Bharti Airtel plots $16 billion subsidiary spending spree

India’s Bharti Airtel has divulged plans to spend more than a trillion rupees doing business with its group companies over the next five years.

By far the largest single chunk of change – some INR880 billion ($11.78 billion) – will go to its Indus Towers joint venture, for the availing of passive infrastructure and related services ahead of the launch (at some point further down the road) of 5G services. Airtel said it will spend INR170 billion per year for the next four years, but as 5G begins to roll out, that figure will ramp up to INR200 billion for the fifth year.

“India is on a crucial stage of readiness towards 5G roll-outs, which presents an opportunity to propel India to the next generation of digital connectivity and deliver significant social and economic benefits. Deploying 5G networks in India will require capital-intensive investments including sufficient spectrum, tower infrastructure and fibre,” said Airtel, in a stock exchange filing.

Meanwhile, INR150 billion ($2.01 billion) will be spent on doing intra-company business with Airtel’s data centre arm, Nxtra Data.

“Nxtra has the largest network of data centres in India, serving the requirements of India’s fast growing digital economy and therefore, Nxtra is positioned to offer in the interest of the company superior reliability, reach, flexible power configurations and carrier-dense ecosystem for a superior customer experience,” said Airtel.

Nxtra has a plan to source 50 percent of its energy needs from renewable sources, and therefore some of Airtel’s money will go towards achieving this objective. spend INR50 billion ($669.4 million) to expand its cloud footprint in metro areas; the income from its parent will no doubt help towards that target.

“The transactions related to procurement of environment-efficient data centre services completely align with Airtel’s overall GHG (greenhouse gas) emission reduction goals,” Airtel said.

In addition, Airtel will also spend INR140 billion ($1.87 billion) on its Bharti Hexacom unit, which offers mobile services in North Eastern India, and fixed and mobile services in Rajasthan.

In total, the five-year spending spree comes to INR1.17 trillion ($15.67 billion). Large groups like Airtel are always doing business with subsidiary companies, but when so-called related party transactions get this big, India’s stock exchange regulations require the company to get shareholder approval first.

The information was disclosed in a National Stock Exchange filing, in which Airtel said it will hold an extraordinary general meeting later this month in order to secure that aforementioned shareholder approval for its spending plan. At this meeting, holders will also be asked to vote on Airtel’s proposal to issue Google more than 71 million shares as part of the latter’s $1 billion plan to invest in the telco.

Announced last month, the deal comprises a $700 million equity investment – giving it a 1.2 percent stake in Airtel – and up to $300 million to fund commercial agreements designed to scale Airtel’s offerings, and by extension achieve Google’s broader ambition to lower barriers to smartphone adoption and develop India-specific 5G use cases.