Detailed Narrative
Q1 FY26 Financial Performance Overview
Bharti Hexacom reported a strong Q1 FY26 with revenue of ₹2,263 crores. The company achieved an EBITDAaL of ₹1,079 crores, translating to a robust margin of 47.7%, which improved by 110 basis points sequentially. ARPU for the quarter stood at ₹246, benefiting from continued mix improvement. Operating free cash generation (EBITDAaL minus capex) was a healthy ₹854 crores, reflecting efficient operations.
Customer Growth and Smartphone Adoption
The company continued its growth trajectory by adding 17,000 mobile customers and 54,000 homes customers during the quarter. Smartphone customer additions were significant at 283,000. Management emphasized that ARPU growth is driven by value-cost propositions and contextual ancillary revenues, rather than headline tariff increases, focusing on customers adopting higher price points and data top-ups.
Capital Allocation and Balance Sheet Strength
Bharti Hexacom maintains a strong balance sheet with net debt excluding leases at ₹2,806 crores, resulting in a net debt to EBITDAaL ratio of 0.7 times. The company's capex for the quarter was approximately ₹225 crores, primarily directed towards FTTH, FWA, CPEs, and fiber rollout. Management indicated that capex intensity is expected to marginally unwind in FY26 and beyond, and the company will have surplus funds, with the Board considering a directional increase in dividends over the years.
Broadband and Converged Services Strategy
The company's broadband strategy in its less urbanized circles involves a balance between FWA and FTTH, with FWA expected to have a larger share in the long term, while fiberization continues. The Airtel Black IPTV proposition is gaining significant traction in Hexacom circles, driven by its convenience (no dish required, no weather disruption) and converged content offerings, showing promising results and catching up with national adoption levels.
Cost Management and Roaming Revenue Dynamics
Volatility in employee costs was clarified as a reversal of year-end provisions, and underlying opex growth was stated to be much lower at 2.5-3% compared to the reported 7-8%. A reduction in reported revenue due to a drop in roaming charges was attributed to seasonal factors and 'unfortunate incidents' impacting travel, but this was offset by access charges, ensuring no impact on EBITDA.
Tower Infrastructure and Network Expansion
Hexacom's tower strategy is focused on economic and customer acquisition reasons, with rollouts concentrated and prioritized rather than a widespread deployment. The company clarified that its tower numbers are not reducing, and any reported drops are due to relocation or timing mismatches, distinct from the broader outlook of tower companies like Indus Towers.