NEW DELHI: India & # 39; s largest telecom company Bharti Airtel is a new independent optical fiber company and has appointed Abhay Savargaonkar as chief executive officer of the new unit.
Airtel was able to replicate his approach to Indian tower operations and diluted bets to create an independent fiber optic company that rents the main infrastructure to potential mobile phone customers, analysts said.
The telco of Sunil Mittal, who confirmed the new role of Savargaonkar in an e-mail response to ET's questions, made an internal announcement to this effect last week. Savargaonkar, who will continue to report to Gopal Vittal, CEO of Bharti Airtel (India, South Asia), was previously director of networks, equivalent to chief technology officer.
"Given the significant growth in data consumption in recent years, we believe a robust and independent infrastructure company serving the growing need for fiber in the telecom sector is crucial," said Vittal in internal communications, a copy of which was assessed by ET.
Bharti Airtel is in the final phase of transferring its fiber optic cable network to a wholly-owned subsidiary, Telesonic Networks Ltd, through a sale in stores. The company manages 246,000 route kilometers of optical fiber, which it aggressively expands to accommodate rising data growth. "Fiber assets from Telesonic can eventually be transferred to this new subsidiary," said one of the sources.
Nitin Soni, director of Asian companies, told Fitch Ratings that it was logical to have a separate company that owns fiberglass. Airtel had previously set up a telecom tower joint venture – Indus Towers – with Vodafone India and Idea Cellular.
"There is no duplication of capex expenditure such as tower infrastructure, and India is one of those countries where price competitiveness is so high that most telcos are making the rational decision to create independent companies," he said. .
But to make it a truly independent company, Airtel would have to sell a majority stake to attract other players to use the assets, similar to what it does with its tower business, Soni said.
"If you continue to hold a stake, it will not be considered as truly independent by competitors like Reliance Jio and would continue to build its own fiber, unless assets are hired by Jio, these independent companies can not grow," added he's ready.
Airtel also takes over Randeep Singh Sekhon to lead the network department as the new technology manager for his operations in India and South Asia, replacing Savargaonkar. Sekhon, who also reports to Vittal, previously worked in several senior management positions at telco's in Malaysia and Indonesia, with his previous role as CEO of Hutchison 3 Indonesia.
A spokesman of Airtel confirmed the appointment of Sekhon but did not comment on the formation of the new independent optical fiber unit.
The new appointments follow the exit of Airtel's chief technology officer for mobile networks, Shyam Mardikar, who is speculated on a large scale to join a rival telco. Airtel & # 39; s business head Ashok Ganapathy recently left the company and was replaced by Ajay Chitkara, who now oversees both domestic and global operations.
The establishment of the new independent fiber optic company comes at a time when Airtel is preparing for a new fight with Reliance Jio centered around the fiber-optic network – the country's wired broadband market. Airtel and Jio are already locked in an intense price war in the wireless segment.
Jio is generally expected to start offering a mass broadband broadband product, bundled with internet-based television programming, starting at around Rs 500 per month, almost half of the current market rates for comparable services.
Soni said that Airtel will benefit from the expansion of the market as Jio enters, but pressure will be put on the ARPUs that will fall by 30-50%. "In the short term, they will be faced with declining EBITDA yields in the home broadband segment [Airtel] and we are confident that they will benefit from the expansion of the market in the medium term," he added.
Analysts said that in addition to Jio Airtel, the combined Vodafone-Idea Cellular company will have to acquire a relatively strong fiber-optic activity through the recently acquired YOU Broadband activities.
Airtel offers fixed telephony and broadband (DSL) services for homes in 89 cities of pan-India. ET reported earlier that Airtel is likely to reserve a substantial portion of its Rs 24,000 crore capital expenditure plan for FY19 to expand its broadband network to at least 100 major cities from 89.
The company plans to connect another 10 million plus homes of FY21, which are expected to result in at least 3 million to 5 million new customers for home services over the next three years.
In the market for broadband internet, BSNL and Bharti Airtel currently have a 51% and 12% share, respectively, of the 18 million households in the country currently subscribing to fixed broadband services. The home market for broadband itself is a fraction of the more than 1 billion mobile phone subscribers, of which just over 400 million are mobile broadband users.
Airtel achieved less than 10% of its turnover with broadband internet and the digital TV segment