Bharti Airtel restructures: Digital comes in, telecom goes out

New corporate structure of Bharti Airtel

Telecom operator Bharti Airtel seems to have borrowed a leaf from rival Reliance Jio in announcing a restructuring of its business that puts its digital business at center stage, while moving the pipe or connectivity business to a separate, wholly owned subsidiary.

This is the opposite of how things stand now.

At present, the connectivity business is housed directly under Bharti Airtel, while the digital services — such as Wynk Music, Airtel Ads, Airtel Cloud and so on — are housed in a separate unit called Airtel Digital. The new format will flip the roles.

“The new structure envisages Airtel Digital Limited folding into the listed entity, Bharti Airtel. This will now house all of the digital assets spanning Wynk Music, Airtel X stream, Airtel Thanks, Mitra Payments platform used by a million retailers, Airtel Ads, Airtel IQ, Airtel Secure, Airtel Cloud and all future digital products and services,” the company pointed out.

Meanwhile, “..all the telecom businesses [will be housed] in a newly created entity — Airtel Limited – a wholly owned subsidiary of Bharti Airtel Limited.”

The DTH unit, Bharti Telemedia, will remain a separate subsidiary of Bharti Airtel and “sit alongside” the telecom arm Airtel Limited for now.

“It is intended to eventually fold the DTH business into Airtel Limited to move towards the National Digital Communications Policy vision of converged services to customers,” it said.

The company said it is implementing this change keeping in mind its “digital ambition”.

The move is similar to what Reliance Jio, which also started out primarily as a connectivity provider, did to move its pipe or connectivity business to a separate sub-unit, while moving all its digital assets — such as its various content and app products — to the main company.

Besides DTH, Airtel Payments Bank too will remain a separate entity under Bharti Airtel, as will the company’s infrastructure businesses such as Nxtra and Indus Towers. International subsidiaries and affiliates will also remain separate units and subsidiaries as well.

It said the new structure will sharpen the “focus of the company in driving the rapidly unfolding digital opportunity in India while enabling it to unlock value”.

To explore the possibility of merging the DTH unit with the connectivity unit (Airtel Ltd), the company has moved the government to seek clarity on licensing policy, “given that carriage i.e. telecom and DTH is currently being regulated and managed under two separate ministries of Communications and I&B respectively.”

Bharti Airtel’s board of directors today approved the scheme enabling the company to file for all  statutory approvals to give effect to the proposed rearrangement.

The move is likely to improve Bharti Airtel’s valuations, given that it can now position itself as a digital solutions or products company, instead of just a pipe or connectivity provider.

“The new structure sets the exciting future course for Bharti Airtel and provides focus on the four distinct businesses – Digital, India, International and Infrastructure, each, in a razor sharp way,” said Sunil Bharti Mittal, Chairman, Bharti Airtel.

“We believe this will provide agility, expertise and operational rigour to serve our customers brilliantly while providing flexibility to unlock value for our shareholders. This structure will serve us well over the coming years and is a win-win for all stakeholders.”