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Business – Bharti can now focus on expansion into 3G space

Ranjit Shinde

The termination of the proposed merger with MTN has clearly postponed the global aspirations of Bharti Airtel. But the company and its shareholders
can take heart from the fact that it preserves Bharti’s fi-nancial muscle for bigger battles. Inida’s biggest telecom company can now focus on its expansion into 3G space in India without stretching its finances.

The regulatory authorities have set a reserve price of Rs 3,500 crore for an all-India licence for 3G services. Currently, telecom operators are struggling to cope with the limitations of the existing 2G networks while serving the 455 million strong subscriber base that is growing at a break-neck pace of 12-13 million per month. An entry into the 3G arena would resolve the pressure on the networks by offering more bandwidth.

Undoubtedly, 3G is going to be the next big thing in the domestic telecom space as operators will be able to cater to a bigger subscriber base. Further, 3G will be a rare commodity since only four licences will be offered per circle notwithstanding the entry of several new players in the 2G space in last few months.

Bharti looks comfortably placed with enough financial muscles to take on 3G expansion. By the end of June 2009, the company had Rs 6,307 crore in cash and investments that can be easily converted into cash. If the deal with MTN were to happen, Bharti would have had to take fresh debt on its books, which could have strained its balance sheet.

Now that the deal is called off, this sets Bharti free to plough its re-sources into domestic expansion. Also, after successfully operating pan-India networks, Bharti appears to be far more comfortable in the current scenario, both financially and functionally, compared to other ambitious players such as NTT Docomo, which has partnered with Tata Teleservices.

3G also throws open opportunities in the non-SMS services including data, music, and video. This calls for more investments from the operators and here again Bharti looks on a comfortable footing.

Apart from 3G, another growth area in the Indian market is consumer services such as direct-to-home (DTH) and TV service based on internet protocol (IP). Bharti has entered both the segments and faces stiff competition from players including Reliance Communications and Tata Sky. Investments in the consumer services space would be key to Bharti’s future progress given that the wireless telecom space, which is inching towards 50% penetration, would soon reach a point of saturation.


October 1, 2009 - Posted by | Uncategorized |

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