Bharti Hexacom Limited — Q1 FY26 earnings call

See, roaming charges, as you mentioned, they are seasonal. There were couple of unfortunate incidents which happened in Q1 and I was discussing with the CFO of a large travel aggregator and he also confided that travel had indeed come down and picked up later. As is evident from the numbers Sanjesh, this is like a pass through, our EBITDA has not got impacted. So I think there would be a bit of fluctuation, which is why when we did the IPO, we also gave out the intrinsic ARPU, so when I said that the ARPU is 246 that is the intrinsic ARPU excluding the roaming charges because in India, frankly, the customer does not pay for roaming, so I would say yes, this is seasonal and it will keep going up or down. This time, I think it is a little large than what I would have expected but clearly offset through access charges which means, yes, roaming revenue was impacted.

Clarifies the reason for the reported revenue reduction, attributing it to seasonal factors and confirming no EBITDA impact due to offsetting access charges.

Asked by Mr. Sanjesh Jain

So, the employee cost was some year-end provisions which was made in the last quarter and has got reversed. We participate in one of the two circles that we have under the company, under the universal service obligation fund, the USO fund. When you set up a USOF tower under that fund, you get certain benefits or certain subsidies for constructing the tower and there are various stage gates which you need to cross before that subsidy gets cleared. Some of those were a little stuck which was provided for, but fortunately with the help of the department, we could clarify their points and a lot of reversal crept in into that number. Without getting into gory details, I know you see a very large, I think, 7-8% growth in opex. The underlying growth is much lower, I would say, in the range of about 2.5-3%.

Explains the one-off nature of employee cost changes and clarifies that underlying opex growth is significantly lower than the reported figure, indicating better cost control.

Asked by Mr. Sanjesh Jain

Well, it would be improper for me to overtake the authority of the Board. As you know, this year, the dividend has been increased and there would be a directional increase in dividend. I must also tell you that the debt that we have because our external debt is very small it is not even worth mentioning. It is primarily the deferred payment liabilities which is to the department and the coupons that it carry. It is not very exciting to repay that, but yes, Bharti Hexacom at the position of cash that it has and it will continue to do. We may evaluate even some amount of prepaying of the debts, but as far as the distribution or the allocation of capital is concerned, I must also call out to you whilst this company does not have a lot of investment into digital platforms and all but as time progresses, we might like to increase our number of sites. We have leadership positions in both circles, there will be 5G deployment and so on and so forth. So, it is not completely out of the woods. There could be investments which would go in but, yes, directionally I agree with you, the company will have surplus funds and I think, the Board would take into cognizance future liability and thereby decide the payout at which direction it should increase.

Provides insights into the company's approach to shareholder returns and future investments, indicating a balance between increasing dividends and funding growth areas like 5G deployment.

Asked by Mr. Sanjesh Jain

The way the consumer looks at it is the value cost equation. It is new people adopting higher price points. We are not trying to get a postpaid customer who gives me Rs.350 to go to 400. The way of doing this is to provide propositions to customers, which will appeal to them at a higher cost. I will give you a simple example. You have 1.5 GB pack and you are watching something and I tell you that you are at 90% of your daily data limit, would you like to buy a top up of 1 GB, which is for today. Now, as demographic income changes and affordability increases, the probability of you taking that 1GB, maybe you will not need the whole 1 GB, maybe you will need only half a GB but the probability of you taking goes up. At that moment of time you are not evaluating that I am paying Rs. 19 over our Rs.300 ARPU. My today's data is over, I want to watch this movie, so, I will spend 19 bucks. So, if you look at it from this perspective, what will happen is the more contextual I can make it, the more timing is appropriate for the next best action for that customer, the ARPU will keep growing up because headline tariff if it is not changing, what is changing is ancillary revenue attached to our mobile connection, which is contextual to our customer.

Details the company's nuanced strategy for ARPU growth through value-added propositions and contextual monetization, rather than relying on broad tariff increases.

Asked by Mr. Aditya Suresh

I will take the second one first and that is obvious one, Vivekanand. The penetration of Wi-Fi eats into mobile data consumption, so, the rest of the country has more Wi-Fi penetration or people go to work in places where they have access to Wi-Fi where they do not need to use mobile data. That is the single biggest reason why the data consumption per customer per month, which is about 29 GB, is higher than the blended average of any of the players, whether it is Airtel or others in the market, who operate nationally, so that is the second answer. The first answer, you are directionally right, which is to say, that FWA will have a possibly bigger share when the complete rollout, let us say, five years from now. FWA will have a bigger share of total connected homes in these two markets as compared to rest of the country because these are less urbanized, but at the same time we are also seeing because these are less urbanized a lot of development which is happening, new buildings coming up, new residential settlements, shared services offices, opportunities to work within the state, a lot of this is coming up. The terrain is difficult to pull fiber in both the two circles, so to that extent, it is challenged but directionally, I would like to believe that we will continue our fiberization. If you are looking at the ultimate mix, as I said five years from now, yes, most likely, wireless broadband through FWA will have a higher share of total broadband in these two circles than rest of the country but that share will come down compared to today because we will be rolling out fiber in these two states as much as possible because there are a lot of T&P towns in both these two, FLPs are also there, so, they may not feature in top 30. The other very interesting thing about NESA is that it is a very culturally evolved place and there is a lot of adoption of newer things, newer technologies and if we can pull a long haul national long-distance fiber to, let us say, Shillong which we have, I am sure we will be able to make sense because the extraction of that fiber will be very, very good.

Explains the long-term strategy for broadband deployment in Hexacom's less urbanized circles, balancing FWA and FTTH, and clarifies the reasons for higher data consumption per user.

Asked by Mr. Vivekanand Subbaraman

So see, the reconciliation is simple because Indus works with four, five organizations. We are one of them and possibly between us and another one, we are the smallest. We have heard that Airtel still continues to do some rollouts. We have heard from media reports that there are some other players in the market who are also looking at rolling out. We will also do some, it would not be zero. I know this quarter, some of you would have seen a number for a drop, that is nothing but relocation, timing mismatch, so please ignore that. We are not reducing our number of towers but Indus has multiple sources, we are only one of them. As far as Airtel India is concerned, I think it is improper to discuss this because the shareholders of Airtel India may be or may not be on the call but since you have raised the point, I will tell you. Airtel India will look at which place they want to roll out based on economic reasons, customer acquisition reasons, customer experience reasons, so, it is not a sprinkling of 10,000 towers across 22 circles, it is concentrated and prioritized, so in that priority in Q1, Bharti Hexacom has evaluated it independently and realized we can live with this as of now.

Clarifies that Hexacom's tower strategy is independent and focused on economic and customer reasons, explaining why its outlook might differ from a broader tower company perspective.

Asked by Mr. Kunal Vohra

Coming to Black attach, I think, this current proposition with IPTV is seeing a lot of traction in these circles as well. We are looking at a very convenient solution where, first of all, the dish, as it was called, is no more required. There is no disruption because of weather because one of the problems which a DTH service had was disruption due to cloudiness or rains; all of that is not there. The earlier black also meant you had two kinds of sources through which content came. The OTTs came through the broadband, whereas the linear content came through satellite, now that has all been converged so that helps the cost. We have had very, very promising result, nothing different from what we have seen in other parts of the country. Rajasthan, it took a little time to take off but I think, now, it has taken off and if I look at the last two weeks, three weeks numbers, I think, it is catching up with the national level, so it will trend in a similar way but as I mentioned again, the proposition is very good for two, three reasons and which is why the adoption has increased significantly.

Highlights the positive traction and benefits of the Airtel Black IPTV proposition in Hexacom's operating areas, driven by convenience and converged content.

Asked by Mr. Piyush Choudhary