Bharti Airtel to Invest in Data Centres, Ramp Up Capacity
Bharti Airtel is planning to allocate approximately Rs.30,000 crore towards capital expenditures in India and Rs.9,000 crore ($1 billion) for Africa. During a recent investor conference call, Sunil Mittal, chairman of Bharti Enterprises and promoter of Bharti Airtel, mentioned plans to expand investments in data centers, surpassing a capacity of 1 gigawatt (Gw).
The chief executive of India's second-largest telecommunications service provider emphasized the importance of shareholder interests in relation to new investment opportunities, with a focus on selecting only those with favorable prospects.
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In terms of dividend distribution, the company intends to follow a 'progressive increase policy' that will be gradually elevated.
Mittal indicated that Bharti Telecom (BTL), with a 41 percent ownership stake in the publicly traded company Bharti Airtel, will serve as the primary entity for holding Airtel. The Bharti group and Singapore's Singtel, a significant shareholder, have been adjusting their ownership stakes in Bharti Airtel to align them over time as part of Singtel's strategy to decrease debt, support 5G capital expenditures, and enhance dividend growth.
At present, there is a remaining eight percent stake, with seven percent belonging to Singtel and one percent held by the Mittal family. The stakes will be gradually divested in an organized manner and will be completely sold off within the next few years.
Mittal stated that Bharti Airtel does not intend to make further financial investments in British Telecom, in which it acquired a 25 percent stake in 2024.
He emphasized the importance of Airtel having a controlling stake at an appropriate valuation for any international telecommunications company acquisition.
Additionally, Mittal indicated that Airtel's focus will be on expanding its core business and maintaining a strong presence in both rural and urban markets in India and Africa without conceding any territory. The company has confirmed their commitment to increasing dividends and has outlined a progressive dividend policy for the future.
Additionally, they have stated that they will explore opportunities outside of their core business, such as in financial services and new territories in Africa, while also remaining open to other options outside of their current operational footprint. BofA emphasized that the company will prioritize shareholder perspectives and will only make investments that are deemed highly attractive.
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In regards to its subsidiary Airtel Money obtaining a non-banking financial company (NBFC) license and Airtel's pledge of Rs.20,000 crore, Mittal stated that in the initial year, the company plans to allocate 10 percent of capital, amounting to Rs.1500-2,000 crore. Of this capital, the listed entity will contribute 70 percent.
The entire investment amount is anticipated to be the highest capital needed prior to the NBFC achieving self-sufficiency. According to BofA's report, the company is motivated by NuBank and will utilize the vast amount of customer data intelligence that Airtel possesses.
Airtel has detailed information on 3,000 attributes of each individual user, showcasing significant data intelligence on various channels. The company has the potential to facilitate digital payment collection and issue reminders for pending equated monthly installments (EMIs).
Analysts highlighted that the acquisition cost is notably lower, and the essence of the business lies in repeat loans and user quality. However, one challenge to address is that the current Airtel app context is primarily focused on telecommunication, necessitating marketing investments and gradual word-of-mouth promotion for financial services.
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The company reaffirmed its target of achieving an average revenue per user (ARPU) of Rs.300, which it is currently falling short of by 15 percent. Mittal emphasized that maintaining an accessible entry point for low-end users is also a priority for the company.
Airtel is heavily investing in data centers and forming partnerships with artificial intelligence (AI) companies to enhance customer services. Ongoing discussions with multiple companies signal the company's commitment to embracing cutting-edge technology.
In addition, Airtel is leveraging open source language models (LLMs) to develop customized models for enterprise applications. The company currently utilizes 350-400 GPUs for training purposes, with plans to increase this number to around 2,000 GPUs in the future. AI is also being integrated into Airtel's internal operations, including contract management, coding efficiency, and customer care services without interactive voice response (IVR) systems.