Bharti Airtel Limited — Q1 FY26 earnings call

Well, I think, firstly, this quarter capex has been low but the way that I would urge you to look at it Manish, is look at it over Q4 and Q1, you have sort of ups and downs in a particular quarter, so you average that out, that is the sort of run rate that we are currently operating at. You are right in the assumption that radio capex generally is trending down but at the same time, when you look at transport capex, the investments that are going in fiber, on our core networks, they continue because that is linked to our quest to connect more and more sites to fiber, upgrading our transport infrastructure, as also running on our core networks based on the capacities and the bandwidths that get consumed.

Clarifies the company's capex strategy, distinguishing between declining radio capex and ongoing investments in fiber, B2B, data centers, and modular Cloud capex.

Asked by Mr. Manish Adukia - Goldman Sachs

On the AGR payments, we have written to the government, as you know, to be extended the same relief as any other telco and that is a decision that the government has to take, we will abide by whatever decision they take. To that extent I would say that we have the room to make whatever payments are required. On the overall strength of the balance sheet because the debt position is getting better and there is a lot of free cash that will get generated over time, we have always maintained that our dividends will increase, our leverage goes down and we will continue to look for opportunities to grow our business in market around the adjacencies that we are operating in.

Addresses the uncertainty around AGR payments and reiterates the commitment to increasing dividends and deleveraging, leveraging strong free cash flow.

Asked by Mr. Manish Adukia - Goldman Sachs

So let me start with the Cloud. I think this is a very large market and it is also growing rapidly. In the market that we are playing in and the services that we are offering, we estimate that this market could well be in the ballpark of 60,000 Crores. So, as I have mentioned before, this is an ocean that we are playing in, it is also growing very rapidly, so, for us to pick up any market share there will be a substantial contribution to the B2B business, so I think that is the first point. The second point on software is that that is an even bigger ocean because you have got so many telcos around the world and then of course, there are other sectors but to start with even in telcos, there is huge opportunity and this, as you know, is a product that we built for ourselves, it has got a roadmap that is ongoing for the next several years that will keep getting better and better, for example, I mentioned that we are going to put Al at the heart of it, that is going to come in the releases in coming quarters and therefore, I do believe that the development effort that is going in on the software business is a development effort that is going in for Airtel India and the subsidiary that we have set up, which is Xtelify, where all our people are housed, is anyway supporting Airtel, so when you take this to market, which typically you have multi-million dollar deals over five years, this is typically software business so it is just like a SaaS business where you are licensing software. The margins are very, very good and there is barely any capex.

Provides insight into the significant market opportunity for Airtel Cloud and software solutions, highlighting high margins and low capex for these SaaS-like offerings.

Asked by Mr. Piyush Choudhary - HSBC

On UBR, just to give you a little bit of colour on this, UBR it is really using the Wi-Fi band to provide connectivity. This is used in the B2B space through the IWAN, sort of, links that get provided. One of the challenges particularly in dense urban areas is there is a very high degree of interference and that happens in the Wi-Fi band so even if you have interference mitigating solutions, you end up with high churn and you end up with poor experience. Where the density of the customer base is very low on fixed broadband, UBR could definitely work, so we have done a lot of trials with this UBR piece and we will see where to deploy it if we have to but it will certainly not be in dense server. The second point I would make is that we have already got a 5G investment that has played out in mobile and fixed wireless access is just a topping on the cake. So it does not require any incremental capex on the radio side and you can use that to monetize the investment.

Explains Airtel's cautious approach to UBR due to interference issues in dense areas, preferring fiber, but sees potential for UBR/FWA in less dense areas leveraging existing 5G investments.

Asked by Mr. Piyush Choudhary - HSBC

Well, on Airtel Business, if you look at the drivers of growth, we think of the business as having five, sort of, broad segments: one is connectivity, which has historically been our bread and butter. Margins here are very good, in fact, better than what we report as the overall margin for the business because this is what we manufacture ourselves. The underlying market growth here has now slowed down, to maybe 4-5% and while we are getting faster growth in the market, that is the reality that we are confronted with. The second segment that we look at is IoT. Here, we have a market share of almost 60% and we are clearly winning the segment, this is a very fast growing segment. We have seen massive fit out of meters into smart meters and electricity in homes and as the DISCOMs or the distribution companies have, sort of, upgraded their infrastructure. There are opportunities around auto, there are opportunities around fleet tracking, so this is a business that will only grow and if you look at the total IoT customer base that we would typically have now, it would be in the ballpark of about 50 million and growing rapidly and again, here, the margins are very good because again, this is our core business.

Details the five segments of Airtel Business, highlighting IoT as a fast-growing segment with high margins and significant market share, and clarifies the capex strategy for new growth areas.

Asked by Mr. Sachin Salgaonkar - Bank of America

Sanjesh, I have already mentioned that we will certainly look to step up dividend over the years. You have already seen that playing out right now. We will continue to look at that. We are certainly going to see opportunities in market growth in adjacencies. So in some of the B2B areas that I have already talked about, in data centres, certainly, those are areas that we will look at and then over and above that, I would say it is too premature because at this point in time, our focus is to make sure that we identify opportunities around adjacencies so that we can really get some acceleration and the market there is very large and it is a real ocean as you know. So, this is an area that we need to step up our game on and we have had multiple, sort of, options but none of them have, sort of, fructified for various reasons but we are clear that we could see opportunities in market acquisitions around adjacencies.

Management confirms intent to increase dividends and explore M&A in adjacencies, but indicates it's too early for specific plans regarding value unlocking for all subsidiaries.

Asked by Mr. Vivekanand Subbaraman - Ambit

On tariff, our view is that, like I have mentioned before, whether you look at average revenue per user or you look at rate per GB, India is at the bottom on both the axis when compared to other markets all around the world including markets that have a lower per capita income. So the opportunity is clearly there. The second is that, as I have again mentioned in the past, the architecture pricing in India is quite skewed, where at the entry level itself or just above the entry level, you get so much of data allowance, you get so much of calling and messaging that you really do not have any reason to upgrade. If there was a more sensible architecture, like you have got, for example, in Indonesia, then we would already be sitting at an APRU that is substantially higher than where India is today without any pain to customers at the low end or without any pain to customers who cannot afford to pay more. So it is just that unfortunate situation where people who can afford to pay, the rich, are paying less and we do not need to charge the poor anymore, so, I think that is real issue on the tariff side.

Gopal Vittal reiterates the need for tariff repair in India due to low ARPU/GB rates and skewed pricing architecture, where high-end users pay less than they should.

Asked by Mr. Vivekanand Subbaraman - Ambit

Well, I think, on the first question, we are a very large platform in the country. Access to, perhaps, the best quality customers as reflected in our APRU and therefore, any company that is looking to get distribution, we are the first port of call. Suffice it to say that I cannot disclose the economics but it is really at a very, very marginal cost because this is really providing the distribution platform to Perplexity and we are very delighted with the partnership. The value being delivered to customers is very high but the cost is marginal for us. On the overall finance side, yes, we have partnerships with Bajaj. We also have partnerships with other NBFCs. It is currently scaling up nicely, so, we have lit up the EMI card across multiple channels which include our digital interfaces, as also our stores, and increasingly, we will spread into other channels as well. For us, the real focus is to make sure that we lend to the right person so that even the collection cost goes down and the delinquencies are low, which then proves the power of the platform and I think, that is really what we are trying to do but it is scaling nicely. We are currently seeing in the month of July, substantial growth of almost 15% over June and that is continuing to sort of grow traction across.

Explains that the Perplexity partnership is about leveraging Airtel's platform at marginal cost for customer value, and highlights strong traction and 15% growth in July for financial services partnerships.

Asked by Mr. Aditya Suresh - Macquarie