 "Bharti bracing for data war")
Bharti Airtel, the country's largest telecom service provider, on Friday signed a deal with Aircel to acquire the latter's 2,300-MHz spectrum band in eight circles for Rs 3,500 crore. The acquisition is expected to help Bharti Airtel meet its twin objectives of matching Reliance Jio's MHz in the race to build a pan-India 4G spectrum base, while limiting the risk of having to fork out substantial sums to bridge the spectrum gaps in the coming auctions.
The deal comes barely a month after the company acquired more efficient 1,800-MHz spectrum in six circles (valid till 2032) from Videocon for Rs 4,428 crore. The price paid by Bharti in the Aircel deal is also reasonable, considering the base price in the coming auction is Rs 4,400 crore, and as it is valid till September 2030. Prior to these two deals, Bharti could offer 4G services in only 15 circles. While the Videocon deal increased its 4G reach to 19 circles, the Aircel deal has increased it further to cover all the circles.
The Videocon deal had increased Bharti's 3G/4G spectrum holding to the highest levels across all operators (including Jio) and the current deal will only add to its spectrum bank, taking it to 770 MHZ versus Reliance Jio's 640 MHz. This not only gives it an advantage over Reliance Jio and will help Bharti defend its position but has also significantly increased its chances of improving market share over rivals, Vodafone and Idea.
These two incumbents, who are number two and three players on a pan India basis, have 4G coverage in 10 (Idea) and five (Vodafone) circles, respectively. Even including 3G and 4G spectrum there are three-five circles where both Idea and Vodafone do not have spectrum and cannot offer coverage in either of the two technologies. Bharti will have an edge in its plan to acquire market share where it is not the market leader by offering these services to higher ARPU (average revenue per user) subscribers. By divesting some its tower assets and telecom services offerings in Africa, the company (while containing debt) is indicating its focus on India and the need to counter the Reliance Jio threat. With data services playing a key role in the growth of the major players, the recent deal should lead to significant gains for Bharti.
In the near term, investors will keep an eye out for the March quarter results and the Reliance Jio launch. Bharti is expected to post steady wireless revenue growth, led by higher data adoption in the March quarter. Data revenue growth is expected to be 49 per cent over a year. However, due to the rapid network roll-out to offer 4G services, margins could come down 30 basis points both year-on-year and sequentially. The decline in voice and data revenues per user is likely to continue.
The deal comes barely a month after the company acquired more efficient 1,800-MHz spectrum in six circles (valid till 2032) from Videocon for Rs 4,428 crore. The price paid by Bharti in the Aircel deal is also reasonable, considering the base price in the coming auction is Rs 4,400 crore, and as it is valid till September 2030. Prior to these two deals, Bharti could offer 4G services in only 15 circles. While the Videocon deal increased its 4G reach to 19 circles, the Aircel deal has increased it further to cover all the circles.
The Videocon deal had increased Bharti's 3G/4G spectrum holding to the highest levels across all operators (including Jio) and the current deal will only add to its spectrum bank, taking it to 770 MHZ versus Reliance Jio's 640 MHz. This not only gives it an advantage over Reliance Jio and will help Bharti defend its position but has also significantly increased its chances of improving market share over rivals, Vodafone and Idea.
These two incumbents, who are number two and three players on a pan India basis, have 4G coverage in 10 (Idea) and five (Vodafone) circles, respectively. Even including 3G and 4G spectrum there are three-five circles where both Idea and Vodafone do not have spectrum and cannot offer coverage in either of the two technologies. Bharti will have an edge in its plan to acquire market share where it is not the market leader by offering these services to higher ARPU (average revenue per user) subscribers. By divesting some its tower assets and telecom services offerings in Africa, the company (while containing debt) is indicating its focus on India and the need to counter the Reliance Jio threat. With data services playing a key role in the growth of the major players, the recent deal should lead to significant gains for Bharti.
In the near term, investors will keep an eye out for the March quarter results and the Reliance Jio launch. Bharti is expected to post steady wireless revenue growth, led by higher data adoption in the March quarter. Data revenue growth is expected to be 49 per cent over a year. However, due to the rapid network roll-out to offer 4G services, margins could come down 30 basis points both year-on-year and sequentially. The decline in voice and data revenues per user is likely to continue.