## Bharti Airtel’s CAPEX Growth
Bharti Airtel, India’s second-largest wireless telecommunications provider, is set to boost its capital expenditure (CAPEX) to approximately $5 billion in FY 2022. This marks an increase from $4.6 billion recorded in FY 2021, as reported by Fitch Ratings.
## Investment in 5G Spectrum
A significant portion of this budget, around $1.5 billion, will be allocated for an upfront payment to acquire new 5G spectrum assets during India’s upcoming spectrum auction. This strategic move is aimed at enhancing its network capabilities.
### Strengthening Fiber Infrastructure
Fitch predicts that Airtel will continue to invest in its fiber infrastructure. This includes connecting towers with fiber technology and enhancing backhaul capabilities in preparation for 5G service launches anticipated between 2022 and 2023. The focus on 5G infrastructure is expected to replace investments previously directed toward 4G, as the latter’s coverage is nearing completion.
## Deleveraging Plans
In addition to its infrastructure investment, Airtel’s deleveraging strategy has received positive feedback from Fitch. The plan includes an equity issuance of $2.8 billion, which aims to improve its financial leverage to about 2x. This move is expected to strengthen Airtel’s market position significantly.
### Equity Issuance Structure
The equity will be raised in three tranches. One-quarter of the proceeds will be received upfront, while the remainder will come in two installments over the next three years. This approach follows a substantial capital raise of approximately $9 billion in FY20 and FY21, achieved through various sales, including a stake in Airtel Africa Plc and tower sale-leaseback agreements.
## Adjusted Gross Revenue (AGR) Dues
Regarding regulatory matters, Airtel has paid around $2.4 billion towards a total of $6.4 billion owed to the Department of Telecommunications concerning adjusted gross revenue (AGR) dues. Fitch has incorporated a calculation of remaining dues amounting to $4 billion into its leverage estimates, although the Supreme Court has allowed the balance to be paid over a ten-year period starting from March 2022.
### Market Positioning Against Competitors
Fitch projects that Airtel and wireless market leader Reliance Jio will increase their combined revenue market share among private telecom operators to between 80% and 82%. This shift comes at the likely expense of Vodafone Idea, which could potentially lose between 50 million to 70 million subscribers in the next year.
## Vodafone Idea’s Subscriber Losses
Vodafone Idea faced a decline of around 180 million subscribers over the past three years, standing at 255 million by the end of June 2021. The company is currently under pressure to secure new funds to meet its capital expenditure needs, settle outstanding AGR dues, and address maturing debts.
What are your thoughts on Airtel’s investment strategies to prepare for 5G?