New structure: Bharti does a Jio, gives digital primacy

Bharti said in a statement on Wednesday that the new structure is expected to sharpen the focus of the company in driving the rapidly digital opportunity while enabling it to unlock value.

Bharti Airtel has followed the Jio model by unveiling a new corporate structure wherein Airtel Digital will fold into the listed entity. What this means is that Airtel Digital will now sit on top of the telecom business – the latter will become a unit of the digital business – quite similar to Jio Platforms under which Reliance Jio sits. All the telecom businesses of the company, mobile, broadband and enterprises, will now be housed in a newly created entity, Airtel Limited, which will sit below Airtel Digital.

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Bharti said in a statement on Wednesday that the new structure is expected to sharpen the focus of the company in driving the rapidly digital opportunity while enabling it to unlock value.

Airtel Digital will house all of the digital assets spanning Wynk Music, Airtel X stream, Airtel Thanks, Mitra Payments platform used by a million retailers, Airtel Ads, Airtel IQ, Airtel Secure, Airtel Cloud and all future digital products and services.

Analysts said that since Jio Platforms is an unlisted entity and 100% subsidiary of Reliance Industries, it could dilute stakes and get investment by global PE firms and technology majors like Facebook and Google. However, for the doing the same Bharti would at some stage have to hive off the digital business as a separate entity. As far as the digital business is part of the listed entity, Bharti Airtel, stake sale can only happen if any existing investor dilutes its equity.

According to analysts by focusing on Digital, Bharti would be looking at upping its valuation which may attract investors at a later stage, when the hiving off could be done. Though the company does not disclose the revenues of its digital offerings, currently it would be less than 5% of the total revenues.

Some analysts speculate that maybe the company is aiming at keeping the digital revenues out of the ambit of the adjusted gross revenue on which licence fee is paid to the government. However, it is unlikely that the government would agree to this arrangement. The digital revenues can only be outside the ambit of AGR if the the business is hived off the telecom business as in the case of telecom towers.

Bharti Telemedia, the 100% arm operating DTH services, will sit alongside Airtel Limited for now, the company said. It is intended to eventually fold the DTH business into Airtel Limited to move towards the NDCP vision of converged services to customers. The company has moved the government to seek clarity on licensing policy given that carriage i.e. telecom and DTH is currently being regulated and managed under two separate ministries of communications and information and broadcasting respectively.

Airtel Payments Bank will remain a separate entity under Bharti Airtel and work closely with the growing customer base to play a pivotal role in realising the digital opportunity that payments and financial services provides, the company said.

All of the company’s infrastructure businesses such as Nxtra and Indus Towers will continue to remain in separate entities as they are currently. So will international subsidiaries and affiliates.

Sunil Bharti Mittal, chairman, Bharti Airtel, said: “The new structure sets the exciting future course for Bharti Airtel and provides focus on the four distinct businesses – Digital, India, International and Infrastructure, each, in a razor sharp way. We believe this will provide agility, expertise and operational rigour to serve our customers brilliantly while providing flexibility to unlock value for our shareholders. This structure will serve us well over the coming years and is a win-win for all stakeholders”.

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