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Earnings Call Summary - Q4FY24

Bharti Airtel Limited & Bharti Hexacom Limited Q4 FY2024 Earnings Call Analysis

1. Summary of Quarterly Results

Bharti Airtel Limited

Full Year FY2024

  • Consolidated Revenue: Approximately ₹150,000 Crores
    • Impacted by currency devaluation in Africa
  • EBITDA Margin: 53.8%
    • Expanded by 1.6% year-over-year despite increased 5G costs
  • Operating Free Cash Flow (India): Over ₹25,650 Crores
  • Debt Repayment: ₹16,350 Crores paid down
  • Net Debt to EBITDA (India): 2.86

Q4 FY2024

  • Consolidated Revenue: Just under ₹37,600 Crores
    • Impacted by Naira devaluation
  • India Revenue: ₹28,513 Crores
    • Sequential Growth: 2.5%
    • Adjusted Growth (excluding Beetel acquisition): 1.7%
  • EBITDA Margin: 53.6%
    • Adjusted Margin (excluding Beetel): 54.1%
  • Operating Free Cash Flow: Approximately ₹6,800 Crores

Mobility Segment

  • Q4 Net Adds:
    • REC Net Adds: 6.7 million
    • Smartphone Net Adds: 7.8 million
  • Mobile Churn: Reduced from 2.9% in Q3 to 2.4% in Q4
  • Postpaid Net Adds: Steady at 0.8 million
  • Average Revenue Per User (ARPU): ₹209
    • Increased by ₹16 in FY2024, highest in the industry
  • 5G Base: Approximately 72 million users

Broadband Segment

  • Customer Additions: 1.6 million
  • Net Additions: 0.36 lakhs in Q4
  • Fiber Home Passes Added: 2.2 million in Q4
  • Geographical Expansion: 23 additional cities
  • Converged Plans: 43% of all broadband customer additions

Direct-to-Home (DTH) Segment

  • Q4 Customer Growth: 9,000
  • Annual Customer Growth: Over 200,000, the only operator to achieve growth this year
  • Revenue Growth: Moderate price hike due to broadcasters' price increases

Airtel Business

  • Q4 Revenue Growth: 0.6% sequentially
  • Annual Revenue Growth: Sustained double-digit growth despite global headwinds

Payments Bank

  • Monthly Transacting Users: 67 million
  • Annualized Revenue Run Rate: Over ₹2,100 Crores
  • Deposits: Approximately ₹2,800 Crores, up nearly 50% year-over-year
  • Savings Bank Account Balances: Highest-ever quarter-on-quarter growth of 22%

Digital Businesses

  • Annualized Run Rate: Just under ₹1,900 Crores
  • Revenue Growth: 50% in the last fiscal year

Bharti Hexacom Limited

Q4 FY2024

  • Total Revenue: Approximately ₹1,868 Crores
    • Increased by 3.5% quarter-over-quarter
  • Mobility Revenue Growth: Upwards of 4% quarter-over-quarter
  • EBITDA: Approximately ₹914 Crores
    • EBITDA Margin: 48.9%, improved by ~1 percentage point quarter-over-quarter
  • Net Income: Approximately ₹223 Crores
  • Operating Free Cash Flow: Approximately ₹1,467 Crores
  • Debt Repayment: ₹1,500 Crores repaid in Q4
  • Net Debt to EBITDA: Approximately 2.14
  • Network Additions: Approximately 4,000 towers last year

2. Management Guidance and Outlook

Bharti Airtel Limited

  • Capital Expenditure (Capex):

    • FY2024 marked an elevated and peak level of capex.
    • Expectation of clear moderation in capex for FY2025.
    • Continued investment in transport infrastructure, enterprise business, data center business, and fiber expansion.
    • Potential bolt-on acquisitions in the B2B area to strengthen the portfolio.

  • 5G Deployment:

    • Continued rollout with 5G available across urban and select rural areas.
    • Fixed Wireless Access (FWA) launch expected to scale in Q2 FY2025, complementing FTTH where fiber is unavailable.

  • Debt Management:

    • Ongoing debt reduction with a comfortable net debt to EBITDA ratio.
    • Further debt reduction anticipated going forward.

  • Strategic Focus:

    • Emphasis on postpaid growth, B2B expansion, home broadband, and digital services.
    • War on waste program to optimize network costs and improve return ratios.

Bharti Hexacom Limited

  • Capital Expenditure (Capex):
    • Expectation of capex moderation in FY2025, similar to Bharti Airtel.
    • Current elevated capex attributed to strategic rollouts and enterprise expansion.
  • Debt Management:
    • Continued focus on debt repayment with net debt to EBITDA at 2.14.
  • Growth Initiatives:
    • Ongoing rural rollout with a total of ~4,000 network sites added last year.
    • Plans to further rollout 25,000 sites in the next few quarters, expecting capex moderation thereafter.

3. Key Analyst Concerns

Competition and Market Structure

  • Concern: Impact of Vodafone Idea's capex plans on Bharti's market share trajectory.
  • Response: Management remains confident in maintaining market share through strong execution and continual efforts despite a highly competitive and volatile market.

Tariff Repair and ARPU Impact

  • Concern: How tariff repairs will affect ARPU and return ratios.
  • Response: Management emphasized the need for industry-wide tariff repair to improve return ratios. While Bharti can lead tariff increases, they depend on industry-wide adjustments to prevent customer losses. ARPU improvements are being driven through feature phone to smartphone upgrades, prepaid to postpaid transitions, and higher data monetization.

Capex Trends

  • Concern: Elevated capex levels and expectations of moderation.
  • Response: Elevated capex attributed to strategic expansions and rollouts, with clear expectations of moderation in FY2025. One-off capex items explained, particularly related to enterprise and data center investments.

5G Monetization

  • Concern: Limited current monetization of 5G and future prospects.
  • Response: Acknowledged limited monetization currently but emphasized that 5G is a future-proof technology. Capex related to 5G is expected to moderate next year, with monetization dependent on tariff repairs and market dynamics.

Broadband Growth and Saturation

  • Concern: Slowdown in broadband subscriber growth and potential market saturation.
  • Response: Management remains optimistic about broadband growth, focusing on expanding fiber presence, driving converged offers, and launching fixed wireless access to complement FTTH. No immediate concerns about market saturation.

Hexacom Specific Concerns

  • Concern: Clarifications on capital allocation, capex guidance, and sustainable ROE.
  • Response: Capex expected to moderate in FY2025 with current elevated levels being a peak year. Sustainable ROE targets remain undefined, focusing instead on continuous improvement through tariff repairs and operational efficiencies.

4. Management Tone Analysis

  • Overall Tone:

    • Confident and Optimistic: Despite challenges like currency devaluation and competitive pressures, management expressed confidence in their strategic initiatives and execution capabilities. Achievements in market share and ARPU growth underpin the optimistic outlook.
    • Cautious and Realistic: Acknowledged the need for industry-wide tariff repairs and the impact of competitive pressures. Management remained realistic about the time required for capex moderation and the challenges in monetizing 5G.
    • Proactive and Strategic: Emphasized strategic focus areas such as quality customer acquisition, digital transformation, and waste reduction. Highlighted ongoing and future initiatives to drive growth and operational efficiency.

  • Comparative Tone:

    • There are no direct comparisons to previous calls within the transcript. However, the emphasis on achieving a lifetime high in market share and continued strategic execution suggests an ongoing commitment to growth and improvement.