Bharti Airtel: How 5G is developing | Duopoly with Jio

As per the sources, international brokerage BofA Securities stated in a study that Bharti Airtel will be under pressure to build a comparable network in the future as Jio is expected to roll out standalone 5G.

Bharti Airtel: Word from BofA and Morgan Stanley

According to them, this increases the chance that Bharti will win 700 MHz in the following auction, with pricing that is probably going to be comparable to this auction. Even capital expenditures should be increased, first for NSA deployment and subsequently for standalone 5G.

In light of this, 5G-related investments are anticipated to remain high for a few years, according to BofA Securities. They believe Jio and Bharti Airtel’s duopoly over 5G will continue in the consumer market, and they predict that both companies will establish themselves as the market leaders with integrated 5G products.

Bharti Airtel: How 5G is developing | Duopoly with Jio
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As per the reports, foreign brokerage Morgan Stanley said that the 5G auction’s main effects on Bharti Airtel include margin accretion from a lower SUC charge, increased net debt because of an underestimated spectrum liability, and a potential overhang from peers winning more spectrum. In a deal of Rs 432 billion ($5.5 billion), Bharti Airtel was awarded spectrum in the 900MHz, 1800MHz, 2100MHz, and 26GHz bands.

Morgan Stanley said that their projected net debt for Bharti Airtel would grow by $2.5 billion due to the additional spectrum liabilities compared to their earlier forecast. However, a lower SUC charge could increase the Indian mobility business’ EBITDA margin by 350 bps ($330 mn in absolute terms), translating to an increase of 6-7% in EBITDA (70 percent of SOTP).

This will however result in an up to 2% increase in intrinsic value on a net basis. On the other hand, there is a chance that expenditure will be front-loaded in the first few years, resulting in a bigger cash outflow than anticipated. Furthermore, the source said, the peer’s acquisition of more spectrum, particularly in the 700 MHz range, could raise doubts if the business ultimately decides to develop a 700 MHz portfolio in the upcoming years, suggesting higher debt.

Statement from the ICICI Securities

Throughout a study, ICICI Securities said that Bharti is in charge of capital allocation. By purchasing 100 MHz of C-band spectrum over all of India and 800 MHz of 26 GHz spectrum, Bharti has exercised restraint in its use of capital for spectrum.

Bharti Airtel: How 5G is developing | Duopoly with Jio
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To increase 4G capacity, it has also purchased some spectrum in the 900/1,800/2,100MHz band or purchased spectrum in advance for imminent expirations. The overall compensation for Bharti Airtel will be Rs 431 billion, including Rs 22 billion upfront payment and Rs 18 billion in monthly installments following SUC savings (of Rs 22 billion), according to ICICI Securities.

Following the purchase of the spectrum, the company’s net debt increases to Rs 1,550 billion. This debt should decrease by Rs 150 billion pending the entry of funds from a rights issue and Rs 50 billion from a preferential offer to Google. The fundamental net debt will therefore be Rs 1,350 billion.

The timing of Bharti Airtel’s acquisition of the 700 MHz band spectrum, which at current prices will cost Rs 200 bn for 5 MHz across India, is crucial to observe because it likely expedited 5G spending, which puts our FCF projections at risk. According to ICICI Securities, Bharti would continue with NSA-5G throughout the initial rollout.

About the Bharti Airtel’s Plans

Bharti Airtel now has plans to roll out 5G services across the nation, beginning in the nation’s major cities. Certainly, the nation’s higher-quality customer base would quickly adopt 5G technology.

Bharti Airtel: How 5G is developing | Duopoly with Jio
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ICICI Securities questioned whether competition will force Bharti Airtel to change its passive approach to 5G deployment. The corporation already has the best pool of spectrum in the industry, so it won’t need to spend a significant amount of money on the spectrum for many years to come.

They’ve also said that major spectrum investments are on hold, although the 700 MHz purchase might need a second look, the report added. It has declared that it has contracts for 5G networks with Ericsson, Nokia, and Samsung and that the 5G rollout will start in August 2022.

With Nokia and Ericsson, it has had long-standing cooperation for connectivity and pan-India managed services; the partnership with Samsung will start this year. The Department of Telecom held spectrum auctions in, and Bharti participated and won 19867.8 MHZ of spectrum in the 900 MHz, 1800 MHz, 2100 MHz, 3300 MHz, and 26 GHz bands. These 5G collaborations came shortly after.

Future of Bharti Airtel and 5G

According to the sources, Gopal Vittal, MD, and CEO of Bharti Airtel commented on the agreements by saying that they are happy to announce that Airtel will start rolling out 5G services in August. Airtel will collaborate with the top technology partners from across the world to provide our customers with the full benefits of 5G connectivity once their network agreements are finalized.

Bharti Airtel: How 5G is developing | Duopoly with Jio
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Telecom will be at the forefront of India’s shift to a digital economy, and 5G offers a revolutionary potential to propel that transformation across businesses, sectors, and India’s socioeconomic development.

Bharti Airtel will be able to roll out 5G services with ultra-high speeds, low latency, and large data handling capabilities thanks to its choice of multiple partners, the company said. This will enable a high-quality user experience and allow the company to pursue new, groundbreaking use cases with enterprise and industry customers.

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