5G, Data Capacity and More: What Nxtra Brings to Bharti Airtel, and India

In a press briefing on Thursday, Bharti Airtel unveiled Nxtra by Airtel, its data center business. Notably, the telco will invest Rs. 5,000 crore in the data centers business, to "serve the requirements of India’s fast-growing digital economy". However, what will the telecom's big data center gamble bring to the table?

Nxtra by Airtel - Airtel's Data Centers Venture

The telco said that Nxtra owns 10 core data centers, and 120 edge data centers across the country. Not only data centers; Nxtra will also manage "critical" submarine landing stations as well. These data centers combined have a total capacity of 120 MW; the venture already has a solid customer base of more than 400.

The telco announced that it will put Rs. 5,000 crores in Nxtra by 2025 to scale up its network of data centers. Along with new hyperscale data centers, it will also develop new data center campuses in key metro cities. Airtel will look to more than triple its existing DC capacity to over 400 MW.

Ajay Chitkara, Director & CEO, Airtel Business said, "Airtel has built the largest data center network in India and we are now doubling down on this business to scale up our network that will be at the core of 5G and Digital India". He added, "the new brand identity embodies this vision and ambition".

The Enterprise Focus

As was discussed previously, Nxtra data centers will cater to a variety of enterprises, not just telcos. The recent IT laws have mandated foreign apps and services to store their data in India; Nxtra can really snag a few high-profile customers looking for data shelves.

India's data center industry will reach a capacity of 1074 MW by 2023, going up from 450 MW currently. The recent IT laws will play a crucial role in fueling this rise.

Airtel knows this; in the statement, it said, "with 5G around the corner, a fast-growing digital economy, enterprises transitioning to cloud and local data storage regulations, India is witnessing strong demand for reliable data center solutions".

One Eye on 5G

While Nxtra looks like another move by Airtel to invest in its assets and later monetize them, the telco has its eyes set on the imminent 5G launch - whenever that will happen. One of the most interesting aspects of the 5G has been the ability to disaggregate the network - telcos can now virtualize their network functions and move them closer to the edge.

What that means is that the telcos can bring the network closer to the users, which gives 5G such low latency. For Airtel, low latency will play a crucial role. The telco did test 5G-based cloud gaming last month, over their trial network in Manesar. With the help of cloud-based deployment of the network, the telco can look forward to better decentralization, more agility and control, low latencies and higher bandwidths, and an overall greater QoS. All made possible via its Nxtra hyperscale and edge data centers.

And this won't be a phenomenon limited to Airtel; other telcos can lease data capacity across their data centers and benefit from the same. Since everyone will go with open network infrastructures to cut long-term costs, the telco's investment in its cloud business couldn't have come at a better time.

Green Airtel

Recently, Airtel had become the first telco from India to become a part of the UN Global Compact. The telco joined the Science Based Targets initiative (SBTi)’s ‘Business Ambition for 1.5°C’ campaign and has adopted targets to significantly reduce its carbon footprint and emissions from its network operations.

Also, the company has work in progress on a 14MW captive solar power plant in Uttar Pradesh; the telco will use it to meet the energy requirements of its core and edge data centers in the state. Lastly, it has also acquired a 7.48% share in Sandhya Hydro Power Project Balargha at Rs. 1.74 crore, to enable Nxtra in powering edge data centers in Delhi.

With 5G's focus being on sustainable network deployment, Airtel might do well to work on reducing the carbon footprint of its data centers, which will form a core aspect of its 5G network.

A Case Study in Business Accounting

One of the most interesting things that happened in the telecom sector over the last few years, apart from the launch of Reliance Jio, was when RIL erased all of the debt of Jio in October 2019. The conglomerate did so by setting up a wholly-owned subsidiary that became Jio Platforms Limited.

Back then, RIL had infused ₹1.08 trillion in JPL in form of Optionally Convertible Preference Shares. The parent company also set up the WOP with about ₹65,000 crores in equity, equity shares, and OCPS in RJIL. This internal reshuffle took the newborn company’s total equity to ₹1.73 trillion; a remarkable level of equity. RIL had made Jio essentially debt-free.

RIL reaped the dividends big time; in May 2020, JPL had an enterprise value of ₹5.15 trillion; more than everything else Reliance does, combined. What's even more impressive is that Jio Platforms alone stands as the fourth-largest company in India, behind RIL (including JPL), TCS, and HDFC Bank.

Just like what Reliance pulled off with Jio in 2019, Bharti has been looking to rejig the finances in order to reduce the burden on its telecom business. Therefore, the company has been working in order to separate the telco entirely from the rest of the Bharti umbrella and bring its digital assets under a different entity called Bharti Global. None of this has been set in stone yet.

The fact is that, unlike Reliance, Bharti Enterprises draws most of its income from its telecom business. Therefore, it doesn't have the kind of equity that RIL had to just infuse in the telecom business via a WOS. However, creating a different entity for its digital assets can be a possible play for Airtel here; its digital assets include Wynk Music, Airtel XStream, Airtel Thanks, Airtel Payments Bank, Airtel Ads, Airtel IQ, Airtel Secure, Airtel Cloud, and Nxtra. Therefore, as one of the most promising digital assets, Nxtra can serve as a driving force behind the telco, not only technology-wise but also by becoming a siphon for its debt and making it financially stronger.

Nxtra - A Worthwhile Gamble?

Right now, with the government's new IT laws, data centers have seen unprecedented demand in India. With more and more companies having to store their data in India, the infrastructure needs to grow. Also, 5G, with its disaggregation and network automation, will also need telcos to bulk up on their data capacities. Moving network applications to the edge also remains a

Needless to say, the demand is there. Airtel looks set to provide the supply. Nxtra has the potential to become the telco's most valuable asset after its telecom business, and the huge investment reflects that sentiment.