Airtel may invest $8 bln over next 3 yrs on 5G, 4G expansion
According to a news report, Bharti Airtel will rely heavily on an upward revision in mobile tariffs in the medium term to sustain a whopping $8 billion (Rs 56,000 crore) of incremental investments it is estimated to make over the next three years in greenfield 5G roll-outs and in expanding existing 4G networks.
It is estimated that Bharti Airtel will need to invest an incremental $5 billion (Rs 35,000 crore) over the first three years even for a selective 5G roll-out, and an additional $3 billion (Rs 21,000 crore) for 4G expansion, for which mobile pricing will need to be revised upwards, primarily to support upcoming investments in 5G spectrum and networks.
Studies show that there is a challenge as Bharti doesn’t see mobile tariffs rising anytime soon, and it is believed any meaningful increase in mobile pricing is at least 2-3 quarters away.
Airtel's recent mega fund raise via rights issue, bond sales and an upcoming Africa IPO is expected to address balance sheet concerns and cut leverage, but incremental investment needs towards 5G spectrum and network roll-outs would have to be recovered from operating income growth, which can happen once mobile tariffs rise.
Recently the government has announced the auctioning of 4G and 5G airwaves in calendar 2019, which will be the country’s biggest ever spectrum sale. Airtel has said it will buy 5G airwaves only if prices are reduced.
Another potential pain-point for Airtel, going forward, is that the 17 million-odd 2G customers who have upgraded to data over the last six months have not contributed to the company’s ARPU growth.
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