Bharti Airtel: Calibrated 5G rollout and strong execution

14 Feb 2024 , 02:17 PM

Analysts of IIFL Capital Services hosted Bharti Airtel at IIFL’s Enterprising Bharat Conference. ARPU increase continues to be driven by 2G-to-4G upgrades, pre-paid to post-paid conversion and adoption of bundled plans (Airtel Black). Bharti expects monetisation of investments to be driven by tariff hikes rather than having differential pricing on 5G services. Bharti’s 5G rollout will be linked to emergence of use cases and handset penetration. FY24 India capex will peak at Rs310bn. Bharti’s capex is linked to visibility of RMS gains. 

Substantial ARPU improvement depends on tariff hike: 

ARPU increase has been happening and will continue to happen from 2G-to4G upgrades, pre-paid to post-paid conversion and adoption of bundled plans (Airtel Black). That said, Airtel Black revenue is bifurcated between mobility, homes and DTH as appropriate. While this will continue, a substantial ARPU improvement depends on tariff repair. 

No differential tariffs for 5G: 

A key factor that determines whether a customer churns out is network experience. There is a segment of customers who switch to 5G irrespective of whether they find it useful. There is no intent to introduce differential tariffs for 5G considering the absence of compelling use cases – this is the case globally as well. 

Near-term focus on deleveraging; consequently payouts will follow: 

Bharti would look to plug the coverage gap vs. the market leader in five key circles where it has 25k fewer 4G sites. In the upcoming spectrum auctions, Bharti faces renewals in six circles. Rs163bn spectrum debt was paid down in YTDFY24. All this pertained to 2015 auctions that carries 10% interest rate. Rs50-60bn pending spectrum debt at 10% interest rate will be paid down next. The nearterm focus is on deleveraging. Subsequently, the company will consider payouts.