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Bharti Airtel – Q2 FY24 Earnings Call Insights

Key highlights from Bharti Airtel Ltd (BHARTIARTL) Q2 FY24 Earnings Concall.

Financial Performance

  • Consolidated revenues at INR37,000 crores, impacted by currency devaluation in Africa.
  • India revenue grew 2.3% sequentially to over INR27,000 crores.
  • EBITDA margins expanded to 53.7%.
  • Strong cash flows generated despite elevated capex.
  • Performance driven by steady growth in mobile, homes and digital services, some moderation in enterprise business.

5G Strategy and Performance

  • The company has 55 million 5G customers across 5000 cities and 30,000 villages.
  • Believes throwing more capex for largest rollout is not the priority – focus is on where the market is and delivering best experience.
  • Airtel will switch to standalone 5G only when there are clear additional benefits, which is not the case currently.

Mobile Segment Performance

  • 4G net adds strong at 7.7 million, postpaid net adds close to 1 million.
  • ARPU increased to INR 203 from INR 200 in previous quarter.
  • Drivers of ARPU growth – upgrades, prepaid to postpaid, data monetization, international roaming.

Homes and Enterprise Strategy

  • Added highest ever 4.7 lakh home broadband customers.
  • 35% home additions now on converged Airtel Black plans.
  • Focus on improving sales productivity for continued momentum.
  • Enterprise growth moderated due to global players deferring spends.
  • Accelerating growth in domestic enterprise business with focus on managed services.

Subscriber Growth Momentum

  • Strong additions in high-end 4G, 5G and postpaid subscribers.
  • Drivers are family plans, small format store expansion, 5G brand aspiration.
  • Postpaid additions from prepaid base, competition, and own conversions.
  • 4G penetration now at 70%, further upgrade cycles expected in next 3-5 years.

ARPU Trends

  • Overall ARPU increased by INR 3 in 2Q.
  • Adjusting for extra day, underlying growth is INR 1.2, driven by prepaid to postpaid migration, data monetization, international roaming.
  • Entry level plan gap with smartphone plans has compressed, lowering upgrade impact.
  • Further upgrades from 2G to 4G will improve ARPU over next few years.

Capex and Rollouts

  • Capex lower this quarter due to seasonality and monsoons.
  • On track for peak capex this fiscal year.
  • 5G and 4G rollout capex to moderate next year.
  • On track to complete most rollouts by March 2024.

5G Fixed Wireless Access

  • Initial response and testing completed.
  • CPE prices coming down, moving from indoor to outdoor CPE.
  • FWA addressable market about 60 million households.
  • Addressable market limited based on ARPU affordability.
  • FWA pricing similar to fiber at INR 500/month.

5G Spectrum Capitalization and User Behavior

  • Intangible assets reduced by one-third over last year.
  • Indicates 5G spectrum capitalization charge to P&L.
  • Users oblivious to 5G vs 4G, just need good data experience.
  • Usage higher as 5G free currently, data corrupted.
  • Saw 5-8% usage increase earlier when paid, but very early stages.

Spectrum Auction Plans

  • Don’t foresee need for more spectrum now and have enough sub-1GHz for coverage.
  • May only need small renewals in some circles.
  • Little spectrum spending next 2 years likely.

Investments vs Revenue Growth

  • Large investment differential between players but revenue growth differential narrowing.
  • Seeing benefits of rural 4G expansion. Gaining share based on rural rollout metrics.

Tariff Hike Outlook

  • Tariffs very low currently, need hikes for viability.
  • Not having full control over timing, may independently make a decision at some point, but could revert it if not matched by competitors.
  • Another hike expected but no timeline.

AlphaStreet

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