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Airtel Q4-FY15 concall: Spectrum auctions 2015, 4G rollout plans & more


Of the Rs 29,129 crores Bharti Airtel spent on spectrum acquisition during the recently concluded auction, 57% was for additional spectrum, said Bharti Airtel’s Global CFO Srikanth Balachandran during the company’s Q4-FY15 earnings conference call. The remaining 43% was spent on acquiring spectrum in the 6 circles up for renewal in 2015-16. He added that “Kerala is the only circle without our own 3G spectrum but that is covered by both FD and TD-LTE spectrum.”

Balachandran also addressed certain concerns Airtel has regarding investment on spectrum vs revenue generation. He said that “this auction (March 2015 auction) has been defining in many ways. It paves the way for increased certainty and stability over the next 20 years. At this stage one must take stock of the economic realities of the telecom sector. Since 2010 operators have sunk $50 billion just on spectrum. As Internet penetration moves up month-on-month, operators are also continuously investing in network. Hence, revenue development accompanied by cash generation is the only way forward for sustained investments in the sector, which we believe can be sustained by top players thereby further consolidating market in favor of top players. In the auctions Airtel not only renewed its spectrum but also acquired more across bands to augment voice and data delivery.” He added that this will “allow us (Airtel) to fully participate in the data story going forward, reduce dependency on ICR arrangements, and (develop) a more cost optimized network.”

Airtel acquired 111.6 MHz spectrum during the auction: 60.20 MHz in the 900 MHz band, 15.40 MHz in the 1800 MHz band and 35 MHz in the 2100 MHz band. At the time, the telco had said that now it will be able to offer pan India 4G services using a combination of FD-LTE technology in the 1800 MHz band and TD-LTE roll out in the 2300 MHz band. It will also be able to offer 3G across all markets with the exception of Kerala using a combination of 900 MHz and 2100 MHz. In the earnings call, Balachandran said that Airtel “now has the capability to deploy premium 3G over 900 MHz band in ten circles within the next one to two years.” He also claimed that Airtel’s spectrum market share has expanded to 16.1% from 15%.

Answering an analyst question, Airtel’s Joint MD and CEO India & South Asia Gopal Vittal said that “we picked up 3G spectrum in many circles, we are going to rollout our 3G networks aggressively over the first six months of this year.” Post the spectrum auction, Vittal had said that “the auction design and the scarcity of spectrum have resulted in exorbitant bids to secure the spectrum, particularly in renewal circles, where huge investments have already been made on the assurance of a continuity of business enshrined in the licenses issued by the DoT. We hope that in future auctions, the Government will make available adequate spectrum by securing it from agencies and operators who are underutilising this vital resource.”

On 4G rollout: Vittal said “we are in the process of rolling out 4G aggressively in some of our key cities through a combination of both TD-LTE rollout as well as FD rollout. You will recall that we have launched TD-LTE in four circles. We are looking at launches in several other cities over the course of this year. I am not at liberty to share the specific timing of the plans, but suffice it to say that during the course of the year you will see launches across several other cities.” He also mentioned that “if you look at some circles for example, if you look at circles like Andhra Pradesh and Tamil Nadu we do not have TD and we will look at FD to get 4G in there. Similarly when you look at circles like Karnataka we might look at a combination of TD and FD depending on the cities, primarily to ensure that we get the right coverage along with capacities and this may apply in Delhi as well. So we will look at a combination in some circles and in other circles where we have only FD we will look at FD standalone.

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On deferred spectrum liabilities: Balachandran said that “at this point in time, we have about Rs 140 billion of deferred spectrum liabilities on the February 2014 auction, 10% per annum is the interest and you can see how much would come into the books. That is something which would go into the P&L. As far as the March 2015 auctions are concerned, about Rs 178 billion of liability would come in only after the spectrum is allocated and the 10% interest on that would initially be capitalized till the asset is put to use and after that it would be expensed in the P&L.”

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