Genai meets Capex: Telco Data Centers as the next profit driver

In the second quarter of 2025, 87% of the total smartphones that were sent in India was 5G-Intenscheld (IDC), a remarkable increase of 79% the previous year. The pan-India rollout of fixed wireless access services and the rising acceptance of broadband connections at home contributed to a 20-30% growth in data traffic for telcos during FY25.

The rise of generative AI (Genai) has also emerged as a new data traffic, computer use and storage infrastructure driver. Telco-operated data centers Integrated with core networks are an important theme.

Genai & Data Center Capex Wave: India not in a bubble area

Generative AI -Workloads require significant calculation sources, which leads to an increased demand for data centers. Global Hyperscale Data Center capacity is expected to triple in 2030, powered by Cloud and AI. Worldwide data center peaks peak in 2024. Alibaba chairman Joe Tsai, however, warned of a potential “bell” in the construction of AI data center, suggesting that technology companies can calibrate AI budgets again, including data center requirements, as the question normalizes. India remains a growing market, supported by low data costs, rising internet and smartphone penetration and favorable regulatory policy.

Government’s incentives have attracted a government of 60 billion in cumulative investments by 2024. The colocation capacity of India was 854 MW in 2023, surpassed 1 GW in 2024 and is expected to reach ~ 3 GW by 2028.

Telco-operated data centers: built on resilient foundations

Telco’s own fiber optic dazzes/optical soil threads (upset fibers), submarine cable compounds and spectrum activa, making connectivity with low latency essential for modern data processing. Their operating relationships and existing physical infrastructure, including re -use Legacy 2G sites for Edge data centers, offer various benefits. Telco’s often supplement hyperscalers by offering colocation and connectivity services that support public cloud offering. They have also forged strategic partnerships with global players such as Amazon, Brookfield, Carlyle, Google, IBM, Microsoft and Nvidia.

In addition, Telco’s AI are in their workflows, with products such as Jiobrain and Xtelify Serve, and now offer them as an industry-specific AI-driven solutions. Jio wants to bring AI to the masses and expand worldwide, while Airtel recently brought Globe Telecom (Philippines) and Singapore on board as customers for Xtelify.

Diverging aspirations and approaches

Airtel has chosen not to invest in large language models (LLMS) because of their extremely high costs and the availability of high-quality open source and external models. Instead, Alytel focuses on the use of these sources for targeted, domain-specific applications, such as small language models and specialized AI pipelines.

In the meantime, Reliance strives to evolve into a depth company by building Gigawatt scale, AI-ready data centers in Jamnagar, driven by its own green energy. It also develops national AI Investment Facilities, with the aim of achieving the world’s lowest AI Invference costs that are tailored to India-specific applications.

Income and reinvestment options Vooruit

Despite three mobile tariff increases aimed at market correction since December 2019, Indian telecom operators have difficulty generating returns that generate sufficient returns to justify their large -scale investments in continental broadband networks that have emerged in step with worldwide technologies such as 5G. Data rates per GB remain the lowest worldwide, while speech services are still offered for free.

Although 5G was the first technology that was specially designed for companies, its acceptance is limited within this segment, partly due to the global economic headwind. Nevertheless, Telco’s proactive investments continue to invest. With Carlyle as an external investor, Airtel’s Datacenter -arm, Nxtra, planning to invest USD 550-600 million in the coming years to expand its capacity from around 240 MW to 400 MW.

In the meantime, media reports indicate that reliance is planning to invest USD 20-30 billion in an AI-driven data center with 3 GW, which is the largest of its kind worldwide. The generation of income from both customers and investors comes up and the next border for telco’s. Although AI-conducted investments do not yet make an important contribution to the turnover, they offer strong visibility for rapid sales growth and they open opportunities for reinvestment.

(The author Vivekanand Subbaraman is the main analyst for telecom, media, oil and gas franchises at Ambit Capital. Views are own)

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