Highlights of Airtel’s Earnings Call, Q2FY21

Gopal Vittal, CEO, Bharti Airtel
“It has indeed been a very eventful journey as Bharti Airtel marks its 25^th year anniversary, from laying a strong foundation in telecom in the early years to rapid growth and now to the shift of us becoming a powerful digital services provider.

This year in particular has been truly unprecedented. The outbreak of COVID earlier in the year changed everything. Yet we continue to serve our customers and the nation brilliantly. I am particularly proud of how our teams went above and beyond the call of duty to serve our customers. The real reason we were able to recover so quickly was because of our people and our investments in digital over the last few years. We were able to respond with agility, reorient many parts of our business model and focus on what matters, serving our customers. This is why our performance in the quarter was strong. We showed healthy growth across revenues, margins, and customers. Our consolidated revenues grew sequentially by 7.7 percent, while the India business grew by 6.6 percent, in a quarter that is normally weak because of seasonality.

Growth was broad-based across the portfolio, though the star segment was mobility, we had growth of 7.4 percent. With operating leverage also kicking in, we reported an overall EBITDA margin of 46 percent.

Let me now turn to each of our business segments and let me start with our Homes business. I believe that the broadband category is at a cusp in terms of growth. With COVID as the trigger point we’re seeing an increase in work from home in online education and in streaming services. All of these need reliable high-speed broadband. We’re therefore doubling down on broadband through four approaches.

First, is the rapid expansion of our own coverage we added one million home passes in the cities during the quarter, that is in the cities we are present in. Second, the acceleration of our LCO partnership model. During the quarter, we expanded to 29 new cities. Third, bringing the full power of Airtel services as well as our partner services to deliver an integrated, converged offer, encompassing connectivity, entertainment, and more. Our Airtel Xstream bundle now combines the power of Airtel Xstream fiber, unlimited data, the first of its kind Airtel Xtream Android 4k TV box and access to an intuitive customer face, which is delivered seamlessly across screens. Finally, an adjustment in entry prices, due to competitive reasons toward the end of the quarter.

As a result, we saw growing momentum across the quarter, while adding close to 130,000 net adds in this business. Our DTH business added 549,000 customers in the quarter. One of the reasons for acceleration has been the distribution synergy we were able to get, to leveraging the larger mobility sales infrastructure. We’re now doubling down on this capability.

Let me now turn to Airtel Business, which as a segment grew by 2.3 percent. I believe this is one business that has incredible promise and the growth of this business is limited by our own imagination. When we talk to our enterprise customers, we hear them asking us for three things. The first thing they ask us is to ensure that we raise the quality of our services, strengthen network resilience for them, while helping them bring down their cost. To meet this ask, we added almost 7.6 terabytes of capacity in our transport network. While this serves all our needs across homes, mobility and enterprise, we are one of the few players that can do this so efficiently. We also made investments in strengthening customer experience to the launch of the state-of-the-art workforce management solution, which is a platform that handles customer complaints, while moving hundreds of enterprise connectivity links to a highly resilient MPLS backbone.

To help lower costs, we launched several solutions. Airtel Work@Home that meets all the B2B needs of employees working from home. Airtel BlueJeans offers a reliable secure way to have meetings wherever your employer customer is. Airtel Office-in-a-Box is our effort to provide a single touch seamless and holistic service to help startups and companies seeking to enter India for the first time. We also launched Airtel Cloud by signing a multi-year strategic collaboration agreement with Amazon Web Services to deliver a comprehensive set of cloud solutions to customers in India. This collaboration brings AWS, the world’s leading cloud platform together with Airtel’s deep reach and proven expertise in handling network, data centers, security and cloud as an integrated solution. We also have a rapidly growing Nxtra, our data center business that allows customers to store their data in India.

Each of these products lower costs for our customers, take away the hassle of dealing with multiple partners, and meet the gold standards of security and reliability that matters to our customers.

The second thing our customers ask us is to help them engage digitally with their customers, so that they can serve them better or get more growth. Our launch of Airtel IQ, earlier this week is the first step in meeting this need. Airtel IQ is a cloud-based omni-channel customer relationship management platform. This product helps our customers engage with their customers in a safe, secure manner across multiple channels be it voice sms or increasingly video. The entire communication gets orchestrated over Airtel IQ in a seamless, secure and reliable manner all over the cloud. Many of India’s biggest brands are already on Airtel IQ. We believe that with Airtel IQ, we are well positioned to become a major player in the billion dollar cloud communication market that is growing rapidly. You will see more and more innovation from us on Airtel IQ over the coming months

The third thing our customers ask us is to help them protect their data and information from the increased cyber security threats that everyone faces today. Airtel Secure does exactly that. Airtel Secure is a comprehensive suite of advanced cyber security solutions that has been built through the power of best-of-breed partnerships . Our partners here include global leaders in their respective domains, Cisco, Radware, VMware and Forcepoint. In addition, we have made a substantial investment in building a world-class security intelligence center, which uses AI and machine learning to real-time monitoring of security threats across all business applications. So our strategy in B2B is no different from the overall Airtel strategy. We will simply leverage our strengths to provide solutions to our customers, either through building products ourselves or through world-class partnerships, in order to meet the digital needs of our customers.

Let me now turn to the star segment of the quarter, Mobile. Our revenues grew by Rs 955 crores, a sequential growth of 7.4 percent, which enabled us to expand our EBITDA margins by 2 percent. This performance was on the back of strong 4G net adds at 14.4 million. In fact, over the last four quarters, we’ve added 50 million 4G customers on our network. We also added 700,000 net adds in the postpaid segment, which was one of our strongest performances in recent times. Our overall customer net adds was at 13.9 million and our churn was at an all-time low of 1.7 percent. Most heartening, was that ARPU also moved up from Rs 157 to Rs 162.

We believe our strategy of being relentlessly focused on winning quality customers is paying off. Our brand is the most aspirational and trusted brand in the country. Our experience is decidedly the best in the country. In fact, we are consistently seen as the best network by independent global tests and have won several awards-Best network for gaming, Best network for video experience, lowest latency and fastest downloads. For every discerning customer in India, this truly matters. Experience for us is the cornerstone of our strategy. We therefore continue to invest in experience.

Last quarter, we added 5047 sites. With this, we are now at above 200,000 physical sites. We’ve also ramped up densification of our networks through solutions, such as adding sectors, adding twin beams, refarming our spectrum, experimenting with features that enhance spectral efficiency, and adding massive MIMOs. Our voice over wi-fi solution is now being used by around 13 million customers, who’ve seen a significant improvement in their indoor coverage. We’ve invested in several tools in our state-of-the-art network operating center at Manesar that allows us to diagnose and fix problems in a very granular and real-time manner.

Our entire company is unified by a single purpose to deliver a superior experience. One of the important milestones we delivered was the launch of our high-speed 4G services in Andaman and Nicobar, with the commissioning of the submarine optical cable fiber project.

Today, our networks are increasingly future ready. We’re one of the leading players in the Open-RAN effort. In fact, during the quarter, we hosted the global O-RAN Plugfest event, the first of its kind event in India for demonstration of interoperability of open interfaces as defined by the O-RAN Alliance. The quarter also saw our first field deployments of the O-RAN based outdoor small cell, which has been designed by our in-house R&D team and supported by several partners.

Let me now turn to the digital capabilities we are building. These capabilities are allowing us to do three very powerful things. First, they allow us to acquire quality customers. Second, they allow us to drive greater share of wallet and reduce churn, both of which enhance lifetime value of the customer. Third, they allow us to eliminate waste. This is what digital means for us. And, we believe this is now impacting our business materially and building what I would call a virtual flywheel. The first element of this flywheel is the impact on the core business. Today, fifty percent of our business is now online. More than forty percent of our high value customer acquisitions are now omni-channel, ordered online and delivered straight to the home. Every customer journey is being reimagined and delivered in an omni-channel way, and our faults are down by over 50 percent in the last year, saving us substantial cost. So this is the first element of the flywheel which is, impact on the core. The second element of this flywheel is the strengths that we’ve been able to extract and build out digitally. And we have referred to them earlier.

We have four strengths. First is data. Today in addition to our customer base of 294 million mobile customers, 20 million homes and a million offices, we already have 160 million monthly active users engaged on our digital assets. Wynk is the most popular music app at 59 million. Airtel Thanks is one of the most powerful digital assets with over 82 million monthly active users. The data provided by this scale is incredible and allows us to make personalized recommendations. Second, payments. Our Mitra app is now used by over 1 million retailers to collect cash and perform transactions across mobile, the bank, and soon for, DTH. Our Payments Bank is already at USD 2.5 billion monthly throughput and growing. This scale allows us to engage our customers and fulfil transactions end-to-end. Customers will soon be able to make payments online, add our stores, or simply add their service to the bill. This is a priceless capability. Therefore whether it’s our own services or allying with partners to distribute their services, it is this payments capability that allows us to close the loop from engagement to purchase. Third, distribution. The access to our 294 million customers, 160 million digitally engaged customers, 20 million homes, and a million offices is a scale that is unique. The fact that these customers are the best customers today, makes it even more attractive. Finally network, which allows us to identify the location, expose APIs and provide value-added services where relevant. Airtel IQ leverages this network  strength and therefore it is precisely through this capability that Airtel IQ has been built by our software teams. The third element of this flywheel is partnerships. We have a model of partnerships that we have referred to before, which follows a powerful concept that is working for us. And it’s quite simple. It’s called TEAM. T is for transparent commercials, which is what a partner likes. E is for ease of integration and this is very important to a partner. A is for accelerated adoption and discovery of partner services on our platform. And M is for mutual growth. This concept has now been created into APIs and a model that allows for easy plug and play. You will see that much of these capabilities are now translating to differentiated products and services that solve real customer problems. Airtel IQ, Airtel Secure, and Airtel BlueJeans have all been launched in the last few months. Our ad tech platform is in beta testing. We’re gradually beginning to scale our partnerships on selling financial services like insurance as well as content. Every one of these services are  developed at almost no CapEx. They simply ride on the underlying strengths that we’ve built and are being delivered through the tremendous digital talent base of 1500 people we now have in-house. Going forward, you will see us building this ever more powerfully.

In sum, the last quarter has been eventful. Our strategy remains the same. Win quality customers by giving them an exceptional experience. Do this by building an aspirational brand and do it all in an efficient way. Finally, wrap everything we do, to digital, omni channel and with scale. As we do this, deliver meaningful services both our own as well as partner services.
Thank you.
CT Bureau