Bharti Airtel has been delivering a strong operational and financial performance. The telco has gained market share across all segments, including wireless, broadband, business-to-business (B2B) and direct-to-home (DTH). During Airtel’s recent earnings call, Gopal Vittal, managing director and chief executive officer, Bharti Airtel Limited, highlighted the key aspects of the company’s growing footprint and the strategies being adopted to future-proof Airtel. Edited excerpts from his speech…
We have delivered a competitive and consistent performance during the quarter ended December 2022. Our consolidated revenue grew by 3.7 per cent sequentially, hit Rs 358 billion. Our earnings before interest, taxes, depreciation and amortisation (EBITDA) margins are at 52 per cent. This is an expansion from the last quarter EBITDA of 51.3 per cent. Margins are up due to three reasons. One is our continued operational leverage. The second is our strong war-on-waste programme, which continues to be a big focus for the company. The third is the flowthrough of the lower spectrum usage charges that were announced by the government.
The most gratifying thing that we have witnessed during the quarter is that, despite our stepped-up 5G roll-out and consequent build-up of capex, our net debt has come down by Rs 30 billion. This is really because of very strong operating and free cash flows. Looking ahead, we expect our net debt to go down further in the coming year.
Our concern continues to be return on capital employed. Today, at a consolidated level, this stands at 11.9 per cent for us. India’s return on capital employed is less than 9 per cent, and therefore, we do believe that the ARPU needs to go up. An ARPU of Rs 300 is critical for a respectable return on capital employed, and that is something that we hope will happen in due course of time.
For the quarter, the stand-out performance is really for the wireless segment. We have seen a net addition of 4.4 million revenue earning customers. In terms of 4G net additions, we have added 6.4 million customers. Post-paid net additions have gone from roughly 280,000 during the last quarter to 650,000 this quarter. So there has been a sharp upsurge, and the overall ARPU has moved up from Rs 190 to Rs 193. This has been driven by upgrades on both the 4G and post-paid fronts, as well as sophisticated data monetisation using contextual marketing.
In the mobile segment, we also disrupted the international roaming sector by launching the Airtel World Pass. This World Pass gives customers one-plan access to any country in the world. We also raised the tariffs of the entry-level plans from Rs 99 to Rs 155. We exceeded our action standards in both Haryana and Odisha, and we have now extended this across 17 circles in the country.
The broadband segment continues to look strong. We had 432,000 broadband net additions this quarter. We are now present in 1,140 cities. This is up from 847 last year. We have 24 million-25 million home passes, and we are on track to actually getting to 30 million. The local cable operator model has been a very interesting innovation for us, and this is one of the reasons that we have been able to power ahead and expand to many more cities. It is a capex-light business model which is very healthy in terms of return on capital relative to the old model, and it works very well in flatbed geographies, which are not like high-rise geographies.
The net additions in the DTH segment stand at 214,000, up from 66,000 last quarter. We are seeing some growth in the DTH segment after a long time. This is happening because of a very simple strategy that we have introduced. First, we have dramatically simplified our tariff plans, and now eight tariff plans are active across the country with different bundles. The second is the strategy of convergence, which is very unique to Airtel – we have introduced Airtel Black, whereby we are bundling both linear and over-the-top content with our broadband offerings. But these are just very early, green shoots.
Airtel Business and other segments
Airtel Business continues to witness strong performance. We have grown sequentially at 2.5 per cent, and today I would say decisively that we are the largest B2B player. Our margins in this business are just south of 40 per cent. This is the best in the industry, and I think our strategy of going both wide, to cover more and more accounts, and deep, to build stronger relationships and more solutions with a greater wallet share from existing accounts, is beginning to deliver. We are also building strong capabilities and scoring strong wins on internet of things, communications-platform-as-a-service and Nxtra, which is our data centre business.
Our payments bank customer deposits grew by 50 per cent over the last year. We have hit a revenue run rate of about Rs 13 billion. Our digital businesses are at an annualised revenue run rate of about Rs 10.5 billion. One of the highlights of the quarter is that we won a large multiyear tender for cloud from DIKSHA, which is a national platform for school education established by the Ministry of Education.
Focus on ESG
In terms of environmental, social and governance (ESG) initiatives, we are pleased that the concept of reduction of the carbon footprint is now very deeply embedded across both our data centre business Nxtra and our mobile networks. We plan to make Nxtra fully green, in line with government regulations, and there has been a significant ramp-up of solar sites and plans for solar sites on the wireless side.
Future focus areas
I want to look at how we are building the future around five big themes. The first big theme or the first big focus area for us is our portfolio. Our portfolio is now resilient and diverse. Africa accounts for about 30 per cent of our business. The wireless segment in India accounts for 50 per cent, and the balance is accounted for by our fast growing homes and enterprise business. Investments will continue and go into where the growth is, and this will hopefully further strengthen our portfolio.
The second theme is rural growth. In 60,000 high-potential villages, Airtel is not just present but expanding. This expansion will provide a fair market share and tailwinds to business. In these 60,000 high-potential villages, we have identified roughly 40,000 high-potential clusters of communities.
The third theme is the “top 150 cities”. The top 150 cities in India account for about 40 per cent of the Indian telecom market. Here, we are looking at three big areas, which we think are massive opportunities. The first is using 5G as a lever and a pivot to really drive our post-paid growth. 5G is now live in 70 cities. We will be live in about 300 cities by March 2023 and all urban areas will be covered by March 2024. The second big area is what we are calling the one transport band. We are now deploying very sophisticated data science to forecast and predict demand across all our businesses, whether B2B, broadband or the way traffic will grow in the next 12 months. Therefore, we need to plan fiberisation based on traffic and the likely growth of the market. The third area is our go-to-market approach on the enterprise side. If you look at the enterprise business, of the top 500 accounts we have, in 50 we have seen almost 300 per cent growth.
The fourth theme is a radical reset of experience. We have identified 3,000 catchments across our 150 cities to dramatically improve network experience using digital tools. The first thing we are doing here is revamping all our customer journeys. The second thing is transparent communication. Many years ago, we launched our Open Network, and now we are elevating it to be extremely transparent with customers. The third thing is raising our digital velocity and moving away from a product-centric single-line-of-business approach to a platform approach for both experience and digital monetisation.
The last theme or focus area is resetting the war on waste. During the past 12 months, we have seen a lot of headwinds with regard to cost. Energy prices have gone up and our deployment is also rising. We are concerned about the increase in sales cost, as well as sales and distribution costs. Therefore, we are relaunching our war-on-waste programme and relooking at every cost item.