Bharti Airtel Ltd.’s new corporate structure to focus on digital, India, international and infrastructure businesses distinctly will help the telecom operator to save money on licensing and spectrum usage charges, at least two brokerages said.
Bharti Airtel had digital assets sitting in multiple entities and thus, it was missing a united push and an opportunity to cross-sell services, ICICI Securities said. A separate digital entity, according to the brokerage, is expected to bring focus to business and united efforts are intended at sharpening the execution.
The new structure is along the lines of that at Reliance Industries Ltd. In 2019, the Mukesh Ambani-led conglomerate had devised a new holding structure for its telecom and digital businesses — Reliance Jio Infocomm Ltd. Eventually, Jio Platforms raised more than Rs 1.5 lakh crore by selling over 33% in equity stakes to Facebook Inc., Google and several other strategic and financial investors.
Operational Impact
According to Kotak Securities, it’s difficult to estimate the break-up and likely benefit for now, but a 10-15% shift in revenue can boost Bharti Airtel’s India wireless Ebitda by 3-4% in FY22.
Credit Suisse, however, said the value-unlocking potential would be limited given the current scale of digital business. Once the segment attains scale over the next 5-10 years, the company may revisit the organisational structure to unlock value. The business-to-consumer digital businesses comprising Airtel Thanks, Airtel Wynk and Airtel Xtream are fast-growing, with a monthly active user base of 19 crore (62% of its total wireless subscriber base) and revenue of around Rs 100 crore, the research firm said.
The new structure, ICICI Securities said, indicates no immediate monetisation plans of digital assets, as it’s yet to exploit the potential from the business. But in the future, when business becomes large, it can always restructure efficiently to monetise the digital asset.
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