Bharti to hive-off towers business; acquire under-sea cable; enter DTH

Rex Mathew
23 January 2007

Bharti Airtel, the country's largest mobile telecom company, has announced some major plans to restructure its business and expand into new areas. These plans are aimed at expanding its service offerings, achieving cost efficiencies and possibly unlocking some value in future.

In a major move, the company would transfer all its mobile telecom towers and related infrastructure to a wholly owned subsidiary — Bharti Infratel. Telecom towers are major assets for most telecom companies, built up with heavy investments. Bharti currently has nearly 40,000 towers across the country and is adding more at a fast pace as the company expands its network reach.

Bharti says the transfer of towers and related infrastructure is to enhance operational efficiency. The company believes that telecom operators can achieve better cost efficiency by sharing infrastructure like towers. Bharti says shifting of this infrastructure to a separate entity would facilitate sharing with other service providers.

But most analysts believe that this is a move to unlock value in future by selling a stake in Bharti Infratel to strategic investors. In more mature markets, there are companies which own and manage telecom towers. This infrastructure is then leased to mobile service providers for a fee.

As the Indian market matures, some of these telecom tower companies may enter the market and would be looking to buy out existing infrastructure. Reliance Communications, the largest CDMA mobile service provider, had also announced plans to hive off towers into a separate company and possibly sell a stake to a strategic investor. There is also some speculation that Reliance Communications is planning to list this entity in London.

Bharti is also buying out the India-Singapore undersea cable network from Network i2i, which is jointly owned by Singtel and a Bharti group company. The acquisition would cost $110 million. Bharti expects substantial growth in data services market in India and said the sub-sea link to Singapore is crucial to expand in this business.