Thursday, September 21, 2023

Airtel expects capex intensity to decline from FY25, telco deploys team to explore artificial intelligence use cases

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  • Airtel‘s wireless capex will decrease from FY25 as 5G rollout is likely to occur this fiscal year.
  • Delay in smartphone shipments and fewer use cases around 5G to limit investment next fiscal year, company CEO says Gopal Vital.
  • Airtel is appointing a team to investigate disruptive technologies such as ChatGPT and how they can be incorporated into mainstream business functions.

The intensity of Bharti AirtelThe company’s capital expenditures are expected to decline in FY25. This may sound like music to investors as in the past year and also in the current fiscal year, the company is set to spend nearly ₹30,000 crore in capex on the rollout of 5G across India. The telco has exited FY23 with a capex of ₹28,500 crore. The company expects to complete the urban 5G rollout by this year and the intensity of the rollout will slow down next year as the telecom sector leads the way in its investments.

Addressing an analyst meeting on Wednesday, Gopal Vittal, CEO of Airtel, said: “Wireless capex on 5G will definitely fall compared to what you will see this year. We have completed urban coverage this year and will roll it out in top villages as well. This is a modular company and string a set of radios on a tower. We are seeing smartphone shipments decrease and this is a trend worldwide as replacement cycles are lengthened. If that trend continues, there will be some relief on capex as we head into FY25.”

Commenting on consumer behavior, Vittal said the ecosystem has not yet created enough use cases for 5G. The applications most consumers use, such as messaging or video, don’t require the kind of speeds that 5G offers. Just as 4G sparked a wave of innovation in content, entertainment and payments, Vittal believes the ecosystem around 5G has yet to evolve.

He said: “In my opinion, 5G is not just a radio technology. It’s a supercomputer and it’s connected to the cloud. It gives you lower latency and you can have 100x devices connected compared to previous 4G. The applications used today, such as video and messaging, do not require the supercomputing capabilities that 5G enables. Content, applications and the entire ecosystem must change. The telecom industry is ahead of the rest of the ecosystem.”

Airtel will also not make any further investments in 4G rollout. “I imagine our 4G rollout will be complete by FY25. We no longer invest in 4G capabilities. Will continue to add towers,” he added. However, the company will continue to invest in businesses such as housing and data centers. Vittal explained that currently 32% of Airtel’s postpaid customers have a 5G handset. Today, 5G is given free of charge with existing subscriptions, but the consumers who opted for 5G consumed much more data.

When asked why the home broadband ARPU (average revenue per user) fell, Vittal said many of Airtel’s customers come from outside the top 100 cities, leading to some dilution in ARPUs. However, the business was profitable and margins were strong as the cost of doing business in these cities was based on an innovative business model.

In an analyst call, you’d expect questions about the company’s business plan and financials, but the first question Airtel’s Vittal was asked during the call was about artificial intelligence (AI) and use cases of technologies like ChatGPT. Vittal said the company has appointed a team to investigate the use cases of the new disruptive technologies. He explained: “We have a full team assessing the impact of AI on our business. There are opportunities around experience, customer service and go-to-market, analytics and purchasing. There are also risks around cybersecurity. We have started some experiments in this regard. We have a team working on these new technologies and how to incorporate them into our core business.”

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