Bharti Airtel And The Telecom Sector In India

Poised for great times ahead!

(Source)

Disclosures:

1. This is not an investment advice. Please consult your financial adviser before investing.
2. ‘Bharti Airtel’ is a part of my long term portfolio.

In this post, I am going to discuss:

1. The long consolidation in telecom sector
2. The mounting debt of telecom companies
3. End of long consolidation
4. Data is the new oil
5. A rise in ‘Work from home’ culture
6. Hopes of increase in ‘ARPUs’
7. Telecom Sector: A probable duopoly
8. Bharti Airtel is 5G ready
9. Bharti Airtel’s latest acquisition: OneWeb

The long consolidation in telecom sector

The telecommunication sector in India has always been a wealth destroyer for many years before ‘Reliance Jio’ entered and changed the rules of the game. Reliance Communication, Vodafone-Idea, Tata Communications, etc to name a few, never created wealth over long term for the investors.

One of the major reasons for this long consolidation in the telecom sector is the ‘AGR (Adjusted Gross Revenue)’ case which was an overhang from 2007–2020.

Let me brief you about the AGR case.

For a telecom company to operate in India, it would need two things from the Government,

1. The telecom license
2. The spectrum

The telecom license is akin to taking permission from the Government for operating in the telecom sector.

The spectrum, in simple language is the fees telecos pay for the range of electromagnetic waves. To simplify further, the internet speed we get as a customer depends on the spectrum (2G, 3G, 4G in common parlance).

In 1999, the new deal was that the telecos were required to pay the following percentage of AGR:

1. 3–5% for spectrum usage charges
2. 8% for license fees

Let me tell you more about how Telecom companies earn ‘revenue’.