Bharti Airtel Conference Call Highlights

General Highlights:

• Indian Mobiles Business- 20% of growth
• Enterprise and Homes + Africa - 80% of growth.
• Wireless business was affected due to lockdown and covid but rest of the portfolio delivered strong growth
• Homes Broadband: 1 Million home passes through local network and 98 towns. Looking to be present in 300 towns
• Online and Entertainment – 2.8L customers. Looking to target 3.35 Million customers
• Strong momentum after covid.
• Fibre to home is a large opportunity: 2000 towns, 35 Million Home passes in next 3 years
• DTH: Number 2 position. Present in 18 million high value homes.
• ARPU (Average revenue per user) for DTH is 151.
• Airtel has recommended Government of India to bring DTH (Direct to Home) under DoT (Department of Telecom) so that cohesively the sector can be regulated and the policies can be framed.
• Mobiles Business: The Quarter was flat w.r.t. revenue growth. June has seen a strong bounce back and the momentum will continue further. Revenue market share is an all time high of >35%.
• Company has increased the tariff for the Rs 49 category to Rs 79 by adding more value added services. Also the post paid segment for the corporates has been hiked. This was needed because the ARPU is significantly low in India compared to global peers, also affecting the telecom sector in India.
• ROCE is in low single digits: Due to high Capex (Capital Expenditure) requirement the return, low ARPU, cut throat competition and government policies like AGR (Adjusted gross revenue) calculations, etc.
• Going forward company is planning to increase ARPU to 200 and then Rs 300 subsequently over the years to improve the ROCE and general profitability of the company
• Deployed sub- giga Hertz footprint on a pan India basis in this quarter which increased the Capex this quarter as compared to the previous ones. This deployment will give wide coverage of additional 90 million people.
• During the quarter, data traffic surged but consumption of pattern was flat across the day. Investment of capex is made on the basis of peak demand and not the average demand. Hence, with a flatter curve capex is not required.

Airtel Business:

• 3600 large enterprises plus 1 million emerging enterprises. In this segment, 20% of customers contribute 80% of revenues.
• As per Frost and Sullivan, in enterprise data market airtel has increased the market share from 22.4% to 31.4%.
• Enterprise Mobility market- Leaders in the industry with market share of 43.3%
• Leaders in IoT (Internet of things) connectivity
• There are many large greenfield accounts where they have low share hence scope for growth around cloud-based services, work from home solutions, surveillance, cloud communication, etc.

Market Opportunity in India:

• Potential 50 million high value Homes (executive, self-employed, business). They are located in top 25 cities of India. Their spend on all telecom and entertainment services is about Rs 1500- Rs 2000 per month.
• 500 million aspiring users: migrants, traders, etc.; who live in 300 odd districts of India.
• 85 to 90% of the market will come from the above segment.

Because of the above potential market opportunity, company has developed four-pronged approach to gain market share

1. Razor sharp focus on 85 t0 90% of the above customers: By using differentiated services and difficult to replicate. For e.g. Company is using this approach and launched several new initiatives like

1. Postpaid family Plan services
2. Airtel Payments Bank
3. Airtel Black: Bundle the services together and approach the high value homes.

Company will reach 700,000 mark soon. Each of the homes gives an additional revenue per account of Rs-650.

2. Relentless amazing customer experience:

1. Company has invested nearly one lakh crore over the last 5 years to improve the network connectivity. Complaints by customers are an all time low.
2. They have already started trials and demonstration in 5G area.
3. They are investing in ORAN (Open Radio Access Network) technologies with the help of Intel, Qualcomm, Mavenir, Red Hat, among others.
4. Formidable portion of spectrum holdings can be deployed for 5G over time.
5. All this is supported by largest network of data centers and large submarine fiber optic capacities.

3. Leverage digital assets and partnerships to create new revenue sources:

1. Over 190 million monthly active customers over the 3 platforms: Airtel thanks, Airtel extreme and Airtel Wynk music.

4. Financial Discipline and Governance

Airtel IoT: Market leader in M2M (machine to machine) segment.

Airtel IQ: Cloud communication suite. They have 120 enterprises as customers.

Airtel Payments Bank: It is an independent subsidiary of Airtel.

Monthly 30 million users

Gross Merchandise Value (GMV): 100,000 crore

Merchant base: 7 million

Fully integrated online and offline

Company has reached a break even in July,21.

Company has following revenue sources w.r.t. Payment’s Bank

1. Interest on deposits: Deposits are growing
2. Remittances
3. Payments to Merchants
4. Digital Cash at source

SC had dismissed AGR dues case recently. Company has made the provisions for AGR dues. Review petition hasn’t been decided yet by the company.

Debt position:

1. When compared to global peers, Net Debt to EBITDA is at 3x, which is comfortable as the company is in capex building phase.
2. Core EBITDA has been increasing
3. India business is free cash flow positive
4. Africa generates 500 million dollars of FCF (free cash flow) per year.
5. Bharti Airtel has a stake of nearly 41% in Indus towers which generates good FCF. Also, the PAT is 5000 crores plus for the year. Hence, through way of dividends company has access to cash.
6. Africa and Indus towers do not need any Capex.
7. Bank Debt is virtually zero. Most of the debt is Dollar denominated and Rupee denominated bonds.
8. Other debt consists of financial lease and Department of telecom debt.
9. Marginal debt in subsidiaries.
10. They have highest rating from CRISIL, a rating agency.