Key highlights from Bharti Airtel Ltd (BHARTIARTL) Q4 FY23 Earnings Concall
Management Update:
- [00:07:41] BHARTIARTL said that its DTH business experienced some customer loss due to seasonality but is expected to improve.
Q&A Highlights:
- [00:22:02] Kunal Vora of BNP Paribas asked if the acceleration in postpaid customer additions being led by 5G, and how does postpaid ARPU compare to prepaid ARPU. Gopal Vittal MD said the company is using 5G as a pivot to accelerate postpaid growth. BHARTIARTL has also launched a new plan targeted at nuclear families, which is seeing some good traction. Postpaid ARPU is stronger than prepaid ARPU.
- [00:22:56] Kunal Vora of BNP Paribas queried about the company’s perspective on the impact of AI on its business. Gopal Vittal MD replied that the company has a dedicated team assessing the various opportunities and risks presented by AI, and conducting small-scale experiments to evaluate its impact on BHARTIARTL business.
- [00:23:52] Kunal Vora of BNP Paribas enquired about the capex for FY24 and FY25. Gopal Vittal MD replied that BHARTIARTL’s capex for 4Q23 was INR9,000 crores, which is elevated. However, the full-year capex is expected to be INR28,500 crores, which is in line with the company’s three-year capex plan.
- [00:25:00] Kunal Vora with BNP Paribas asked if capex will decline in FY25 due to the potential absence of rural 5G expansion. Gopal Vittal MD answered that the 4G rollout will be completed with a few small rollouts in some circles. Investments will continue in transport, data centers and homes while wireless capex on 5G will come down. The company will track device shipments and assess capex needed in rural areas for 2024 and 2025.
- [00:27:08] Piyush Choudhary at HSBC asked about the comparison of 5G subscriber vs. 4G subscriber like data usage, use of applications etc. Gopal Vittal MD said the telecom industry’s adoption of 5G as a supercomputer connected to the cloud is ahead of the rest of the ecosystem, and for the full potential of 5G to be realized, other sectors such as devices, applications, and content need to catch up and evolve accordingly.
- [00:27:30] Piyush Choudhary with HSBC also asked about the number of postpaid customers in 5G. Gopal Vittal MD replied that about 32% of BHARTIARTL’s postpaid users have a 5G handset.
- [00:30:24] Piyush Choudhary of HSBC asked that BHARTIARTL’s home broadband ARPU is down 6% YonY and if it’s due to price competition or mix change of lower ARPU subs as BHARTIARTL is expanding in new cities. Gopal Vittal MD said the lower ARPU dilution in non-top 100 cities for home broadband, coupled with profitable business, strong revenue growth, and cost-effective partnerships with local cable operators, indicates the right business model for accelerated growth in this segment.
- [00:31:52] Sanjesh Jain at ICICI Securities asked that regarding the enterprise side, with increased capex investment in data centers and plans to grow by four times, how will the revenue be generated. Gopal Vittal MD replied that BHARTIARTL capex on the enterprise business is elevated due to specific deals and cable investments. The company is pre-booking data center capacity from hyperscalers, so it will start generating revenue from data centers as soon as the capex is completed.
- [00:37:38] Sanjesh Jain at ICICI Securities asked about the company’s status compared to Jio’s 60,000 sites presence in terms of 5G. Gopal Vittal MD clarified that the company’s focus is on achieving better coverage rather than competing on the number of sites, and its use of NSA technology in 5G allows for seamless coverage in areas where it is needed, with already being present in over 3,500 cities.
- [00:39:54] Sanjesh Jain at ICICI Securities enquired about the drivers of significant jump of 36% in G&A cost in India. Soumen Ray CFO clarified that the increase in SG&A cost is driven by competitive intensity in customer acquisition, and while efforts are being made to optimize and find areas for improvement, it is necessary to match the investments made by other industry players to remain competitive.
- [00:42:22] Vivekanand Subbaraman of Ambit Capital asked about the plans to utilize the millimeter wave spectrum. Gopal Vittal MD replied that currently, there are no plans to utilize the millimeter-wave spectrum, as it is still in the early stages of deployment and trials are being conducted to assess its propagation characteristics and long-term potential.
- [00:49:38] Aliasgar Shakir with Motilal Oswal asked about typical trends of a new technology rollout in terms of coverage, densification, and refarming and whether the 5G rollout will be a prolonged process. Gopal Vittal MD replied that the high cost of 5G devices and the extended device replacement cycle will moderate the rollout of 5G in India.
- [00:57:23] Gaurav Rateria of Morgan Stanley asked about the opinion on the pricing difference between high-end and low-end data consumers and any expected changes in pricing with 5G. Gopal Vittal MD said the pricing structure in India’s telecom market is flawed, as it follows a one-size-fits-all approach, lacking differentiation based on consumers’ willingness to pay.