Won't shy away from raising tariffs: Bharti Airtel's Sunil Mittal

'We hope that the spectrum pricing auction will be made attractive,' says Bharti chairman

Telecom operator Bharti Airtel's chairman Sunil Mittal on Monday said the company won't shy away from raising tariffs. 

Mittal was speaking with investors a day after Airtel's board approved raising up to Rs 21,000 crore by way of rights issue, at a price of Rs 535 per share.

In a rare move, the Bharti Airtel Ltd chairman attended about an hour-long investor call, answering queries related to the rights issue as well as those pertaining to the telecom sector.

Asked if Airtel will take a lead in raising tariffs in future, Mittal said that the company has already been doing it in a limited manner by pushing up base tariffs to Rs 79.

"Can this go to Rs 99 eventually, my answer is yes, the question is when...In the end, we are also bound by market forces, we can't be outlier beyond a point. You can be having some premium given strength of the brand but you can't go beyond a point where you start to hurt yourself," Mittal observed.

Airtel will be "vigilant" and "happy to take small baby steps which could even be first and foremost compared to others", he pointed out.

"People are consuming average 16GB of data per user per month. It is time that tariffs do take a tick up to make the industry viable and, more importantly, have decent and appropriate returns on capital to grow into more technology areas, to roll out more networks, and become more viable model of sustainability in the future," Mittal said.
 

He stressed that the industry needs to have "right economic model", and rued that "for far too long, we have played in this game by growing this industry at a very minimal pricing level".

The mega fundraising is bound to give more firepower to Airtel, as the company takes on rivals in the fiercely-competitive Indian telecom market.

India, which is the world's second-largest telecom market and the biggest data consumer, is now gearing up for 5G that will significantly scale up connectivity pipes, enabling ultra-high-speeds and new-age applications for users, and new revenue streams for players.

Bharti founder-chairman said the company had been burdened with extraordinary debt and he felt confident that now was the time to invest and grow.

"We want to improve our debt leverage and have access to growth capital. We hope that the spectrum pricing auction will be made attractive," said Mittal.

He further said that the company remains committed to monetisation of assets but "at right time".

Mittal also urged the government to step up investments in digital infrastructure as he expected the levies and burdens on telecom companies to come down, while adding that delay in fundraising could have been detrimental for the company.

"We have been also urging the government to attend to some pressing issues inhibiting continued investments in the sector given the negative to low returns," Mittal added.

"For every Rs 100 of revenue, Rs 35 go in various forms of levies. We hope that as we step up and do our part, the government will also favourably look at some of the genuine demands of the industry, enabling a multiplier effect and positive outcome," Mittal said in an investor call on the company's fundraising plans.

Airtel "has the opportunity to be the tip of the spear for the new digital economy and take India into the next phase of growth", he added.

The investments would be channelised in areas like 5G, fibre, and data centre business, he said.

The capital raise will give the company the "fuel to grow" and "go extra mile" to leverage opportunities that are "around the corner", he said.

"This capital will help improve the leverage position for the company and simultaneously provide the fuel to accelerate investments across several parts of our portfolio to drive for competitive and profitable growth," Mittal said.

Mittal also expects mobile average revenue per user (ARPU), a key metric for telecoms companies to inch up to Rs 200 by the end of this financial year and eventually move to Rs 300.

Airtel's quarterly ARPU was Rs 146 rupees for the quarter ended June.

He said the company will not frontload investments and will be very careful.

The terms of payment of issue price envisage 25 per cent on application and balance in two more additional calls as may be decided by the board or its committee based on the company's requirements within an overall time-horizon of 36 months, Airtel said on Sunday.

Promoter holding in the company stands at about 55.8 per cent, while public holds 44.09 per cent.

The shares of Airtel had closed at Rs 625 apiece on Monday, 5 per cent higher than the previous close.

In its note last week, Jefferies had said that any capital raise by Bharti Airtel that aims to enhance capacity in anticipation of large market share shifts from Vodafone Idea could be seen "positively".

Sunil Mittal-led Bharti Airtel is the second largest telco in the three private player market and as per subscriber data released by telecom regulator recently, Airtel added 3.8 million wireless subscribers in June, pushing up its mobile user base to 352 million.

Reliance Jio, which has been cementing its lead, gained 5.4 million users in June, as its mobile subscriber base swelled to 436 million during the month.

Industry body COAI has urged the government for financial reforms in the telecom sector, making a strong pitch for cut in levies, doubling tenure of auctioned radiowave holdings, along with 7-10 year moratorium for spectrum payments, to address viability concerns.