Airtel Can Invest Rs 56,000 Crore For 5G, 4G Expansion: Here’s The Maths & The Logic
The new 5G age is near, and it’s happening as you are reading these lines. South Korea and the USA has already kickstarted 5G network, and efforts are on everywhere to make it happen. As soon as possible.
India’s leading telecom carrier Airtel will also need to ramp up their efforts to implement 5G and improve the existing 4G network in India, and very soon, they are expected to make massive investments upto Rs 56,000 crore for the same.
But how will this happen? Here is the maths and the logic behind Airtel’s expansion plans.
Airtel May Invest $8 Billion For 5G and 4G Expansion
As per research by SBICap Securities, Airtel will be required to spend $8 billion to expand their existing telecom infrastructure and to sustain their position as the market leader.
Out of $8 billion (Rs 56,000 crore) potential expenditure, $5 billion can be allocated for setting up 5G infrastructure, and $3 billion for expanding their existing 4G capabilities, and improving their coverage.
Now, the big question: How will Airtel raise the funds required for their mega-expansion?
Airtel’s Investment of Rs 56,000 Crore: How Will It Work?
Airtel is expected to ramp up their war-chest via a rights issue, bond sales, and an upcoming Africa IPO, but they also need one very crucial income source: Revenues from operations.
SBICap Securities’ research tells us that Airtel will arrange most of the funds required for expansion in India, via increasing mobile pricing.
However, there is a challenge: Airtel cannot increase the prices suddenly, and they will have to wait for atleast 3-4 quarters to do the same.
Rajiv Sharma, co-head of research at SBICap Securities, said, “Bharti doesn’t see mobile tariffs rising anytime soon, and we also believe any meaningful increase in mobile pricing is at least 2-3 quarters away.”
Airtel Is Taking Small Steps Towards Increasing Revenues
So, as of now, two things are clear: Airtel will be required to spend Rs 56,000 crore for their expanding and enhancing their networks, and to do so, they will need to increase revenues from their Indian operations.
Although a sudden tariff increase is out of the question for atleast another year, Airtel has managed to increase revenues via small, consistent steps, and they have ensured that they are on the right path.
For the January-March quarter, Airtel managed 4.2% sequential rise in revenues to Rs 10,632.2, which has set the platform for future revenue growth this year. By achieving this revenue growth, Airtel has narrowed the gap with Jio, and beaten Vodafone-Idea by a long margin.
At the same time, Airtel has achieved ARPU or Average Revenue Per User of Rs 123, which is almost 19% jump compared to last quarter. Airtel’s pushing up minimum recharge plans and changing the Rs 99/149 packs to Rs 119/169 has been widely attributed as leading causes of the same.
At the same time, Airtel has beaten Jio is data and voice usage, which again translates to better coverage and better services, which will directly have an impact on revenues next quarter.
Gopal Vittal, Bharti Airtel’s managing director (India & South Asia) has already stated that the ARPU of Rs 123 achieved by Airtel has not reached a sustainable level, and we are sure that they are drawing up blueprints to beat that.
Now, all eyes are set on Airtel, to find out how and when they start their massive investments, and what changes they will bring along the way.
We will keep you updated, as we receive more updates.