Bharti Airtel abandons ‘digital pivot’ strategy as 5G auction nears

Airtel will again focus on the wires and cables, and not on ‘digital business’

Bharti Airtel has abandoned its plan to reorganize its corporate structure by focusing on the digital business — such as its Wynk app, Airtel Cloud, Airtel Xstream and so on — by moving all telecom infrastructure into a different subsidiary known as Airtel Ltd.

The move was announced eight months ago, and was widely seen as a page from the playbook of Mukesh Ambani-owned Reliance Jio.

Jio had done something similar, and created something called Jio Platforms as its main business unit, and moved actual physical assets — such as fiber and towers — into a subsidiary.

This was done reportedly to improve valuations of the parent company. Typically a ‘digital’ company — such as Google or Amazon — focused on things like apps commanded much better valuations among investors compared to an ‘old economy’ telecom company that was engaged in owning and operating real and physical assets, rather than ‘digital’ assets.

Reliance Jio successfully raised billions of dollars from investors keen to get a stake in its emerging digital business. Keeping the physical/telecom infrastructure in a different unit is supposed to have helped the company avoid the low valuations that plague traditional wires-and-switches telecom firms.

Bharti Airtel too was therefore keen to refocus itself on the digital side, which was considered more dynamic and more full of potential.

However, neither Jio nor Bharti Airtel have had limited success in establishing themselves as digital companies similar to Google, Amazon, Facebook etc.. Most of the apps and digital services started by Indian telecom players have not yielded the kind of growth that many expected.

Secondly, Bharti Airtel needs money for the upcoming 5G auction, rather than for investing in its app business.

As such, it would make less sense for the company to move its core telecom/network business out of the primary, listed entity and into an unlisted subsidiary.

“With a strong balance sheet and 5G ready network, Bharti Airtel is well positioned to invest aggressively in the emerging growth opportunities offered by India’s digital economy,” it said today.

“The Board of Directors (“Board”) of Airtel is of the view that the existing corporate structure of the Company is, therefore, optimal for leveraging these emerging opportunities and unlocking value while continuing to scale up Airtel’s digital businesses. Therefore, the scheme of arrangement for the new corporate structure announced on April 14, 2021 stands withdrawn,” it added.

The move is an indirect reaffirmation of the importance of physical infrastructure and the core business of providing connectivity.

In keeping with the focus on the core business of providing connectivity on a physical level, the company also said that it would fold two of its subsidiaries that own part of its physical infrastructure — Telesonic Networks Limited and Nettle Infrastructure Investment — with itself.

Nettle Infra is focused on establishing and funding companies’ engaged in the business of providing telecom
services and other companies engaged in the activities ancillary to the telecom industry.

This would result in the “simplification the group structure by aligning the interest of various stakeholders into the company and cost reduction, retaining talent, optimization of support functions, efficiencies and productivity gains by pooling the resources,” it said.

The amalgamation of Telesonic — which owns a large chunk of the company’s wired network — into Bharti Airtel would consolidate all fibre assets in a single entity”, it added.