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BHARTIARTL

Earnings Call Summary - Q3FY25

Bharti Airtel Limited Q3 FY2025 Earnings Call Analysis

1. Summary of Quarterly Results

  • Consolidated Revenues: ₹45,130 Crores.

    • India Revenue (excluding Indus): ₹33,000 Crores, up 4.8% sequentially.

  • EBITDA Margins: Improved to 56.2%, a 1.4% increase quarter-over-quarter (QoQ).

  • EBITDAaL (EBITDA after lease obligations): ₹16,306 Crores with a margin of 49.3%.

  • Operating Free Cash Flow: ₹9,440 Crores.

    • Capex for the Quarter: ₹6,860 Crores.

  • Fiber Deployment:

    • Rolled out 5,214 network sites.
    • Deployed 13,950 route kilometers of fiber.
    • Cumulative fiber deployment exceeded 100,000 kilometers over the last 24 months.

  • Customer Metrics:

    • Mobile Segment:
      • Added 4.9 million customers.
      • Added 6.5 million smartphone customers.
    • Postpaid Net Adds: 0.6 million, impacted by tariff repair.
    • ARPU (Average Revenue Per User): Increased to ₹245 from ₹233 QoQ.

  • Broadband Segment:

    • Added 674,000 customers.
    • Expanded Fixed Wireless Access (FWA) coverage to over 2,000 cities.
    • Fiber Home Pass Additions: 1.9 million per quarter, totaling 35 million.

  • DTH (Direct-To-Home): Added 29,000 customers in the quarter.

  • Airtel Business:

    • Revenue of ₹5,650 Crores, growing 8.7% year-over-year (YoY).

  • Digital Businesses:

    • Airtel Finance:
      • Served over 1 million customers.
      • Total disbursement of ₹4,600 Crores.
      • Current Assets Under Management (AUM) of ₹2,500 Crores.
    • Airtel Payments Bank:
      • 87 million monthly transacting users.
      • Annualized revenue run rate of ₹2,800 Crores, growing 50% YoY.
      • Deposits at ₹3,300 Crores, growing 42% YoY.

  • Financial Prudence:

    • Net Debt / EBITDAaL Ratio: Improved to 1.8 from 2.5 a year ago.
    • Prepayments: Paid off over ₹35,500 Crores in high-cost spectrum dues over the last six quarters.

  • Geographical Revenue Breakdown:

    • Africa: 23% of total revenues.
    • India Mobile: 56% of total revenues.
    • India Non-Mobile: 14% of total revenues.
    • Indus Towers: 7% of total revenues.

2. Management Guidance and Outlook

  • Capex Outlook:

    • Forecast: Capex as a percentage of revenues is expected to trend downwards.
    • FY2025: Capex anticipated to be lower than FY2024.
    • FY2026: Continued reduction in capex as it unwinds.

  • Strategic Initiatives:

    • Tower Transfer to Indus Towers:

      • 16,100 telecom towers to be transferred (₹12,700 from Bharti Airtel and ₹3,400 from Bharti Hexacom).
      • Expected Benefits: Enhanced operational efficiency, freed management bandwidth, and long-term value creation for Indus Towers.

    • Fiber and FWA Expansion:

      • Ongoing rollout of fiber home passes and FWA coverage.
      • Continued focus on underperforming regions with accelerated sales channel improvements.

    • Postpaid Segment Expansion:

      • Aim to convert up to 50 million additional subscribers to postpaid over the next few years.
      • Focus on simplifying customer journeys and leveraging digital tools.

    • B2B Segment Retrenchment:

      • Exit from low-margin commodity voice and messaging business.
      • Increased investment in high-margin digital adjacencies like Cloud, Security, IoT, and CPaaS.

  • Financial Strategy:

    • Deleveraging: Ongoing efforts to reduce net debt.
    • Dividend Policy: Potential increase in dividend payouts.
    • Selective Investments & M&A: Prudent and selective approach to investments and acquisitions, focusing on strategic growth areas.

  • Digital Services Focus:

    • Expansion of digital business segments including CPaaS, Financial Services, IoT, Cybersecurity, and Cloud.
    • Strengthening partnerships, notably with Bajaj Finance, to enhance Airtel Finance offerings.

3. Key Analyst Concerns

  • Capex Allocation and Reduction:

    • Concern: Impact of reduced capex on growth initiatives.
    • Management Response: Detailed focus on critical areas such as transport infrastructure, homes, and B2B, ensuring strategic investments despite overall capex reduction.

  • Home Broadband Performance:

    • Concern: Slower growth in home broadband compared to competitors like Jio.
    • Management Response: Emphasized ongoing improvements, expansion of sales channels, and enhanced FWA rollout strategies to drive competitive growth.

  • Free Cash Flow Utilization:

    • Concern: Allocation of increasing free cash flow amidst debt repayment.
    • Management Response: Plans to channel free cash flow towards deleveraging, increasing dividends, and selective, prudent investments rather than broad M&A activities.

  • FWA and Fiber Rollout Impact:

    • Concern: Balance between FWA and fiber rollout impacting backhaul capacity and overall network performance.
    • Management Response: Assurance of strategic planning and readiness to deploy FWA or fiber based on regional demands and capacity requirements, ensuring network efficiency.

  • Digital Revenue Growth:

    • Concern: Lagging digital revenue growth compared to competitors like Jio.
    • Management Response: Focused on scaling digital services, optimizing partnerships (e.g., with Bajaj Finance), and enhancing digital capabilities to drive growth in digital revenue streams.

  • Exceptional Charges:

    • Concern: One-time exceptional charge of ₹1.4 billion impacting financials.
    • Management Response: Clarified it was due to periodic asset and liability reviews and recent legal judgments, framing it as a non-recurring item with no ongoing trend.

4. Management Tone Analysis

  • Overall Tone: Confident and pragmatic with a focus on strategic growth and financial prudence.

  • Confidence Indicators:

    • Emphasized strong operational performance and strategic initiatives.
    • Highlighted significant improvements in financial metrics like EBITDA margins and net debt ratios.
    • Discussed readiness and strategic planning for future growth areas such as postpaid conversion and digital services.

  • Caution:

    • Acknowledged challenges in home broadband growth relative to competitors.
    • Indicated controlled capex spending while still investing in critical growth areas.
    • Addressed the need for continued efforts to enhance competitive performance in various segments.

  • Forward-Looking Optimism:

    • Optimistic about future growth opportunities in postpaid, broadband, and digital services.
    • Positive outlook on financial stability through ongoing deleveraging and strategic investments.

  • Consistency:

    • Maintained a consistent message around financial discipline, strategic focus, and commitment to growth.
    • Reinforced the importance of operational efficiency and strategic reallocations, such as the transfer of towers to Indus Towers.

Note: This analysis is based solely on the provided transcript of the Bharti Airtel Limited Q3 FY2025 Earnings Call held on February 7, 2025.