airtel has eyes on the prize, as it focuses on funding for 5G rollout.
(Source: Steve Jurvetson on Flickr CC2.0)

"The rights issue has been designed such that the money will be called upon as and when required and closely monitored for utilization," Sunil Bharti Mittal, Airtel's chairman, said during an investor call.

Five reasons why

Part of these funds will be used to provide a 5G network in key cities. Airtel must gain an early advantage to prevent churn of its high-value subscribers to Jio networks if Jio beats Airtel to launch.

Airtel, along with other private telcos, is conducting 5G trials in several parts of the country. While there is no confirmation from the Department of Telecommunications (DoT), media reports indicate India plans to hold a 5G auction by mid-2022.

Airtel will also invest in expanding its fiber footprint. According to its last quarterly results, it had 332,542km of fiber network in the country. However, the operator needs to boost this quickly as rival Reliance Jio has more than 1 million km of fiber. Fiber is also crucial to deliver on the promise of 5G.

Airtel is facing stiff competition from Mukesh Ambani-led Reliance Jio. In 2020, the company was in the news for raising more than $19 billion from several technology firms and investors.

Besides adding to its fiber network, the service provider will also invest in its data center business as data consumption continues to grow, with around half of India's population yet to be connected to the Internet.

Balance it out

Significantly, Mittal also raised his concerns about what he sees as excessive levies and duties on the telecom industry.

"For every ₹100 of revenue, ₹35 go in various forms of levies. We hope that as we step up and do our part, the government will also favorably look at some of the genuine demands of the industry, enabling a multiplier effect and positive outcome," he said during the call.

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He also mentioned that the average revenue per user needs to go up. The ARPU per month is likely to touch INR200 ($2.7) by the end of this financial year in March 2022. Airtel reported an ARPU of INR146 ($2) for the quarter ending June 2021.

It is only recently that Airtel started regaining lost market share to Jio, which disrupted the market by launching almost free 4G services in 2016. The current round of fundraising is intended to help Airtel further consolidate its position in the upcoming 5G market.

The company is also believed to be in talks with Google over possible investment. The tech giant invested $4.6 billion in Jio Platforms in 2020.

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— Gagandeep Kaur, contributing editor, special to Light Reading