Bharti Airtel is taking strategic steps to advance its 5G network rollout, with recent developments indicating significant shifts within the telecom sector. After finalizing a pivotal 5G core equipment purchase deal with Sweden's Ericsson, Airtel is geared toward incorporating standalone (SA) network capabilities. This announcement led to speculation about Airtel hastening its transition to SA, which focuses solely on 5G capabilities.
While industry characterized the move as the start of Airtel's eventual growth toward more efficient 5G deployment, Airtel's management clarified the current strategy. An executive reported, "SA... we are already doing it for our fixed wireless access (FWA) piece and all our core networks are anyway SA-ready. But we have no intention to switch on SA now for some time." This sentiment underlines Airtel's methodical approach to adopting 5G technology without rushing to change infrastructure.
Unlike its primary competitor, Reliance Jio, which has fully embraced 5G SA since 2022, Airtel opted initially for non-standalone 5G networks. By leveraging existing 4G infrastructure, Airtel has minimized capital expenditures. The executive added, “4G traffic is not growing but 5G is. But...you need to offload traffic on the 5G bands before transitioning to SA.” Such insights highlight the current challenges faced by operators transitioning to more advanced technologies.
The criticism extended toward the current state of 5G usage, where revenue opportunities remain limited. The executive emphasized, “...it's largely just speed ... and some FWA (use cases). But you don't deploy 5G for FWA...the economics don't work...” To overcome these challenges, he highlighted the need for greater application development to monetize the network effectively.
Airtel's restrained rollout aligns with findings from Vinish Bawa, telecom leader at PwC India, who mentioned the compelling benefits of SA networks including improved performance and security. Nonetheless, the report raises questions about when the timing of Airtel's full migration toward 5G SA would occur and how it would impact its financial strategy.
Despite the challenges around 5G, there are positive signals for Bharti Airtel’s overall business health. Goldman Sachs recently revised its outlook on the telecom industry, projecting growth for Bharti Airtel. They raised their target price for the company's shares to Rs 1,780, reflecting stronger-than-expected revenue growth particularly within broadband and improved wireless margins. The brokerage increased its FY25-28 revenue and EBITDA estimates by 8% and 5%, respectively. Bharti Airtel’s stock showed resilience, climbing 1.8% to Rs 1,630 recently, leading to discussions about its significant market position.
The bullish outlook from Goldman Sachs demonstrates the operator’s commitment to disciplined capital expenditure and focuses on high-margin services, all of which benefit its profitability. Conversely, the brokerage's analysis turned negative on Vodafone Idea and Indus Towers, indicating persistent struggles with financial pressures and operational challenges.
Goldman Sachs maintains its “sell” rating on Vodafone Idea due to deepening financial difficulties, cutting its target price to Rs 2.40, representing near 70% downside from current levels. This contrasts sharply with Airtel, which is thriving amid increasing broadband subscribers and efficient management. Vodafone Idea's future remains tenuous, reliant on potential capital infusions or regulatory changes due to dwindling subscriber growth.
Indus Towers’ target price also faced downward revisions, with Goldman Sachs citing rising capital expenditures as a significant concern. Despite minor improvements due to increased tenancy by Airtel and Vodafone Idea, its outlook remains conflicted.
The latest assessments by Goldman Sachs reinforce Bharti Airtel’s position as the growing leader of India's telecom market, setting it apart from struggling peers like Vodafone Idea. The distinct strategies involved, including network transition methods and financial management, signal what appears to be Airtel's strong footing as the industry gears for 5G proliferation.
With expansion plans materializing and competition intensifying, Airtel appears poised at the intersection of market opportunity and infrastructural evolution. Future developments will focus not only on 5G connectivity shifts but also how operational shifts will impact growth and revenue generation.