Africa move shows Sunil Mittal is digging in for the long haul against Mukesh Ambani

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Disruptive entry of Reliance Jio in India’s telecom sector has forced many players to close down, sell out or merge as it battered them with ultra-low prices. Its relentless race to the top is fuelled by deep pockets of parent Reliance Industries. Several regulatory changes too have given it an upper hand.

Yet, Airtel—the besieged telecom leader of India challenged by Jio—shows no signs of giving in. It is ready for a long price war Jio is waging to gain new and poach old subscribers. Experts have said Airtel is unlikely to be toppled from its top spot by Jio.

In March, global financial major Goldman Sachs said Airtel was likely to remain the market leader due to its strong balance sheet and wide spectrum footprint. Goldman had said Airtel could even sell non-core assets to stay competitive if the price war linger on. Since it does not need to buy or renew airwaves till 2022, it can afford to spend on expansion of its 4G network.

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That’s what Airtel plans to do. Since Jio’s price war is fuelled by deep pockets of parent Reliance Industries, Airtel too is preparing to pour money into business.

Airtel plans to raise as much as $1.5 billion by diluting about a fourth of its stake when it lists the holding company for Africa operations, Bharti Airtel International (Netherlands) BV in early 2019, according to an ET report. The money will help bolster the telco’s efforts to stay competitive in the Indian market, where Bharti has just declared its first quarterly loss in contrast with profits in Africa. Africa operations have started to make profits about seven years after the Indian telco entered the continent in 2010.

The Africa move shows that Sunil Mittal, Chairman of Bharti Enterprises, the holding company of Airtel, is in no mood to go down for want of money.

“Post listing, Airtel could adopt the same strategy that it has for Bharti Infratel — progressively reducing the stake in the business and investing in the core, India mobile business, which we believe has significant growth potential but will need high network investments in the short term,” said analysts at BNP Paribas in a note to clients. The company has been steadily diluting stakes in Bharti Infratel to raise funds and recently announced the tower unit’s merger with Indus Towers. It also plans to sell stakes in the merged entity after the deal is closed, which is expected by March 2019.

Recently, Bank of America-Merrill Lynch said Jio intended to keep its tariffs at a discount to peers, and it didn’t see the company in a rush to raise average revenue per user as its primary focus remained on subscriber additions. By raising money for its core mobile business in India, Airtel seems to have anticipated the Jio strategy and is getting ready to counter it.

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