I have tracked Mr. Sunil Mittal closely until he was at the helm of affairs at Bharti Airtel in executive position before diversifying into unrelated areas such as Finance, Insurance and Retail. I clearly remember him answering in some interview what his trade-off would be if he had a choice on Profit vs Business Expansions, he naturally chose the latter like any hungry entrepreneur would do. In this context, I’d like to point out one of the key things which most missed in Bharti Airtel’s results coverage – Aggressive addition of Cell Sites by adding 5100 in June-12 Quarter which is about 3.x times its last 5 quarter run rate.
Another factor that can be attributed to Airtel’s sudden aggression is that it has been under-investing in the India business in comparison to Idea and Vodafone for quite sometime, but it still lead the pack with the highest number of cell sites. Airtel will go for USD 2Bn India capex this year and plans to to add 12,000 2G cell sites. [Cell Site = Active Infrastructure for Communication, Towers = Passive Infrastructure] So this has made the Investing community very unhappy as profitability is back under pressure, but who knows Airtel’s business better than Sunil Mittal ?
Amidst such heated competition in the marketplace coming from none other than the market leader, do potentially new entrants like Reliance Infotel of Mr. Mukesh Ambani have any chance to churn profits ?