Bharti Airtel Ltd (BHARTIARTL) Q3 FY23 Earnings Concall Transcript

Bharti Airtel Ltd (NSE:BHARTIARTL) Q3 FY23 Earnings Concall dated Feb. 08, 2023.

Corporate Participants:

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Soumen Ray — Chief Financial Officer

Harjeet Kohli — Joint Managing Director, Bharti Enterprises

Analysts:

Manish Adukia — Goldman Sachs — Analyst

Arun — Avendus Capital — Analyst

Piyush Choudhary — HSBC — Analyst

Sanjesh Jain — ICICI Securities — Analyst

Shubham Goel — — Analyst

Mohit Motwani — — Analyst

Avish — — Analyst

Presentation:

Operator

[Operator Instructions]. Welcome to the Bharti Airtel Limited Third Quarter Ended December 31, 2022 Earnings Webinar. Present with us today is the senior leadership team of Bharti Airtel Limited.

I must remind you that the overview and discussions today may include certain forward-looking statements that must be viewed in conjunction with the risks that we face [Operator Instructions].

With this, I would like to hand over to Mr. Gopal Vittal for the opening remarks.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Thank you. A very warm welcome to all of you. On this conference call, are Soumen, our CFO, Harjeet Kohli, and Naval, our new Investor Relations guy.

This quarter I really us — I want to focus on how we are building Airtel of the future. And before. I do that, let me give you a quick update on our business and then start with ESG. We’ve received a ESG rating from two agencies, CDP as well as MSCI. CDP, as you may know is an international non-profit organization, recognized by GSMA, while MSCI is a global agency. And we pleased that both the ratings have improved. We need to do more and that is something that will be an effort going forward.

Also, we won the ISCI National Award for Excellence in Corporate Governance for 2022. This is presented by the Institute of Company Secretaries of India. We’re also pleased that the reduction of carbon footprint is now very deeply embedded across both Nxtra, our data center business as well as our mobile networks. We plan to make Nxtra fully green, in-line with government regulations. And there has been a significant ramp-up of solar sites and plants for solar sites for wireless — on the wireless side.

Let me turn to our performance. The most gratifying thing that we seen in this quarter is that despite stepped-up 5G rollout and constant built up of [Phonetic] CapEx, our net debt has come down, by INR3,000 crores. And this is really because of very strong operating free cash flows. Looking ahead, we expect our net debt go down further in the coming year.

We have delivered in the quarter as you know, a competitive and consistent performance. Our consolidated revenue grew by 3.7% sequentially, to hit INR35,800 crores odd. Our EBITDA margins are at 52%. This is an expansion from last quarter’s 51.3%. Margins are up, really due to three reasons. One is our continued operating leverage. The second is a strong war on waste program that continues to be a big focus for the company. And the third is a flow-through of lower spectrum usage charges that were announced by the government.

On a gratifying note the growth has been broad-based across segments. And as you know, our performance and I’ve spoken about this before, is really based on a very simple strategy, backed by solid execution. Our focus is really to really win with quality customers, consistently improve their experience through a combination of technology of digital tools and creating the right culture within the company.

As a part of this we take great pride in the fact that we have built, perhaps the most aspirational brand in the industry. Our concern continues to be return on capital employed. Today at a consolidated level, we are at 11.9%. India return on capital employed is less than 9%. And therefore, we do believe that the ARPU needs to go up, an ARPU of INR300 is critical for a respectable return on capital employed. And that is something that we hope will happen in due course of time.

Let me move to give you a quick update on each of our segments. For the quarter I would say that the standout performance is really the Wireless segment. We’ve seen 4.4 million revenue earning customer net additions. As you know, we have stringent definition of revenue earning customers. It’s really revenue earned on a rolling 30 day basis. In terms of 4G net additions, we have added 6.4 million. Postpaid net-adds has gone from roughly 280,000 odd last quarter to 650,000 this quarter. So that’s been sharp upsurge. And overall ARPU has moved up from INR190 to INR193 rupees, INR3 rupees growth. And this has really been driven by upgrades, upgrades on both the 4G side as well as postpaid. And like I mentioned last quarter, sophisticated data monetization using contextual marketing.

In the mobile segment, we also disrupted the international roaming area by launching the Airtel World Pass. This World Pass really gives you a One Plan access to any country in the world. And regardless of when you are transiting through a particularly airport lounge on to your destination the pack works. On tariffs we, as you know, introduced — took up tariffs of the entry level plans of INR99 to INR155. We are pleased that it met our action standards. In fact exceeded our action standards in both Haryana and Orissa. And we have not taken this across 17 circles in the country.

Let me turn to broadband. Broadband continues to look strong. We’ve added 430,000 broadband net-adds this quarter. We are now present in 1,140 cities. This is up from 847 last year. We have 30 [Phonetic] million homes passed already. And we are on track. We actually got 24 million, 25 million homes passed and we are on track to actually get to 30 million, 34 million homes passed.

The LCO model which is the model that we use with local cable operators has been a very interesting innovation for us, and this is one of the reasons that we’re able to power ahead and expand to many more cities. It is a CapEx light business model which is far more — which is very healthy in terms of return on capital relative to the old model. And it works very well in non-flat — non-flat — in flatbed geographies, which is not the high rise kind of geographies.

DTH net-adds, were at 214,000. And this was up from 66,000 last quarter. So after a long time, we’ve seen some growth in the DTH. This is really happening because of a very simple strategy that we have. Introduced. Number-one is we have dramatically simplified our tariff plans. So really now eight tariff plans across the country, with different bundles. And the second is the strategy of convergence, which is very unique to Airtel, with the power of Airtel Black where we are bundling with both linear as well as OTT content into our broadband offer.

This you must know is in an industry that continues to be under serious pressure and clearly there is more to be done on DTH. We’re not calling any victory yet, but these are just very early green shoots. Our Airtel business continues to be a strong performance. This, as you know, is a jewel in our portfolio. We’ve grown sequentially at 2.5% and today I would say decisively we are the largest B2B player. Our margins in this business are just south of 40%. This is the best in industry.

And I think our strategy of winning both going both wide and deep, wide to cover more-and-more accounts and deep to build stronger relationships and more solutions with more share of wallet from existing accounts is beginning to deliver. We’ve had some serious wins in the top — out of the top 500 customers at about 50 customers and we are also building strong capabilities around — having strong wins on IoT CPaaS and Nxtra, which is our data center business.

Our Payments Bank customer deposits grew by 50% over last year. We’ve hit a revenue run-rate of about INR1,300 crores. The bank is now building momentum and I would say is entering a virtuous cycle with serious benefits to telco onshore. You would have seen a decline in the monthly transacting users this quarter, but that is just on account of seasonal dip on remittances. As we look at January we’re already well past the previous quarter. So the momentum on that will continue.

Our digital businesses are at an annualized run rate of a little over INR1,000 crores, about INR1,050 crores. We have — one of the highlights of the quarter is that we won a large multi-year tender for cloud with DIKSHA which is a national platform for school education by the Ministry of Education.

Let me now turn to really the focus for this earnings call, which is the future of Airtel. And I want to look at how we are building Airtel of the future around five big themes.

The first big theme or the first big focus area for us is really our portfolio. Our portfolio is now resilient and diverse. If you look at our portfolio, Africa accounts for about 30% of our business. India wireless is 50% and the balance is in our fast growing homes and enterprise business. This portfolio gives us a unique ability to withstand risks, while being solidly position for where growth is coming from. Investments will continue and go into where the growth is, and this will hopefully further strengthen our portfolio.

The second theme that I wanted to pick up is rural. In 60,000 [Phonetic] high potential villages Airtel is just not present. Now we could have gone there earlier, but today I think the time is right for us to expand into these areas. This expansion will give us our fair share and provide a fair market share and provide tailwind to the business. We’re doing a lot of sophisticated data science design, which are the places that we really need to rollout.

In these 60,000 high potential villages we’ve identified roughly 40,000 high potential clusters of communities, because for us it’s really important that a individual town is profitable and revenue accretive. And therefore these clusters of communities, are where the community of interest is, and it’s not just an island that we look at, but we look at where the traffic is moving, where population is disbursed in order to maximize the revenue that we earn.

The third theme that I want to pick up is the top 150 towns. The top 50 cities in India account for about 40% of the Indian telecom market. And here I’m talking about entertainment, mobile, broadband, B2B, DTH all of it. And here we are looking at three big areas, which we think are massive opportunities. The first is using 5G as a lever, and a pivot to really drive our postpaid growth. 5G is now live in 70 cities. We will be live in about 300 cities by March 2023. And as I mentioned before, all of urban will be covered by March 2004.

The interesting thing is that on the NSA technology our commercial trials are giving us 30% higher coverage than what we would have had if we had gone with SA. And that’s a very big impact which will be felt in terms of the number of 5G sites that we put up. Secondly our experience is good, and we are seeing clearly up to our 300, 400, sometimes 500 mbps speeds. So one big area is 5G, use it as a fillip to grow our high-value base particularly postpaid.

The second big area in the top 150 city strategy is really what we are calling the one transported band. Now transport to the shared infrastructure, it works for both our mobile business, our B2B business as well as our broadband business because fiber is then carried from the tower into the home or the office. We are now bringing very sophisticated data science to forecast and predict the demand across all our businesses whether it’s B2B, broadband or the way traffic will grow in the next 12 months. And therefore, how do we need to plan this fiberization based on the traffic and the likely growth of the market. So in effect for the same rupee invested our plan is to get more coverage, more growth and at a lower system cost.

The third area that I want to talk about in the top 150 cities is our go-to-market approach on the enterprise side. If you look at the entire enterprise business of the top 500 accounts we have, in 50 accounts we have seen almost 300% growth. So there’s a massive growth that we’ve seen in 50 accounts of the top 500. And this is really due to deep and brilliant account management, which is an opportunity in itself, because in the other 450 accounts we haven’t seen that kind of growth.

So for us to go deeper and create more stickiness with multiple products by using brilliant account management is really one of the most mission-critical things for the B2B business. One of the consequences of this is that we are now stepping up investments in CPaaS, in IoT, in cloud. And of course in sales force scale.

The next area that I want to talk about, which the port area is really a radical reset of experience. We believe that we have to fix our problems structurally and really fix this once and for all in order to reset experience. We’ve identified 3,000 customers across our 150 cities to dramatically improve network experience using digital tools. What are we doing here? I think the first thing that we are doing is we are remapping all our customer journeys, and this is based on a lot of feedback, a lot of work with customers in the way that they process some of our digital tools.

The second area is really transparent communication. You’ll recall that many years ago we launched Open Network. We are elevating Open Network now to really be extremely transparent with customers in terms of when we fail, because we believe that a moment of failure is a moment of opportunity for us to learn and get better.

The third area that we have really picked up is raising our digital velocity. As we built our digital business over the last three to four years and created digital capabilities, one of the challenges is that oftentimes we write multiple code or the same code for different lines of business. So one of the things that we are doing now is to move away from a product-centric single-line of business approach to a platform approach for both experience as well as digital monetization.

Let me give you three examples of this. The first example is the data mesh. We have a 100 petabytes of data now in one platform, which is being brought together for one future proof customer lifecycle management system across Airtel. This helps our core business, but it also helps partnerships, for example, financial services and lending.

A second example is channels. Now any channel interaction, whether it’s a social media, whether it’s a rap [Phonetic], a call center, a store, a retail — a retail outlet. We look at these interactions through the lens of one customer, and look at how do we drive these interactions down which comes back to structurally fixing our problems.

The third example that I want to talk about is commerce. Search, find and delivered can be anytime and anywhere across any channel. And we have to find ways to actually have some good fulfilment. So one of the major capabilities that we’re building is around commerce. And these are three critical platforms, interactions, data mesh and search — and commerce which we are using to radically reset experience.

The last focus area for us is really to reset war on waste. We have seen in the last 12 months, a lot of headwinds on the cost. Energy prices have gone up, our deployment is going up. We are concerned on the increase in sales, cost of sales and distribution costs that we’ve seen. And one of the things that we have now looked at in the company is to really re-launch our war on waste program and relook at every cost item.

So let me give you one example. We’ve identified 18,470 odd sites which are high cost sites. These are sites for legacy reasons there is an extraordinary amount of diesel that is consumed, there is an extraordinary amount of over engineering that they have been done in the site. Layers that we’ve actually deployed there, the rentals that we pay each of these sites is being surveyed and we’re finding unique solutions to try and lower that cost base. And this will happen in the next six to nine months.

The second example of course is sales cost. As I mentioned we are concerned on the rising sales cost. We need more science to tap into lower cost channels and we are looking at how do we do that across the company. And the third example of re-looking at war on waste is really CapEx. We are seeing already about 11% of our devices, smartphone devices that are already 5G ready. And if you look at an individual customer on a particular site that has 5G about 25% to 35% of traffic is already getting offloaded on 5G from 5G consumption.

So 5G could be a capacity offload for 4G and therefore one of the things that we are looking at is to squeeze out our 4G capacity investments and direct this towards the future of where the economy is going, which is really 5G.

So to sum up, I think the quarter has had a strong performance. We’ve seen strong operating cash flows. The performance has been consistent over seven quarters. We are pleased that we’ve gained market-share across all our segments, whether it’s wireless, broadband B2B or DTH and pretty much to reach lifetime highs in terms of market shares everywhere.

More importantly our effort is to build a future-proofed Airtel that has a resilient portfolio with solid capabilities. With this, let me open up for Q&A.

Questions and Answers:

Operator

Thank you very much sir. [Operator Instructions] First question comes from Mr. Manish Adukia. Mr. Adukia, you may please unmute your side, introduce yourself and ask your question now.

Manish Adukia — Goldman Sachs — Analyst

Hi, good afternoon. Thank you so much for taking my questions. My first question is on the 4G subscriber additions Gopal, which you talked about in your opening remarks as well. Quite strong at about 6 million on a quarter-on-quarter basis, and this is against a backdrop of declining smartphone additions or shipments in the industry. Can you maybe give us a little bit more color in terms of what is driving this? If they’re mostly market share gains? Because when you talk about upgrades, wondering how upgrades are happening despite, let’s say, low smartphone additions. So that would be first question.

And related to that you spoke about 5G and now it’s been a few months since you started rolling out 5G, are you seeing any trends of consumers upgrading to higher packs which is leading to ARPU accretion or any, let’s say, incremental revenue opportunity?

And my second question would be on the entry-level price increase that you talked about, we had late last year. Again, what was the thought process behind such a sharp price increase? We’ve not seen that magnitude of price increase from you in the past? And again, if you can maybe help us give some color what the churn has been like and what are you expecting in terms of overall outcome from that? That’ll be great. Thank you.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Yeah I think 4G net additions are — have been have been reasonably good for us 6.5 million. That is on account of a combination of upgrades as well as the intensity of the rural rollout that we began last quarter. And 5G, we have seen — I don’t think we can comment on any trends on upgrades or ARPU accretion. It is too premature. That’s why I mentioned that we are seeing some traffic offload from 4G to 5G. And if you’re putting in CapEx you may as well put it in to serve a future technology, which is about what we want to drive.

On the entry level plan, the way we see it, is that this plan actually gives you a lot more value. So for customers — some customers sort of buy 1.4, 1.5 packs of you retail packs. And we wanted to simplify the portfolio and keep it at significantly greater value. So we’ve seen good results. So both Haryana and Orissa met action standards. The churn that we were expecting was lower than what we thought it would be. And this is what prompted us to take it across 17 circles. As you know Haryana is a little bit more of a competitive market. Orissa as a market is really a two player market, in effect because the third player is less than 4% revenue market-share. So that’s really the way we see it.

Manish Adukia — Goldman Sachs — Analyst

Sure, and maybe just a follow-on question to that. You’ve started raising prices at the entry-level, which in some ways seems a bit counter-intuitive. Why not also do that fall into the smartphone or the postpaid user base? Do you think that the price level around that also could see some kind of movement? I mean, just trying to understand the thought process behind starting from the entry-level and not from this the higher-end customer-base.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

So this was the one plan that we had, which was a very odd plan, which is a metered plan is the reason we focused on it. This is really largely used by either customers who’ve got a smartphone and are buying these plans or may have a second SIM. And in a way there is a choice, you have to consolidate the SIM. And then, of course some of the chip-on users, for whom we are giving a lot more value.

As far as postpaid is concerned, I’ve mentioned this a few quarters ago, the typical premiums between postpaid and prepaid, if you go back and look at it over time when we were at about 1.72, which means that postpaid being at a pricing of about 1.72 over prepaid, this is the point at postpaid sees a lot more growth. When pricing crashed in industry, the premium went up to almost 3.5 to 4. And we saw a serious decline on postpaid or a serious softness on postpaid.

Today that ratio has back to 1.6 to 1.7. I think your broader and therefore we are expecting and hope that using 5G, you can actually see stronger growth in postpaid. The broader point of these tariff increases across the industry is a valid point, and that has to go as we’ve always mentioned. It’s just that we can’t do this unilaterally. And if you did it, and lost market share then to claw that market share back would actually be far more difficult.

In the case of the entry-level plan it was a calculated bet which is why we took it in two blue small circles representing more or less the country. And given that the results were ahead of our action standards we decided we will roll it as well.

Manish Adukia — Goldman Sachs — Analyst

Sure, thank you so much for taking my questions. All the best.

Operator

Thank you, Mr. Adukia. The next question comes from Mr. Sanjeev Jain. Mr. Jain, you may please unmute your side, introduce yourself and ask your question now.

Arun — Avendus Capital — Analyst

Sorry, this is Arun from Avendus. Hello? Yeah, hi, this is [Technical Issue]. Gopal, my question is on, first on CapEx. We see sequentially, there is an increase in the cap. [Technical Issue]. Hello. Hope you are able to hear me?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Yeah. I mean, we lost you for a moment, Arun. So I’ll just start with CapEx, yeah.

Arun — Avendus Capital — Analyst

Right, right. Gopal, sequentially we see increase in the mobile services, India CapEx. So I think we are — your kind of indication was that 5G CapEx will be replacing 4G all along. So is there something that has happened in this quarter, is something one-off or we are yet to switch-off the 4G CapEx? How should we see — look at the CapEx figures for this quarter?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

No, I think that this — we are in the midst of doing 5G rollout, as you’re aware. And we’ve always mentioned that while we don’t give CapEx guidance, we’ve always mentioned that if you take a three-year view then the moderate or the CapEx that we normally spend, which is per year, and if you look at the India business, is a lot about INR25,000 crores odd. You extrapolate that for three years. We do not expect any significant change to that overall level of CapEx sort of year-over-year.

However what we do believe is that we may have run some of this CapEx into the early years, because it’s just moving forward the CapEx that would anyway have been incurred over the three year period. So that’s the way I would suggest we should — that’s the way we think about it, and that is how we look at it.

Arun — Avendus Capital — Analyst

So what I understand is you are front-loading certain CapEx in this year?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

And we’ve already mentioned that you might see an elevation in a given year. We’ve seen an elevation right now, because are in the midst of a 5G rollout but also in the mix of a rural rollout. We have launched the Gujarat sub-gigahertz, which is now that is concluded. So all of that. I think would have led to an advancing of the CapEx. But the fact is that you take a three-year view then the CapEx would be more or less in the same ballpark. You may have in advancing in the early years.

Arun — Avendus Capital — Analyst

Thank you. Gopal, my second question is on your comment, opening comments or remarks regarding the rural expansion across at least 60,000 villages, high-profile villages. Just this coinciding with your increase in the minimum pricing plan, one would think that if you are entering new geographies, especially where you are not present, probably you will have certain other plans, which will make easy for the new customers to up on your network.

So is it — isn’t it there is a dichotomy in the way your pricing action is saying and how you are saying you will expand in the coming quarters?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

No, there is no dichotomy because remember the entry-level business is really largely a just a minutes plan with a very marginal amount of data, barely 100 mb or 200 mb. And really the way we think of the entry-level is INR155, which is where you get 2 gb of data. But the real data starts to kick-in only at about INR240.

In these villages there is only one competitor, and if you look at that converted the entry-level plan for that competitor is also INR155. This is a fight for 4G customer and less to do with 2G, which is at entry-level price point. So it’s a very simple game of really expanding into areas to take, to win share of smartphones. I think that’s really where we are focused.

Arun — Avendus Capital — Analyst

Correct. All right, okay. Just my last question on–

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Arun that plays squarely in our strategy, which we’ve been talking about, which is really to win with quality customers. So that is clearly valuable.

Arun — Avendus Capital — Analyst

Right. Thanks, Gopal. Just one last question on the spectrum side. In 2021 auction you kind of filled your gaps in the sub-gigahertz portfolio by acquiring some spectrum in few circles in 800 and 900 as well. How is your experience post that? Do you see a remarkable increase in the retention of the customers in those circles? How should — what is the — what are the learnings from that?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Well, in sub-gigahertz is always a spectrum because it has better coverage, more propagation. So while you get improved propagation in villages, so, let’s say, for example level if you’re on an 18,00 grade and on that same tower, if you put in sub-gigahertz on that same tower than you get a little bit more coverage in rural areas. So that’s one advantage.

The second is in our cities where through sub-dealers we are able to penetrate indoor better than what you would do on 1,800. Now in most cases our entire network topology itself was planned on the basis of 1.880 point. But with 1,800 band you still have some of these constraints on indoor coverage and so on and so forth.

So. I think we’ve seen a good evidence to suggest that customers are more pleased, which is measured through the number of complaints or infractions that happened. And that creates greater stickiness for those customers in the cities. We are also able to go and win more customers in some of the rural areas where sub-gigahertz would be now present.

Arun — Avendus Capital — Analyst

Right. But don’t you think that is something we can replicate with more sub-gigahertz spectrum in 700 as well, because we have seen success in the past.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

No, no other. Sub-gigahertz will only give you coverage. Remember there are two parts to the mobile networks. There is coverage and there is capacity. Capacity is really given through mid-band, because all the spectrum in the sub-gigahertz band is very limited. For example, there are circles in India where we have 10 megahertz of sub-gigahertz. The relative difference between 10 and 5 is almost in the zone of no [Phonetic] difference.

The real difference is between 0 and 5. And therefore, sub-gigahertz you don’t need too much because whether you have 5 megahertz or 10 megahertz, the incremental experience that you get at the far edge will move from, let’s say, 2 mbps to 3 mbps or 3.5 mbps. It will not get to 10 mbps or 20 mbps. For that you need the mid band spectrum. And when I say mid band, I’m talking about all the mid band including 18 to 2,100, 23 and a sub and the sub six which is 3.5 gigahertz.

Arun — Avendus Capital — Analyst

Okay, so if I understand right, what you’re saying is the marginal utility of the incremental sub gigahertz spectrum, you don’t see value at this point of time.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Yeah.

Arun — Avendus Capital — Analyst

Yeah, thanks, Gopal. Yeah.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

I am saying at any point in time, because it doesn’t increase your capacity, on increases your coverage.

Arun — Avendus Capital — Analyst

Right. Thanks. Thanks, Gopal. All the best.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Thank you, Mr. Prasad [Phonetic]. The next question comes from Mr. Sanjesh Jain. Mr. Jain you may please unmute your side, introduce yourself and ask your question now. Mr. Jain, you may please unmute your side, introduce yourself and ask your question.

The next question comes from Mr. Piyush Choudhary. Mr. Choudhary, you may please unmute your side, introduce yourself and ask your question now.

Piyush Choudhary — HSBC — Analyst

Yeah, hi. Good afternoon. Thanks for the call. I have two questions. Firstly Gopal, you mentioned about towns covered with 5G rollout, right. But if you want to measure what percentage of your network is fired up with 5G signal. Could you quantify that? And what is the target of your network footprint, which will be fired with 5G signal by March 2024? And could you also comment on the pace of 5G handset adoption? Is it slower than your base case estimate? And has it changed any of your business plan for 5G rollout?

Second is, you talked about future of Airtel. But can you share how you’re thinking about 5G FWA business model among the future of Airtel, like what are the key bottlenecks over there? What we need to watch, which could change your business plan regarding 5G FWA. Thank you.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Thank you, Piyush. I think that — I mean, the answer to your first question is rather complex to answer that, because we don’t want to put in 5G where there is no — where there is no smartphones or there is very limited CapEx. So this is not a ubiquitous layer. Remember even on 5G — even today as you speak if you got a 5G phone like I do, for example, I see a 5G logo. And when I do a speed test, I am seeing 400, 500 mbps. But if I I’m actually using it for my application, which is browsing or video or mail or social media, whatever it is, there I see no palpable difference really between 5G and 4G. And the reason for that is 4 to 8 mbps, if you’re getting 4 to 8 mbps, all these applications work really well.

The video doesn’t browse or the video doesn’t open up and play any faster on 500 mbps than for 4 to 8 mbps. I mean there is no — indifference is high. And therefore the real question is that at this point one of the big uses case on 5G is at the back [indecipherable]. So we will certainly go where the traffic of 4G is high.

The second point. I do want to make is that we’re seeing a 30% incremental coverage. So just to give you an example, in the area that we are in, just now in Gurgaon around the area, from my residence to the office, we have about 35 sites for 4G. But we get a very similar experience across all 35 sites with a fraction of the sites that we today have. So we have invested in coverage and less to do with sites. And that is one of the ways that we are actually looking at. So there are two factors we are looking at, one is coverage and the other is the capacity outlook.

The pace of 5G handset adoption is right now still sitting at about 35%, 40% of shipments. Today, there are about 11% of our devices that are 5G-enabled. We expect this to climb and by March ’24 to get to about 20% plus. We are doing several experiments on fixed wireless. One of the constraints or one of the challenges that you have is that the router cost of fixed wireless is quite high today. The router cost is anywhere between $180 to $200. And if you look at our cost per home passed, today it’s about $25 to $30. And so if you take the utilization rate at about 30%, 32% then cost per connected home passed is about $100 and you still need a home router in both the situations.

So the cost per connected home for fixed wireless access given the router that you need, or then the CPE that you need, let’s call it the CPE, the customer premises equipment is almost double that of a fiber that is rolled straight to the home today. We do believe that this cost will come down over time. And so there are — so one of the things that we’re looking at is actually working on fixed wireless access, attending to trials and pilots and then be ready in the next six months.

Piyush Choudhary — HSBC — Analyst

Thanks, Gopal. So just to follow-up over there. Given you mentioned that capacity offload is one of the prime use cases —

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

At this moment in time. Of course, there are other use cases. Sorry, Piyush I must qualify that. At this point in time it’s capacity offload. B2B is another place where we are looking at other use cases. We just won a big deal with one of our customers on a private network. So we are looking at other areas around B2B. There are aspects around Edge Cloud and so on, which is another area that will happen. But if I look at the overall innovation in the ecosystem, to drive 5G use cases, particularly when it comes to low-latency applications, globally these use cases are still few and far in-between.

Piyush Choudhary — HSBC — Analyst

Yes, so my question was, if the handset penetration or adoption rate remains below your kind of base case estimate, would it lead to lower coverage rollout also in terms of 5G?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

When I say that there are 11% of devices that are 5G-ready already, if you take markets like Delhi, that 11% is not 40%. That 11% maybe 14 %, 15%. And if you look at a market like Bihar, it could be 8%, 9%. And if you start going deeper into rural areas, maybe it’s at 4% to 5%. So it will all happen. It’s just that we have to look at where the devices are, or where they are likely to come over the next six to nine months and plan our rollout, in addition to the coverage that we will provide, wherever we need to go, whichever cities that we have decided to go.

So I think the rollout is going to happen across urban India by March 2024. The pace of the rollout beyond urban India is something that will be dictated by how 5G devices ship out.

Piyush Choudhary — HSBC — Analyst

Got it, thanks a lot.

Operator

Thank you, Mr. Choudhary. The next question comes from Mr. Sanjesh Jain. Mr. Jain, you may please unmute your side, introduce yourself and ask the question?

Sanjesh Jain — ICICI Securities — Analyst

Hello. Thanks for the opportunity. First on the enterprise side, Gopal, you mentioned that 50 of top 500 accounts have grown by 300%, that’s a staggering number. What is driving such a strong growth in these 50 accounts and can it be replicable? As in we are looking at an opportunity in the enterprise, which can grow up by multi-fold than what we are today? And also the services which you think where we are well pleased to capitalize this, that would be my first question.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Yeah, it’s a great question. I think, if you recall, I don’t know if you remember about a year ago we had kicked this off. And at that point, I talked about two examples where we had grown dramatically. And we did try and then take this across the entire 500 accounts, which is what led to our strategy of going wide and going deep. Of the 50 we have been made success and — of the five that we make success in 50. So we’ve had success in 50. We don’t need to make it more repeatable and extended across.

What is driving this? I think there are various things that drive this. One is a natural tailwind of consolidating spends behind fewer suppliers or behind fewer partners, provided there is redundancy. And that redundancy can be provided through more sophisticated technologies such as software-defined wide area networks. So this is one trend that we see.

The second is bringing the full power of Airtel, which is across both our global business as well as our domestic business to actually address the customers’ needs. And that comes down to the third thing, which is really having a very strong account plan, for every single account. This requires a tremendous amount of skilling of our sales force. One of the things that we’ve done is created virtual teams, for example, there is a virtual team for banking and financial services, there is a virtual team for IT, ITS, there is a virtual team with a virtual project, or team leader for manufacturing and distribution.

We have delayered the organization, where the large accounts directly — the account managers directly report in to our domestic enterprise head, who is actually focused on these 500 accounts. So that’s the third area. And the fourth area is actually finding more innovation, more capabilities around some of the adjacencies where particularly things like CPaaS which are seeing strong growth, datacenters and cloud, where we have not made as much headway, because we haven’t yet been able to create as much of capabilities there.

This is an area that we believe we need to step-up our investment, because that market is very large. Just to give you a sense, the connectivity market is as large or the adjacency market is as large as the connectivity market. And in the connectivity segment we have a large share. But in the adjacencies we have a much smaller share. So the headroom for growth is really restricted only by our own imagination and ability to execute, which is really all the allocation of those capabilities.

So that is the reason why, I do believe it’s a repeatable model, it’s repeatable model. It’s not easy. A lot of heavy lifting will need to be done. But this is really the thought.

Sanjesh Jain — ICICI Securities — Analyst

Thank you for that. It’s great detail. But just to follow-on, ex of voice, because that’s declining and that’s somewhat distorting the number, sustainably your 20% growth for next five year considering that 5G will also add to the use case in the enterprise is something you think is a possible scenario or you think that will be a far fetched assumption?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

I’m not going to give you a number because then you will ask an update against that and make it a target for me.

Sanjesh Jain — ICICI Securities — Analyst

No, no, no. It’s not as a guidance.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

But I do want to just for your attention Sanjesh to, the growth that we’ve seen in this business, if you go back three years ago, the growth in this business was 7%. 8%. 8% has gone to 12% and 12% now has gone close to 14%, 15%. So the business has seen a step-up in growth. And that is based on the past track record. It is not that all of this will be done only in the last three, four months. But it’s something that we have consistently sought to drive.

Sanjesh Jain — ICICI Securities — Analyst

Fair enough. One follow-up on the CapEx, last quarter, we called out that we have given an advance of INR50 billion and this quarter the CapEx looks INR93 billion. But commensurate if I look at the BTS Solution, it’s still on the normal run rate of INR18,700. We had some acceleration in fiber that’s not material. Is it that we are buying more equipment for the future deployment and hence there is an upfronting of CapEx in this quarter? And how should one look at BTS growth from here on? And probably an adjacent question on the cost side, how should this drive cost both on the power side as well as on the rental side? What should be the cost inflation on the network OpEx from here on, because of this?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

So Sanjesh, what we’ve seen is that firstly, you won’t get new site addition with 5G because 5G is on an existing site. So just the base spend or base station that gets funded under the existing site. We will see an increase in the amount of sites that you rollout, on the rural front, but 5G has been one of the things that we certainly up branded.

We are obviously as you put in more infrastructure on the site, you do get a headwind in terms of costs, which is why the war on waste program has been setup. But. I would say that we have the most power-efficient solution in the NSA technology that we supply. Soumen, I don’t know if you want to add anything?

Soumen Ray — Chief Financial Officer

Yeah, so I think we will have our war on waste program has being stepped-up because with the rural rollout, as well as with the 5G rollout there will be a creep up on-network costs. So we are working towards it and the impact will certainly get minimized through those efforts. Gopal on OpEx, there won’t be — again, I cannot give a guidance, but overall, it will be equal to or lower than this.

Sanjesh Jain — ICICI Securities — Analyst

Fair enough, fair enough. But a site I could understand, Gopal. But the BTS solutions should drive, right, because for 3,500, we need to deploy an additional BTS. I’m telling BTS solution has also been a normalized run-rate this quarter.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

So I will take that. Sanjesh, it is not relevant because the way we calculate our base stations, that would not be always relevant, where 5G would be an additional agenda which will be strong.

Sanjesh Jain — ICICI Securities — Analyst

Fair enough. I’ll take this offline, this 3,500. But thank you. Thank you very much. Gopal, and Soumen for all those answers.

Operator

Thank you, Mr. Jain. The next question comes from Mr. Shubham Goel [Phonetic]. Mr. Goyal, you may please unmute your side, introduce yourself and ask your question.

Shubham Goel — — Analyst

Good afternoon. Hello, am I audible?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Yeah.

Shubham Goel — — Analyst

Yes, sir. So I just wanted to ask that about the product base to platform base, I didn’t quite understand what did you mean by that?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

So let me explain. Let me give you just one example. Search and buy, which is really what we call as our commerce platform is applicable to all our businesses, which is, whether it’s wireless, broadband, it’s DTH, B2B. Indeed, it is not just our businesses, but also to our partners. Now you have two choices. What do I mean by product business?

A product approach is when you are creating those bespoke journeys for individual lines of business, which means you are writing the code for wireless, if you’re doing an integration with another business that you re-write that code. And that is on account of — and most telcos have this problem. In fact, most traditional companies, legacy companies who’ve grown-up with older systems over 20 years have this problem where underlying billing systems don’t talk to each other and they are complex.

We have created a layer on top through an APR platform, which is able to extract some of that complexity and simplify. What we’re now doing is actually creating a single platform on search and buy, which should be federated across all our business, as a consequence of which we will have a uniform experience across businesses and more importantly, we will have greater digital velocity to drive into our businesses. So that’s what I mean by platforms.

This is one of the things that most mature digital organizations go through. They move away more and one from products to platform. It’s not that products give you agility. So when you are doing something for an individual line of business, it gives you greater agility. But I think we’re now in a situation where with the capabilities that we’ve built, we can indeed get more velocity through a more simplified approach to driving what we are calling platform-centric build.

Shubham Goel — — Analyst

Okay, so sir, this will lead to operational efficiency, right?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

It will lead to operational efficiency, it will lead to our ability to give better experience. For example, it will also lead to some better growth, like when you get a lead, converting that lead from a lead directly into what is possible to deliver to a broadband customer and then having it delivered to an installation engineer. All of that is digitally orchestrated, and it will be much quicker and much more seamless.

Shubham Goel — — Analyst

Okay sir, thank you.

Operator

Thank you, Mr. Goel. The next question comes from Mr. Mohit Motwani [Phonetic]. Mr. Motwani, you may please unmute your side, introduce yourself and ask your question.

Mohit Motwani — — Analyst

Hi, thanks for the opportunity, and congratulations for good set of numbers. I just have one question on the rights issue, which we have, around INR15,000 crores issue, which is yet to be called. With the kind of good free cash flow that you’re generating and you are doing the CapEx from the internal accrual itself, is there any timeframe when you expect this rights issue pending to be called?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Harjeet, do just want to take it?

Harjeet Kohli — Joint Managing Director, Bharti Enterprises

Sure, thanks, Gopal. Mohit, you’re right. I think the pending calls are available for a few quarters more. At this stage you’re right also that the free cash flow profile, they may not necessarily be immediate visibility of the same. But I think from where we are, it’s useful to keep that product alive and maybe over the coming few quarters we can re-benchmark when is the effective need for the balance call.

Mohit Motwani — — Analyst

Got it. Thank you so much.

Operator

Thank you, Mr. Motwani. The next question comes from Mr. Avish Vardha [Phonetic]. Mr. Vardha, you may please unmute your side, introduce yourself and ask your question.

Avish — — Analyst

Hello sir. Sir great performance. Just wanted to understand this prepaid plan — entry plan which you have got, what percentage of the customer base currently accounts for this plan across 22 circles?

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

I don’t think we report out our individual plans and our new customers are there. We have a reasonably large base of feature phone users that as you know those numbers. And let me just give you a little bit of texture to this so that it just helps you in the way that you model. Every prepaid customer doesn’t necessarily recharge at the end of the 28 day, or the 56 day or 84 day when their recharge cycle expires, or their validity ends.

As we start going down the lower-end, people less and less frequently. And therefore, one of the things that you have to look at is we have a definition within. So we really look at how many customers are really live on the network at a given point in time. And that number is really what we look at when we look at some of these plans.

The second point I do want to make is that the revenue contribution of customers are only on 2G device is much smaller then the customer contribution of 2G customers on our network. So if you take our total revenue on a customer base, take out the 4G customers and look at the balance is 2G, you will find the revenue contribution is actually much lower.

Mohit Motwani — — Analyst

So while around 33% is your non-data customers, so the share of — the entry level plan will be in 15% to 20% — around 15% is what we can stipulate it.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

I’ll leave it to you. I think it will probably be a little bit more than that. But I mean I think — I don’t — we don’t have the exact numbers to share with you here.

Avish — — Analyst

And we can expect this plan to be rolled-out across 22 circles pretty soon.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

We rolled it out across 17. And we’ve not rolled it into a few circles. They were relatively weaker, so we have not rolled it there.

Avish — — Analyst

Okay, thank you.

Operator

Thank you, Mr. Vardha. With this I will now hand over the proceedings to Mr. Gopal Vittal for closing remarks.

Gopal Vittal — Managing Director & Chief Executive Officer, India & South Asia

Again I want to thank you for joining in. I really appreciate this and thank you for all your questions. I think, I do want to underscore that — to sum up, broadly, our performance has been consistent. All our businesses are at lifetime high, in terms of revenue market shares. I think the headroom for growth is strong, given our rural rollout, as well as the top 150 series. And there are other areas that we are working on in order to build a future proof Airtel. So again, thank you and see you next time.

Operator

Thank you everyone for joining us. A recording of this webinar will also be available on our website for your reference.