Airtel to Rethink Plans for Changing Business Structure

Previously, Airtel backed the definition of AGR by the telecom department to include non-telecom items as well. Now, it seems to be rethinking the plan to separate its digital and infrastructure businesses from telecom.

Highlights

  • Earlier this year, Airtel unveiled a new corporate structure, wherein is telecom and other businesses will be separate.
  • Now, the government redefined the adjusted gross revenue (AGR) to exclude the revenues from non-telecom businesses.
  • Bharti Airtel seems to be rethinking the plan to separate its digital businesses from telecom.

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Airtel

Bharti Airtel seems to be rethinking the plan to separate its digital and infrastructure businesses from telecom. The company is in this speculation to  change plans of rejigging the business as the government redefined the adjusted gross revenue (AGR) dues to exclude the revenues from non-telecom businesses. As per a report by ET Telecom citing a person familiar with the plans of the Sunil Mittal-led carrier, the government has taken the next step and defined that AGR will eliminate all the revenue from non-telecom revenue.

He stated that the company was awaiting some further clarifications from the government following which it will make the final decision on if it has to go ahead with the new structure or revert to the old will be taken. However, the report noted that the telco did not respond to the same.

Bharti Airtel’s Plan

A telecom operator pays spectrum usage charges and licence fees to the government based on its AGR. The higher the AGR, the more charges it will have to pay to the government. Telecom operators had excluded non-telecom items to calculate AGR. However, in September 2019, Airtel backed the definition of AGR by the telecom department to include non-telecom items as well.

For example, if a telco’s fast-growing digital services and its related segments get added to the revenue from its direct telecom services while estimating the AGR, then its payouts will be higher.

Back in April, Airtel unveiled a new corporate structure, wherein its telecom and other businesses will be separate. This structure will see a newly created unit called Airtel Ltd. This structure was likely to remove the telecom regulatory overhand on the digital business of Airtel and minimise statutory liabilities specific to its mobility business, thereby improving operating income.

New Reforms Unveiled

From October 1, 2021, in a move to improve the sector’s health, the government removed all the non-telecom items while estimating AGR. the items including profit from insurance claims, forex fluctuations, capital gains on the sale of securities and fixed assets, revenue from operations apart from telecom activities, and revenue from activities under I&B licence were excluded from the gross revenue at the AGR. This has forced Airtel to rethink the final decision.

As per analysts, the non-core items of Bharti Airtel make up for 10 percent of its total revenue. The proportion would have increased for Airtel with the anticipated growth of its digital business. The combined digital service revenues is worth Rs 100 crore now and is expected to scale up to Rs 1,000 crore in the coming years, stated the top management.

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Chakri is a go-to guy for your next smartphone recommendation. Back in his engineering days, he used to play with smartphones by installing custom ROMs and that passion got him into the tech industry. He still goes nuts about a smartphone knocking his door for review. Currently managing everything at Telecom Talk, Chakri is trying to master PUBG Mobile in his free time.

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