Gopal Vittal, managing director and chief executive officer (India and South Asia), Bharti Airtel
Bharti Airtel has been making giant strides in expanding its portfolio of digital offerings while reporting strong financial growth. During Airtel’s recent earnings call, Gopal Vittal, managing director and chief executive officer (India and South Asia), Bharti Airtel, highlighted key aspects of Airtel’s growing digital footprint and the company’s focus areas. Edited excerpts from his speech…
Quarterly highlights
An important event during the quarter ended December 2021 was the strengthening of the partnership with Google with a commitment to invest up to $1 billion through a combination of $700 million equity and up to $300 million of investment in creating a corpus to drive mutually agreed commercial objectives. As a part of the first commercial agreement, both companies will work to scale Airtel’s offerings across the three areas of device, cloud and networks. Another event in the quarter was the successful consummation of the Airtel very small aperture terminal (VSAT) business with Hughes, which became the largest VSAT company in India.
Broadband business
In our broadband business, we are seeing healthy customer additions, driven by the increased demand for fibre-to-the-home (FTTH). We have now hit a milestone by going past the 4 million customer homes mark. Sequential growth has been strong at 11.8 per cent this quarter. Our innovative Uber-like digital model with local cable operators as partners and the acceleration in the roll-out of our own fibre in the top 100 cities are the pivots around which our home broadband strategy revolves.
Our overall presence has now expanded to 672 towns and has enabled us to add 1.1 million home passes in the quarter. We believe FTTH is a massive opportunity for us. We will continue to step up investments to take our network to 2,000 towns across India with 35 million home passes in the next three years.
DTH business
In the direct-to-home (DTH) business, we have a presence in 18 million homes with an ARPU of Rs 146. Recent changes in box pricing and a reduction in channel commissions are expected to move the industry towards a more sensible business model by lowering the gross addition in the category while focusing on net additions.
At the same time, the irony is that the opportunity to convert and upgrade from cable is massive. There is also a huge opportunity to monetise over-the-top content and deliver a unified, connected experience through Airtel Xstream. To address this, we have developed a compelling proposition for customers, which will be launched soon.
Airtel Business
We continue to outperform our peers and expand market share. We have a solid portfolio of services spanning connectivity, security, data centres, internet of things (IoT) and communications platform-as-a-service (CPaaS). In each of these areas, we are now the leading player and in security, we are already amongst the top 10. Our CPaas business has again outperformed the market and grown at very strong double-digit levels. Our emphasis on new product acceleration continues.
Mobile business
We are again at a new lifetime high in terms of a revenue market share of 36.9 per cent, validating our strategy of winning with quality customers. ARPU has risen to Rs 163, an increase of Rs 9.10. Early signs of the tariff increase have been encouraging and the full flow-through is expected to be felt in the fourth quarter. At the same time, we have seen some SIM consolidation leading to moderation in customer additions as customers make decisive choices in favour of their preferred brand. We expect this consolidation trend to correct from here on.
In the post-paid segment, we are seeing good momentum at 320,000 net additions as we drive our premiumisation agenda with a significant re-tooling of our overall customer experience. As a consequence, we now have decisive leadership in this segment. We are very bullish on the future of this segment.
Layers of digital infrastructure
We have stopped thinking of our business as a telecom business; we now think of it as an end-to-end digital business. At the core of it is our digital infrastructure. Over these past few years, we have invested over $46 billion in creating the finest digital highway, over which 40 per cent of India’s economic and digital activity takes place. Massive investments have been made in our transport infrastructure in both domestic fibre and international submarine cables. This is what allows us to be ready for 5G. Another very critical part of this digital infrastructure is data. We now have a massive data infrastructure layer that has cleaned, tagged and coded every one of our 350 million customers. Over 400 data scientists and engineers work on this to lend agility and intelligence for Airtel.
Above this core sits our digital experience. This runs across every part of Airtel. We have one digital channel that serves all Airtel’s businesses; one home delivery organisation that is responsible for all of Airtel serving the home; and one business-to-business (B2B) channel that uses different levels of customer touch from direct to digital in serving all our large as well as smaller companies and businesses.
It is through this digital experience that we are able to deliver the best experience for our customers. That is what allows us to win our premiumisation agenda and have industry leading ARPUs. It is the same digital experience that allows us to have low levels of churn and raises switching costs for customers.
The third critical layer is the digital enterprise business. The core of our enterprise digital offers is around connectivity that rides on the digital infrastructure that serves all Airtel businesses. Software-defined wide area network (SD-WAN) is another exciting business and our recent announcement in Lavelle to develop and build SD-WAN will be an important driver of growth in this area.
The fourth layer is digital banking. Today, Airtel Payments Bank has a customer base of 122 million, with a monthly transacting user base of over 32 million users. We are decisively winning in small towns and rural areas on the back of our distribution advantages. However, this is a business that has infinite potential and we are ratcheting up the growth of the digitally savvy user.
The fifth layer is digital services. We have now tested, proven and will scale four exciting new businesses, each of which are in very large and growing markets. Airtel IQ is our full suite of cloud communication solutions that spans voice, messaging, video, streaming, call masking, virtual contact centre solutions and ultimately even workforce management.
Airtel Ads is our Ad tech platform that leverages all our digital assets. We now have 135-plus brands and relationships with all large agencies. This solution is a consent-based, privacy-safe platform that serves one of the biggest pools of quality customers across screens. We are further strengthening this platform by investing in blockchain capabilities and developing solutions that address privacy issues and potential regulations around them.
Nxtra is our data centre platform that is already serving hundreds of customers and all hyperscalers. We have added 28 MW of capacity in just one quarter across four locations. Our capability in the cloud now allows us to partner large tech companies on the public cloud, help scale the private cloud for entities that want their data stored in India and edge cloud that enables businesses to provide low-latency experiences for customers at the point of consumption.
Lastly there is our digital marketplace. Our focus here is on content, loans and insurance. In the content area, we have the Xstream partnership where we provide a single sign-on, unified search, a catalogue of compelling content and a great payment experience to our customers. In the lending area, we have now developed our own proprietary credit score and have commenced lending on our platform through partners. Our insurance partnerships are also seeing traction. With the 180 million plus monthly active users on our platform through Airtel Thanks, Wynk and Xstream, we believe we can build another meaningful revenue stream here around the digital marketplace.
In sum, these five layers of digital infrastructure, digital experience, digital enterprise, digital banking and digital services is what the new Airtel is about.
Financial prudence
While we do this, we are passionate about financial prudence. We, therefore, remain focused on exercising tight control on opex through a multiyear war on waste programme. We are also disciplined on capex through tools that allow us to plan and sweat every single tower that we put up. Our balance sheet is strong with an improved leverage ratio of 2.67x. We expect the tariff hike and operating cash flows to help further de-lever the balance sheet.
ESG initiatives
During the quarter, we constituted an environmental, societal and governance (ESG) committee made up of the board of directors to sharpen our focus on the ESG agenda and on creating value through sustainable business practices. We have agreed on a clear set of goals and initiatives in this area, which we will soon disclose.
We also joined the Science Based Targets initiatives’ Business Ambition for 1.5°C campaign and adopted targets to significantly reduce our carbon footprint and emissions from network operations. We also became the first Indian company to join the United Nations Global Compact, while remaining aligned with the Paris Climate Accord and proactively implementing clean, fuel-based power solutions for our towers, data centres, switching centres and other facilities.
