Views of Gopal Vittal: “Our critical strength is our diversified portfolio” -

Gopal Vittal, managing director and chief executive officer, Bharti Airtel Limited,

Bharti Airtel has been witnessing steady growth in the Indian telecom space. The telco has been focusing on diversifying operations and investing in areas such as rural expansion, fibre deployment and data centres. 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 quarterly performance, growing footprint and strategies being adopted to build a future-ready Airtel. Edited excerpts from his speech…

Quarterly performance

Overall, we have delivered a satisfactory performance during the quarter ended December 2023. Our consolidated revenue of about Rs 379 billion was impacted by the currency devaluation in Africa, particularly the Naira and Malawian Kwacha. India continues to grow steadily at 3 per cent, delivering over Rs 278 billion. The earnings before interest, taxes, depreciation and amortisation margins came in at 53.9 per cent. Mobile and homes delivered consistent growth while Airtel Business saw moderation due to the slowdown in the global business. Capex for the quarter ended December 2023 was Rs 77.50 billion. The investments were focused on 5G, rural expansion, fibre deployment and data centres.

Mobility segment

In the mobility segment, the momentum of 4G net additions was strong at 7.4 million and post-paid net addition remained steady at 0.9 million, marking the third consecutive quarter with more than 25 per cent of total net additions. Our premiumisation agenda to upgrade customers to higher-value plans has been working well and contributing to average revenue per user (ARPU) growth in the absence of tariff hikes. Our 5G coverage expansion is on track despite no monetisation. Growing 5G shipments are reflected in our rapidly growing 5G base as well.

Broadband segment

In the broadband segment, we now serve 1,267 cities, up from 1,140 cities during 2022 in the same quarter. We added almost 1.5 million home passes, indicating the momentum we are experiencing in this business. Airtel Black, our converged offering, is witnessing significant traction. In fact, 47 per cent of net additions are now on the Airtel Black plan. This converged plan helps us provide customers with multiple services, effectively reducing churn and giving a fillip to the average revenue per account. We continue to strengthen our content partnerships to make Xstream a mainstay, with more than 20 over-the-top apps on a single platform.

DTH segment

In the direct-to-home (DTH) business, we added 388,000 customers. This is the highest net addition that we have seen in the past 12 quarters. Revenue growth was driven by both customer additions and ARPU increases.

“We hold a position of leadership across almost 60 per cent of the country.”

Airtel Business and other segments

For Airtel Business, we observed a sequential revenue growth of 1.7 per cent. The global segment continues to be soft while the domestic space is seeing acceleration, with a critical growth driver being internet of things (IoT). We recently signed two big deals – one was a strategic partnership to power up 20 million smart meters with IntelliSmart and offer end-to-end IoT solutions. This partnership marks Airtel’s foray into high-end applications such as advanced metering infrastructure and meter data management systems along with a cloud platform and analytics layer. Second, we won an exclusive connectivity deal from Adani Energy Solutions Limited to power an additional 20 million smart meters across various states.

In the payments bank space, our monthly transacting users stand at 58.6 million. Deposit growth has remained robust at 51 per cent over the past year and the annualised revenue run rate now stands at just under Rs 19 billion.

New telecommunications bill

The Telecommunications Act, 2023, is a forward-looking and progressive bill. In essence, it is a continuation of the reforms announced by the government in September 2021. The highlights of the bill are that it simplifies the currently complex system, which includes various types of licensing, into a more cohesive and efficient authorisation-based regime. It also ensures predictability and availability of spectrum, covering aspects such as refarming, harmonisation, trading, leasing and sharing. A welcome move is the graded and proportionate penalty regime, which will enhance the ease of doing business and compliance while increasing the enforcement rate. The right-of-way (RoW) reforms seek to streamline approvals across the country. However, challenges persist in some states with regard to RoW.

Focus on ESG

On the environmental, social and governance (ESG) front, we are undertaking a number of initiatives under Nxtra. Nxtra has adopted the 3R approach of reduce, reuse and recycle to minimise waste across all its centres, aiming to attain a 100 per cent landfill diversion rate in the next two years. All newly constructed data centres will be Leadership in Energy and Environmental Design-certified, either platinum or gold, or an equivalent certification. Nxtra is the first data centre operator in India to install solid oxide fuel cell-based captive power plants and deploy fuel cell technology. A new campus in Mumbai has been designed for zero discharge. Over the past five years, Nxtra has seen a remarkable 20 per cent improvement in power usage effectiveness, with a further target to reduce 10 per cent by 2025.

Key future strategies

One of our critical strengths is our diversified portfolio. Africa now accounts for 27 per cent of revenues, while the Indian mobile segment accounts for 57 per cent and the non-mobile segment for the remaining revenue. This makes us a resilient business. Africa continues to perform well on an underlying basis, with 6 per cent sequential revenue growth in constant currency terms. We are also incubating the fast-growing digital businesses within our portfolio, which boasts high margins and low capex.

Another segment we are focusing on is rural. Our massive roll-out of almost 30,000 sites has proven successful, be it customers per site, cost per site or competitive performance – all of these have met action standards. This has been made possible through the extensive use of digital tools and data science, and more importantly, our razor-sharp execution. This has now given us the confidence to take it one step further in the coming quarters. We hold a position of leadership across almost 60 per cent of the country. However, in five key circles – Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Kerala and Bengal – we have a gap of almost 18 per cent compared to the number one player. In these circles, we have approximately 25,000 fewer sites, leading to our absence from significant portions of these geographies. We intend to step up our coverage in these areas and build a tailwind for our business in the coming quarters.

Our third strength is the commitment to deliver great experiences. We have significantly developed our digital capabilities around four key platforms linked to customer journeys – buy, bill, pay and serve. This framework is applicable to any business.

The fourth strength is using the underlying digital capabilities to build new digital services. Airtel has three parts to its business model – digital infrastructure, which includes the network infrastructure and the data mesh. This is the basis on which everything works. The second component of our business model is our digital experience layer, which has delivered omnichannel experiences across all customer journeys, including buying, billing, paying or serving. The third part of our business model is our digital services, which ride on the underlying digital infrastructure and digital experience. Our portfolio here includes Airtel IQ, IoT, Ads, Cloud, SD-WAN and Airtel Finance, all of which have been built in-house.

One significant opportunity lies in playing a major role in the deployment of 250 million smart meters in the coming year. The second part involves moving up the stack by offering cloud and analytics services. The third part entails the installation and repair of these devices, which can be carried out by our own delivery fleet since all of them are integrated into our digital tool, Airtel Work.

The fifth and final strength is our relentless focus on combating waste. Over the past quarters, we have seen very strong results, including a reduction in the cost per site, despite the absorption of 5G costs. We believe there is still room for optimisation through the use of artificial intelligence/machine learning-based solutions, solarisation and optimisation of wasteful sales and distribution spends.

Our investments are aligned to build a future-ready Airtel, with a focus on quality customers and an obsession for delivering a great experience, leveraging our strong digital capabilities and ultimately eliminating waste.