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BHARTIARTL

Earnings Call Summary - Q2FY25

Bharti Airtel Limited Q2 2024 Earnings Call Analysis

1. Summary of Quarterly Results

Financial Metrics

  • Consolidated Revenue: ₹41,400 Crores
    • India Revenue: ₹31,500 Crores, up 8.7% sequentially
  • EBITDA Margins: 54.8%, an improvement of 1.1% quarter-over-quarter
  • Operating Free Cash Flow: ₹11,000 Crores (EBITDA minus Capex)
  • Capex: ₹6,260 Crores
  • Net Debt-to-EBITDA (India): 2.6, reduced from 3.1 a year ago

Segment Performance

Mobility

  • Customer Loss: 2.9 million due to SIM consolidation from tariff repairs
  • Smartphone Additions: 4.2 million
  • Postpaid Net Additions: 0.8 million
  • ARPU: ₹233 (up from ₹211 in Q1)

Broadband

  • Customer Additions: Nearly 600,000, a significant increase from previous quarters

DTH

  • Customer Loss: Over 500,000, attributed to seasonal factors

Airtel Business

  • Revenue Growth: 3.3% sequentially
  • Net Debt-to-EBITDA (Global): 2.6, improving from 3.1 a year ago

Bharti Hexacom Q2 FY25 Performance

  • Revenue: ₹2,100 Crores, up 9.8% sequentially
  • Smartphone Additions: 143,000 (previous quarter: 703,000)
  • ARPU: ₹228, up 11.3%
  • EBITDA: ₹1,046 Crores, EBITDA Margin ~50%
  • Net Income: ₹253 Crores
  • Operating Free Cash Flow: ₹600 Crores
  • Net Debt-to-EBITDA: 2.03

2. Management Guidance and Outlook

  • Leadership Transition: Shashwat Sharma to become MD & CEO on January 1, 2026. Gopal Vittal transitioning to Vice-Chairman & MD for 2025, focusing on mentoring, driving synergies, scaling incubation areas, and overseeing overseas operations.
  • Capex Strategy: Continued investment in transport and fiber networks with reduced wireless capex. Ongoing investments in Cloud and other digital services.
  • Broadband Expansion: Target to add over 1.5 million home passes every quarter through FTTH and FWA.
  • 5G Deployment: Transition to standalone 5G for FWA by December 2024, with trials underway to enhance uplink performance.
  • ARPU Growth: Aim to reach an ARPU of ₹300, leveraging tariff repairs, prepaid to postpaid upgrades, data monetization, and international roaming.
  • Debt Reduction: Plans to deleverage by ₹40,000 to ₹45,000 Crores through spectrum prepayments and capex reductions.
  • Digital Services Expansion: Continued focus on CPaaS, Financial Services, IoT, Security, and Cloud to drive growth in B2B segments.

3. Key Analyst Concerns

Homes Broadband and FWA

  • Concern: Customer response, user experience, and unit economics of FWA compared to fiber.
  • Management Response:
    • FWA unit economics now comparable to FTTH.
    • Cost reductions achieved through partnerships with OEMs and chipset manufacturers.
    • Commitment to further reducing costs and enhancing service quality.

Capex Trends

  • Concern: Significant year-on-year drop in capex (22% of revenue in 1H) and future capex expectations.
  • Management Response:
    • Current capex moderation is seasonal and expected to continue.
    • Focus on maintaining robust transport and fiber network investments.
    • Reduction in wireless capex as major rollout phases are nearing completion.

Digital Strategy and ARPU Targets

  • Concern: Specifics of digital strategy and long-term ARPU growth metrics.
  • Management Response:
    • Detailed plans to enhance digital offerings and integrate digital tools.
    • ARPU target of ₹300 discussed with emphasis on meaningful growth aligned with industry structure and customer behavior.

5G Deployment and Adoption

  • Concern: Adoption rates of 5G plans and future tariff hikes.
  • Management Response:
    • Successful retention of user base despite tariff repairs.
    • Plans to transition to standalone 5G for better performance and capacity management.
    • Openness to future tariff adjustments based on market conditions and ARPU growth.

AGR Dues

  • Concern: Status of AGR dues after rejection of the curative petition.
  • Management Response:
    • Current status remains with the curative petition rejected.
    • Potential for a review petition as the moratorium period has yet to start.

Bharti Hexacom Performance

  • Concern: Comparison with Bharti Airtel’s growth and capex strategies.
  • Management Response:
    • Bharti Hexacom's performance aligns directionally with Bharti Airtel, with specific regional sensitivities.
    • Plans to maintain flat amortization rates post-CWIP investments.

4. Management Tone Analysis

  • Overall Tone: Confident and Optimistic
    • Emphasis on strong performance metrics and strategic initiatives.
    • Clear commitment to leadership transition and future growth.
    • Assuredness in handling analyst concerns with detailed explanations and actionable plans.
  • Strategic Focus: Cautious Optimism
    • Balanced approach towards growth and financial prudence.
    • Recognition of challenges in certain segments but confidence in overcoming them through strategic actions.
  • Comparison to Previous Calls: Maintains a consistent tone with an added emphasis on sustainability and digital transformation.