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May 25, 2017
India's largest service provider, Bharti Airtel, has promised to spend about $2.5 billion in the Indian market this fiscal year, despite recording a 72% drop in net profit in the quarter ending March 2017.
"In the next coming 12 months, a very substantial part of our capex will only be towards fiber and 4G," said Gopal Vittal, Airtel's CEO, during an earnings call with analysts. "The capex going in behind 2G and 3G will be almost negligible … we will keep rolling out as and when we see more and more devices coming in, and as and when we see more and more capacity required."
The plans would see Bharti Airtel Ltd. (Mumbai: BHARTIARTL) spend about the same as it did in the financial year ending March 2017. Essentially, it is being forced to maintain its spending even though profitability is plunging, and related metrics are showing steep declines. Airtel's average revenue per user (ARPU), for example, fell 18% to 158 Indian rupees ($2.4) in the quarter ending March 2017, from INR194 ($3) in the same period of the previous financial year.
The problem has been last year's launch of Reliance Jio , a new entrant focused on 4G. With its low-cost (and sometimes free) offers, RJio has had an impact on service provider profits throughout the industry. Moreover, the telecom industry is now massively indebted, owing about 4.6 trillion Indian rupees ($71.2 billion) to the various financial institutions.
But Airtel has had to keep investing in upgrading and modernizing its network to fight competition from RJio, which remains the only service provider in the country to have an all-IP network.
For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.
While Airtel aims to spend $2.5 billion this year, RJio is aiming for investments of INR180 billion ($2.7 billion) in the first quarter. But some of India's other service providers look much further behind on the investment front. Idea Cellular Ltd. , India's number-three player, says it will spend just INR60 billion ($920 million) as capex in the current fiscal.
RJio also has an extensive portfolio of applications and is investing in fiber rollout, besides mobile. The company has already acquired more than 100 million subscribers by offering free voice services for life and free data services for the first six months after its launch.
Airtel will also lose the distinction of being the largest service provider in the country following a merger between Vodafone India , the second-biggest operator, and Idea. With around 400 million subscribers, the combined entity will steal Airtel's crown. It will also be far better placed to fight competition from RJio.
— Gagandeep Kaur, contributing editor, special to Light Reading
Read more about:Asia
With more than a decade of experience, Gagandeep Kaur Sodhi has worked for the most prominent Indian communications industry publications including Dataquest, Business Standard, The Times of India, and Voice&Data, as well as for Light Reading. Delhi-based Kaur, who has knowledge of and covers a broad range of telecom industry developments, regularly interacts with the senior management of companies in India's telecom sector and has been directly responsible for delegate and speaker acquisition for prominent events such as Mobile Broadband Summit, 4G World India, and Next Generation Packet Transport Network.
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