What doesn’t kill you makes you stronger Ft Bharti Airtel

“I am thrilled to share that we have surpassed 2 million customers on our ultrafast Airtel 5G network. We will continue to advance our network, bridging every town and key rural area across the state, allowing many more customers to enjoy superfast access to high definition video streaming, gaming, multiple chatting, instant uploading of photos and more.”

Mr. Tarun Virmani, CEO Tamil Nadu

Stock data

Ticker	BHARTIARTL
Exchange	BSE and NSE
Industry	Telecomm

Price Performance:

Last 5 days	-0.7%
YTD	+6.8%
Last 1 year	+25.04%

Company description:

Bharti Airtel Ltd is one of the world’s leading providers of telecommunication services with presence in 18 countries representing India, Sri Lanka, 14 countries in Africa. 

The Company’s diversified service range includes mobile, voice and data solutions, using 2G, 3G and 4G technologies. It provides telecom services under wireless and fixed line technology, national and international long-distance connectivity, broadband services, Digital TV and complete integrated telecom solutions to its enterprise customers. Airtel Money (known as ‘Airtel Payments Bank’ in India) extends the Company’s product portfolio to further its financial inclusion agenda and offers convenience of payments and money transfers on mobile phones over secure and stable platforms in India, and across all 14 countries in Africa. 

Market Leadership:

Bharti Airtel is India’s largest integrated communications solutions provider and the second largest mobile operator in Africa. Its Revenue Market Share is approx 35% while the Spectrum Share is 33%. 

India’s first 5G Demonstration:

During FY22, the company carried out India’s first 5G demonstration on a live commercial network, rural 5G trial, cloud gaming experience trial and a 700 MHz band 5G trial.

Scheme of Arrangement:

The Composite Scheme of arrangement between Bharti Airtel Limited, Bharti Airtel Services Limited, Hughes and HCIL Comtel Private Limited has become effective on January 4, 2022. Accordingly, VSAT Undertaking of the Company and Bharti Airtel Services Limited stands transferred and vested into Hughes and HCIL Comtel Private Limited, respectively (on a going concern basis) by way of a slump sale with effect from January 4, 2022. 

Stake in Indus Towers:

On the towers front, given the stabilizing industry structure and emerging opportunities related to future 5G rollouts, the company expanded its shareholding to ~48% in Indus Towers. 

Mergers & Acquisitions:

The Company has purchased additional 4.7% equity interest in Indus Towers from Vodafone Plc at ~Rs. 188 per share. It also acquired an additional ~2.9% stake in Vahan Inc. as part of its Startup Accelerator Program. Further, it agreed to acquire a strategic stake in Aqilliz – a Blockchain as a Service Company. Moreover, it acquired ~25% strategic stake in SD-WAN startup Lavelle Networks.

Amalgamation:

The Scheme of Amalgamation of Nettle and Telesonic, wholly-owned subsidiaries, with and into Bharti Airtel Limited is subject to requisite regulatory/statutory approvals. 

Rights Issue:

During FY22, Bharti Airtel issued and allotted ~39 crore partly paid-up equity shares on rights basis, in the ratio of 1 equity share for every 14 equity shares held, at an issue price of Rs. 535 per fully paid-up equity share. 

Investment by Google International LLC:

Google is to invest upto $1 Bn in partnership with Airtel as part of its Google for India Digitization Fund. The deal includes an investment of $700 Mn to acquire 1.28% ownership in Airtel and upto $300 Mn towards potential multi-year commercial agreements. 

Strategic Alliances & Partnerships:

Airtel and Intel announced a collaboration to accelerate 5G in India. The collaboration is part of Airtel’s 5G roadmap for India as it transforms its networks to allow its customers to reap the full possibilities of the hyper connected world. Additionally, it is collaborating with Tata Group/TCS for ‘Made in India’ 5G. Tata Group has developed a state-of-the-art O-RAN based Radio & NSA/SA Core and has integrated a totally indigenous telecom stack, leveraging the Group’s capabilities and that of its partners. Further, Airtel and Tech Mahindra announced a strategic partnership to build and market innovative solutions for India’s digital economy by bringing together their core strengths. 

Financials:

What we like:  

1. Market leader in the telecom sector: 

Bharti Airtel is one of the leading players in the Indian telecom industry, with a substantial market share. It operates in various segments, including mobile services, broadband, and digital TV, and has a significant customer base. The company’s established position in the market could present growth opportunities. 5G smartphone penetration for Bharti is at 32mn out of 335 Mn subscriber base. Though, it is less than 10%; however, penetration in postpaid subscriber base is 33%. This is helping Bharti to grab more postpaid subscribers with a Rs 599 family plan. Company has rolled out 5G in 3,000 cities and is adding 30-45 cities each day. It should complete urban rollout by end-CY23. Rural rollout is based on handset penetration, which has slowed down. 5G handset penetration has not picked pace as was anticipated.

2. Increasing demand for data services: 

With the ongoing digital transformation and the increasing use of smartphones, there is a growing demand for data services in India. Bharti Airtel has been investing in its network infrastructure and expanding its 4G and 5G capabilities to cater to this demand. The company’s focus on providing data services could lead to potential growth in revenue and market share.

3. Diversified revenue streams: 

Bharti Airtel has been diversifying its revenue streams beyond traditional telecom services. It has ventured into areas such as enterprise services, digital content, and payments banking. This diversification could help mitigate risks associated with a single business segment and contribute to overall growth.

4. International presence: 

In addition to its operations in India, Bharti Airtel has a presence in several African countries. This international exposure provides the company with opportunities for expansion and diversification, tapping into potentially high-growth markets.

5. Strong financial performance: 

Bharti Airtel has shown consistent revenue growth and improvement in financial performance over the years. In Q4FY23, consolidated revenue grew 14.3% YoY to Rs 36,009 Cr, driven by robust performance across all segments. Mobile services India business was up 11.9% YoY to Rs.19,394cr, backed by a rise in customer base to 335.3mn in Q4FY23 from 326mn in Q4FY22. Average data consumption increased 8% YoY to 20.3 Gb per month combined with 8.4% increase in average revenue per user (ARPU) to Rs.193. Mobile services Africa business rose 20.1% YoY to Rs. 11,032cr. The Airtel business grew 14.4% YoY to Rs. 4,785 Cr owing to the connectivity market improving by 220 bps and growth in emerging revenue streams such as Internet of things (IoT) and cloud services. Home services revenue grew 25.1% YoY to Rs. 1,097 Cr, backed by a decent customer addition of 0.4 million leading to a total customer base of 6 million (up 34.9% YoY) in Q4FY23. 

Factors to consider:

1. The cutthroat competition may reduce the market share leading to reductions in the revenue growth momentum.
2. The telecom industry faces a lot of regulatory issues which cause a dent in the bottomline of the company. Any new regulation can also hamper the profitability of the company.