Bharti Airtel Ltd Partly Paidup Q4 FY2024 Concall Summary

Key Takeaways

• Tariff repair is the central thesis: India RoCE is just 9.5%, which management calls "extremely low"; a multi-round tariff repair is deemed essential, though no timeline is offered.
• Capex has peaked: FY2024 was the peak year; wireless capex will moderate in FY2025, with overall capex expected to decline clearly.
• War on waste delivered hard savings: Over ₹2,500 Crores of network cost was optimized in FY2024, and network cost per site declined in absolute terms for only the second time in company history.
• Non-mobility bets are scaling: Home broadband, B2B (domestic growing 18–20%), and digital businesses (₹1,900 Crores annualized run rate) are flagged as faster-growth engines.
• What to watch next quarter: Whether the promised FWA scale-up materializes in Q2, any signal on the first round of tariff repair, and the pace of the guided capex moderation.

Tariff Repair & Return Ratios

• The RoCE problem: India RoCE sits at 9.5%, which management describes as extremely low for a business forming the digital spine of the country. Tariff repair is the only lever identified to set this right.
• Pricing architecture is broken: Unlimited, one-size-fits-all plans mean customers who could afford more are paying less. Management sees the current tariff levels as absurdly low relative to any other part of the world.
• Repair will be gradual, not a single jump: The path from ₹200 to ₹300 ARPU will take a couple of rounds, not one shot. Management declined to commit to any specific ARPU milestone or timeline, including a reported ₹250 target.
• Industry structure supports repair: Management welcomed Vi's fundraise, stating India would be well served by three good private operators. Competitive intensity on acquisitions remains surprisingly high given modest organic customer growth.

Vittal: "tariffs are at an absurdly low level relative to any other part of the world so tariff repair is solely needed for return ratios to improve frankly does not matter which technology it comes from"

Capex & Capital Allocation

• Peak capex is behind: FY2024 was the peak year for capex. Wireless capex, which accounts for a large part of the total, will see clear moderation going into FY2025.
• Where capital is shifting: Transport infrastructure will require multi-year investment. Enterprise and data center businesses will continue to absorb capital. Homes will get a step-up in capital allocation. Wireless radio spend moderates.
• B2B capex is lumpy by nature: Q4 saw one-off B2B capex on fiberization (fiber purchases), data centers (land, building, MEP), and submarine cables (large milestone-based investments). This lumpiness will persist.
• Rural coverage nears saturation: After the next 25,000-site rollout over the coming quarters, rural coverage will more or less saturate. Future coverage needs will be concentrated in the top 50–60 cities and will be much more modest.
• Rights issue pending calls: The original three-year guidance has about 6–8 months left. Management will provide a revised formal commentary on the remaining calls within the next 3–5 months, depending on the free cash flow outlook.

War on Waste & Cost Structure

• ₹2,500 Crores optimized in FY2024: The program identified 60,000 high-cost sites and examined the cost structure of every single site. Network cost per site declined in absolute terms for only the second time in company history, despite massive mobile site expansion, 5G rollout, and increased power costs.
• Headroom remains: Management believes there is still scope to strip out further waste and will continue the focused program.
• 5G cost recognition nearly complete: The large part of 5G-related costs is now reflecting in the P&L, with only a few circles remaining. Depreciation, amortization, and finance costs have not fully peaked because amortization timing depends on the month assets are capitalized; some moderation is expected. All cost recognition should be complete in another two quarters.

Mobility & Customer Metrics

• ARPU and subscriber quality: Q4 ARPU was ₹209, impacted by one less day. FY2024 added ₹16 to ARPU, the highest in the industry, driven by feature-phone-to-smartphone upgrades, prepaid-to-postpaid migration, data monetization, and international roaming penetration.
• Churn dropped sharply: Mobile churn fell from 2.9% in Q3 to 2.4% in Q4. Structural interventions kicked in 5–6 months ago: the country was divided into 1 km x 1 km grids, ~20 churn markers are tracked, and network and sales teams work together on each grid. Churn is split into early (first 4 months, quality of acquisition) and tenure churn (month 5+, genuine experience-related).
• 5G headwind from free data: Users on free 5G consume almost double the data. If priced in, usage would calibrate but would still be meaningfully higher than 4G-only usage. Management responded to competitive dynamics and hopes sanity will prevail on monetization.
• Postpaid runway: Over 8 crore credit-scored customers could move to postpaid; the segment is poised for growth. Postpaid net adds were steady at 0.08 crore in Q4.

Vittal: "The intensity in the marketplace on acquisitions continues to be high and it surprises me as to why it is so high particularly in a market where the organic growth of customers if you take a longer term basis is still very modest."

Non-Mobility Growth Engines

Home Broadband

• Subscriber adds moderated: Customer additions grew by 0.16 crore but net additions moderated to 3.6 lakhs. Presence expanded to 23 more cities and 0.22 crore fiber home passes were added. 43% of all broadband customer additions came on converge plans.
• ARPU declined on mix: Entry-level plans are priced slightly below base-level plans (₹499, or ₹699 with content), pulling ARPU down.
• FWA is live, scale expected in Q2: Fixed wireless access launched in 25 cities with outdoor CPE. Customer journeys are being streamlined; full-scale impact is expected in Q2. Management views FWA as relatively niche, with the broadband business at ~5% of the overall company.

Airtel Business

• Domestic strength, global softness: Domestic enterprise business is growing at 18–20%, driven by connectivity share gains, CPaaS solutions (SpamShield on Airtel IQ), IoT, and expansion into cloud and analytics. The global segment (~50% of the enterprise portfolio) remains soft: OTT companies have cut back on cable investments and fiber build-out orders, and messaging traffic is shifting from telco SMS to in-app notifications.
• Google Cloud alliance: A deal was signed recently with Google to gain significant share of the Indian cloud market, expected to reach \$18 billion by 2027. The cloud area is still early.
• Bolt-on M&A considered: Management is looking at potential bolt-on acquisitions in B2B to strengthen adjacencies, though nothing is reportable now.

Digital & Payments Bank

• Digital businesses: Annualized revenue run rate just under ₹1,900 Crores, with 50% revenue growth in the last fiscal. Focus areas are CPaaS, financial services, IoT, security, and cloud. Airtel Finance served four lakh customers and disbursed loans worth ₹2,000 Crores in FY2024.
• Payments Bank: Monthly transacting users under 6.7 crore. Annualized revenue run rate over ₹2,100 Crores. Deposits around ₹2,800 Crores, growing nearly 50% year-on-year. Highest-ever quarterly growth of 22% on savings bank account balances.

Bharti Hexacom

• Maiden quarter post-listing: Strong customer addition, data customer addition, and ARPU improvement drove mobility growth. The listing was described as a great success.
• ARPU jump had a one-off: Manipur telecom services were closed and reopened around the first week of December; the prior quarter captured only ~3 weeks of Manipur revenue, while Q4 captured a full quarter. Data customer improvement and the upgrade story also played out better in Rajasthan and the Northeast this quarter.
• Debt and dividend: About ₹1,500 Crores of debt was repaid in Q4. A dividend policy will be evaluated once bank debt is eliminated or nearly eliminated, with no specific timeline given.
• Capex and returns: Some unwinding of capex is expected this year compared to last year, with moderation anticipated. No specific ROE or ROCE target was provided; management wants to wait for the first round of tariff repair to see how costs evolve.

Ray: "I think we would certainly like to see this grow and as mentioned earlier in the call by Gopal the tariff repair is very important, is very, very important for the financial health of the company."

Guidance & Commitments

Key Metrics