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BHARTIARTL

Earnings Call Summary - Q3FY24

Bharti Airtel Limited Q3 FY2024 Earnings Call Analysis

1. Summary of Quarterly Results

Financial Metrics

| Metric | Q3 FY2024 | Change | |---------------------------------|-------------------|-------------------------------------------| | Consolidated Revenue | ₹37,900 crores | Impacted by currency devaluation in Africa | | Revenue from India | ₹27,800 crores | 3% sequential growth | | EBITDA Margins | 53.9% | - | | Operating Free Cash Flows (India)| Just under ₹7,250 crores | - | | Capex | ₹7,750 crores | Elevated due to 5G and rural expansion | | Net Debt to EBITDA (India) | 2.91 | Improved from 3.08 in Q2 | | Debt Payment | ₹8,325 crores | High-cost DoT debt tranche | | Total Prepaid High-Cost DoT Debt| ₹16,349 crores | - |

Key Performance Indicators

  • Mobility Segment

    • 4G Net Adds: 7.4 million
    • Postpaid Net Adds: 0.9 million (third consecutive quarter with >25% of total net adds)
    • ARPU: ₹208 (up ₹5 from ₹203 in Q2 FY2024)
    • 5G Users: 65 million (15-16% of smartphones)

  • Broadband Segment

    • Net Adds: 3.6 lakhs
    • City Presence: 1,267 cities (up from 1,140 last year)
    • Home Passes Added: ~1.5 million
    • Airtel Black Plan Adoption: 47% of net adds

  • DTH Segment

    • Net Adds: 388,000 customers (highest in the last 12 quarters)

  • Airtel Business

    • Revenue Growth: 1.7% sequentially
    • Key Drivers: IoT partnerships and domestic acceleration

  • Payments Bank

    • Monthly Transacting Users: 58.6 million
    • Deposit Growth: 51% YoY
    • Annualized Revenue Run Rate: ~₹1,900 crores

  • Digital Businesses

    • Annualized Revenue Run Rate: ~₹1,750 crores
    • Airtel Finance Loan Disbursements: ₹620 crores per quarter (up from ₹550 crores in Q2)

2. Management Guidance and Outlook

  • Capex Plans:

    • Current Year: Elevated capex due to extensive 5G rollout, rural expansion, fiber deployment, and data center investments.
    • Next Year: Expected moderation in capex levels. No specific guidance provided; will monitor market conditions.
    • Long-Term Target: Capex to revenue ratio aimed between 15-20%, aligning with global telco standards.

  • Debt Management:

    • Focus: Continuous deleveraging with improvements in net debt to EBITDA ratios.
    • Target: Consolidated net debt to EBITDA to approach closer to 2; India segment aims for 2.5 or below.

  • 5G Expansion:

    • User Base: 65 million 5G users, expecting 25% of smartphones to be 5G-enabled by March 2025.
    • Monetization: Limited monetization expected from consumer side; focus on enterprise private 5G networks.

  • Future Initiatives:

    • Platform Expansion: Replicating successful platform solutions in Africa with potential global extensions.
    • Rural Coverage: Additional rollouts planned in key underserved circles to bridge market share gaps.

3. Key Analyst Concerns

Capex Strategy

  • Query: Capex has been elevated over the past few years. What are the plans to reduce capex in the future, and what is the target capex to sales ratio?
  • Response: Capex expected to moderate next year. Long-term capex to revenue ratio target is between 15-20%, similar to global telcos.

2G Network Shutdown

  • Query: What is the outlook on shutting down the 2G network amidst Jio's push for discontinuation?
  • Response: Gradual phasing out of 2G expected over the next few years, with significant reductions as users upgrade to higher technologies.

Tariff Improvements Without Industry Action

  • Query: Potential tariff upside if there are no industry tariff actions in the next 12 months.
  • Response: Modest ARPU improvements expected from organic growth drivers; significant tariff repair remains contingent on industry actions.

Net Debt to EBITDA Targets

  • Query: Target net debt to EBITDA ratios over the next 12-24 months.
  • Response: Aim for consolidated net debt to EBITDA closer to 2 and India's segment below 2.5 through continuous deleveraging.

Platform Replication in Africa and Globally

  • Query: Plans to replicate platform solutions in Africa and other global markets.
  • Response: Ready to lift and shift platforms to Africa within a few months, with gradual expansion based on initial successes.

Capex Mix Across Businesses

  • Query: Proportion of incremental capex across different business segments.
  • Response: Detailed breakdown provided, emphasizing sustained transport capex, steady non-mobility investments, and selective lumpiness in B2B investments.

Capex Drop from Q1 to Q3

  • Query: Reasons behind the capex decline from Q1 despite consistent tower and base station additions.
  • Response: More 5G deployments in Q1 with some delays due to materials; overall elevated capex for the year remains unchanged.

5G Monetization

  • Query: Timeline for monetizing 5G traffic.
  • Response: Limited monetization from consumer side due to free data; enterprise private 5G networks offer some monetization opportunities.

Dividend Outlook

  • Query: Plans for dividends once free cash flow improves.
  • Response: No formal dividend policy yet; focus remains on deleveraging before considering dividends.

4. Management Tone Analysis

The management exhibited a confident and optimistic tone throughout the earnings call, emphasizing strong operational performance and strategic initiatives. While acknowledging challenges such as currency devaluation and the gradual phasing out of 2G networks, the leadership remained positive about future growth prospects, particularly in 5G expansion, digital businesses, and debt management. The tone was also cautiously optimistic regarding capex moderation and monetization opportunities, reflecting a balanced approach between confidence in current strategies and awareness of market dynamics.