Concall — clean across the call.

Firstly, on the mobile ARPU, what led to strong improvement quarter-on-quarter? Was there any product revamp or some specific plan adoption rows like Fast Lane? Any color over here would be useful and should we expect this trend to be sustainable in absence of tariff hike? Secondly, on Airtel business, you have delivered a very strong growth year-on-year. Can you break down the levers of such growth into various sub segments like connectivity, cloud, data center and if you can discuss the outlook of this, is this kind of number sustainable?

Shashwat: on mobile ARPU see we see as we said, we see substantial headroom within the current customer base itself, the way we are structured because there is enough upgrade that is happening, which is driven by consumption of data, moving to unlimited plans as well as an acceleration on the postpaid with the differentiation we have brought with Fast Lane technology. So, I think it is a combination. We see reasonable headroom in front of us to continue this momentum in the mid-term. Long term, as I spoke, I think the pricing architecture will have to repair with charging for data and consumption becoming the norm if we have to see this kind of a long-term sustainable growth, but I think in the mid-term, there is enough and more we have here. Gopal: on the B2B side like you mentioned, I think our portfolio comprises of three types of businesses. One is the connectivity business, second is our wholesale business which tends to operate at low margins and the third is the digital businesses that we have within B2B , which is our data center, Cloud, CPaaS, IoT, cybersecurity and so on. Over the last couple of years, we have seen sustained growth in our digital businesses, and it is now beginning to accelerate. The problem that we have had in the business in the past has been that we have had a large dependence on wholesale which is subject to a lot of price pressure as also movement of messaging away from SMS to things like WhatsApp and so on and so forth. The connectivity business has been, sort of, the market grows at low single digits. So, what we have seen in the quarter is a step up in our digital businesses as we continue to make investments across all of these areas and also a step up in the connectivity side of the portfolio, particularly on the global side as we won some larger deals , which has impacted the quarter and I think that bodes well even for the underlying margin of the business this quarter.

The first one is on the capex. So, I understand that your annual capex is likely to be in the $4 billion ballpark. Just to drill down a bit further on this, how much reallocation of this capex is happening towards projects like AI infrastructure which include data centers, subsea cables and sovereign compute and how does 5G standalone also play a role in respect to the overall capex number? The second one is on the B2B revenue mix, with increased share from digital services which are asset light and low margin like CPaaS or digital, how do you expect the overall Airtel business EBITDA margins to trend over the next two to three years and if you can talk about the conversion cycles for the recent deals that you signed in Airtel Cloud and translation into revenue?

the radio capex has moderated across the portfolio over the last couple of years. So , I think that is clear. Yes, there will be some step ups based on what happens in the competitive sphere, but broadly it is, sort of, moderated; core capex is small. The large part of our capex is going on transport as well as, which includes all of the stuff around fiber and fibering up the country and so on and so forth and that by the way includes homes as well, so I include that as part of the transport. For 5G standalone, the capex is very modest because it is largely software. Like we have said, it is just a switch of a button and many of these investments over the next couple of years, we will now continue to rapidly sort of scale up our data center portfolio as we are building out from the 120 to 130 megawatts, all the way to 1 gigawatt over the next few years. So, there is going to be a period of rapid capex spend that you will see and within that, the overall capex pool we will have to, sort of, see how do we moderate it. I think my message would be that wherever we think that there is a legitimate need for the business in order to step up growth, in order to be competitive or to actually plan some of these newer bets ; as a Company, we will not hold back on capex. On the B2B revenue mix, your question was on margins as the portfolio retools. I think the fact is that this business is a clutch of different businesses. When you look at areas like cybersecurity and CPaaS, margins are low because as you rightly pointed out, investment is low , but however, if you look at the connectivity side, the margins there are very healthy. IoT , the margins are very healthy , but in cloud and data centers , there is a significant investment as well. So , it is not that these are light investments, sort of options, so there is heavier investment and again the margins are commensurate with the kind of investments. I think, longer term, as the portfolio retools, we think the margins will be in this ballpark, maybe sort of trend slightly downwards as we see the step up in the digital portfolio, but the real metric for us that we should be looking at is faster revenue growth because ultimately this market, as we have repeatedly stressed, is very large and all of it depends on our ability to execute.

We saw that you raised a $1billion at Nxtra to accelerate the investments in that business. Since you are stepping up and raising external funding at a relatively early stage in data centers, is it fair to say that hereon, wherever you see any meaningful step up, jump in capex, you will look for external sponsorship or do you lean on your own balance sheet? What are the considerations on whether to use Airtel's own balance sheet to step up versus targeted fundraise at an entity level?

Gopal: I think we will cross that bridge when we come to it. The fact is that Nxtra will need funding and that funding will be obviously there is some equity infusion, but there will also be a debt that will be raised at Nxtra. Whether it comes off our balance sheet and goes into Nxtra or it comes from outside. I think that is a decision we need to take overtime. But the fact is that Nxtra will need to lever up in order to build out what is required over the next few years. Soumen, anything to add on this? Soumen: as you said, we will take this call as and when it appears. There was opportunity which presented itself in Nxtra and we have used that opportunity.

First on the Fast Lane, what has been the experience of the customer or if you would have studied, how much improvement has the customer felt by moving on to the Fast Lane and will this opportunity attract even more customer and does it offer an opportunity for us to grab higher market share in postpaid? Second, on the data center business, Gopal, when you mentioned that we are scaling up Nxtra from 120 to 130 megawatt to 1 gigawatt hour, does this also includes the contract we signed with Google or this is purely the Co-lo, which Nxtra is looking to do. Third on the FWA, Shashwat, you mentioned that there is an increase in churn and we are making a change in terms of the customer acquisition strategy - what was the churn rate and does this really, materially change the growth rate. And one on the bookkeeping, finance cost in Africa, particularly does Airtel Money, what it pays, interest on the leverage, which it does, that also get captured in the interest cost?

Shashwat: On the Fast Lane, I just want to touch upon the fact that look , what happens with the slicing technology is, the SA slicing technology makes the network more efficient. We are able to generate more capacity in the network. At empty network level, it does not make a substantial tangible difference, but when the networks get congested, when you are in a crowd, those are the kind of places where it starts showing up in a differential experience. We have had some places but overall, net-net, we have been able to demonstrate that the customers on Fast Lane see a differential experience technically , but in reality, in an empty network it mainly does not make a difference. Having said that, the interest of getting customers to upgrade using Fast Lane as a reassurance of a superior experience is working well for us and we have seen positive signs of that. We have seen some acceleration in interest in the business, and we continue to see this as a large growth pillar for us going forward. On fixed wireless access, Sanjesh, I will just touch upon that. I think the real issue there was the fact was we went down on very aggressive low acquisition pricing in the market and that led to some round tripping and quality of acquisition deteriorating. That we have to pull back Sanjesh, in terms of what we are seeing there, so I think that is a place where we are seeing constant month-on-month improvement. Whether we come back to old rates and all, we will see. The more important thing for us right now is to constantly grow the business, go into the right unit economics and we want to double down much more on fiber and use FWA with the right outcomes. Soumen: Airtel Money is added into overall Airtel, Africa and us, but you must remember that Airtel Money Limited is a net cash positive Company. So, there is no net interest cost and whatever little cost is there is a part of cost of goods sold. Gopal: Yes, I think the data center is a simple answer. Yes, the Google one is also included.

What gives us confidence of scaling up to a one-gigawatt power? Are we seeing that kind of a demand in India , which can allow, because there are multiple operators and everybody is talking of a gigawatt power and today India is at roughly 1.6-gigawatt power, so what gives us a confidence and do we have a strong pipeline which gives this confidence for us?

Yes, we do. The short answer to your question is yes, we do and just to give you a little bit more texture to it, the data center market comprises, as you know, of both hyperscalers and domestic enterprises. Within the hyperscaler segment, a very large part of the workloads run out of Mumbai and therefore, one of the key considerations for building, getting to one gigawatt is the right land parcels in Mumbai, which we are in the process of, sort of finalizing. So, that is the first piece. The second part is the existing contracts as you alluded to on Google. The third is upcoming build that is already well underway and that will be a couple of hundred megawatts over the course of the next couple of years and then there is a small gap of the need to fill the balance with the land parcels that we are looking at in Mumbai where we believe that with those parcels, we should be able to fill. So, the reason we have gone out on a limb to say that our ambition is to get to a gigawatt in the next few years is because we have very clear line of sight to actually get there.

First on the homes, if you see margins are under pressure and it has been the lowest in the recent past, sub additions have also been lowest in the past seven to eight quarters. Is it a conscious slowdown given the cost inflation which you touched upon initially or is it a high base catching up or some other increase in competitive landscape? Second, on overall, data sub addition is continuing very strongly. With regards to the issues of price inflation in the smartphone, is the underlying trend too strong to have an impact or something which could be an issue going forward. And lastly, some more color on the B2B capex, is the actual spend pick up more medium term and not near term?

I think, on the B2B capex, I think the material difference that will actually take place is the rapid build out on the data center side. On Cloud, we have already finished the investments in the first round across the three regions that we operate and as it fills out, we will keep adding. That is a modular investment. The data center will be lumpy as the build or large tracts of land are required. So, that will, sort of, show up over the coming quarters. The fact is that there was poor acquisition quality , that has been tightened substantially and therefore that has led to a reduction in the customer adds. We are already seeing traction in the last couple of weeks on this being repaired because this was obviously a short-term hit but it at least builds the business for the future and we believe that we should start seeing momentum coming back from here onwards and where it ends up, we will look at. On the data side, there are a lot of refurbished phones that are still being circulated. That number has gone up with inflation, so we see strong sub additions but over time, how this inflation impacts the customer wallet is yet to be seen, but at this point we would see no impact from that.

My first is on your B2B portfolio. Is it fair to say the largest TAM there will be for the Cloud business? What has been our USP to win those 30 plus customers that you talked about and at what point in time will it start making a difference to the overall growth rate in the portfolio? Second question is around home, is there a market share target that you are looking at from FWA perspective? And the last question is on your Airtel Finance portfolio, how are you trying to manage the conflict, if at all, with your other partners that you have in the Airtel Finance app versus your own NBFC?

on the B2B side, we have had a lot of lessons learned in the last few months as we have gone out to the market. I think the first lesson is that the decision making in a business like this has longer gestation and the reason is quite simple. These are important workloads and for customers to move from, whether it is the premise or whether it is repatriating from a hyperscaler cloud or whether it is to move from a private co -located cloud that they have, the integration effort and the task involved is quite high. The second, of course is that if you are already on a different cloud player, then sometimes, you have egress costs which are high, which also become the barrier, so the gestation period for a decision is large. The third lesson is how do you package this and bundle this intelligently. So where we are seeing traction is around simple propositions which can be easily bought. For example, disaster recovery backup as a service. Storage as a service. Video surveillance as a service. These are where we won a lot of the deals, that we have won over the last quarter. The one place where the deals are large is the need for sovereign clouds where there are more sensitive workloads. On Airtel Finance, we do not believe there is any conflict because even if you look at some of the very large NBFCs in India, you do find that they also have an L SP or a storefront and they work with partners and then there are also obviously some RBI regulations, which dictate the way that we need to operate within the LSP segment and therefore we will abide by that and make sure that we are totally meeting all of the compl iance requirements that the business needs. We do not set a target for FWA, we only set a target for home broadband and we do not believe that we should have a target for technology. We believe we have a target for a customer and a business and that is really our focus.

Given your thrust on the Africa business, can you maybe speak about what sort of contribution you see Africa scaling to over the next three to five years, whether it be EBITDA, invested capital, any other frame of reference? The second question, return on average capital employed per your kind of data pack, we are now above 20%. As you can drive your topline, is there any reason why you think that the ROCE would not expand at least 500 basis points over the next three years?

On Africa, like I said, I think the structural factors that are prevalent in the continent make for a very, very compelling o pportunity for our business and we are very excited about the fact that the business is now on a sustained momentum of 20% plus CAG R growth. We believe the headroom for growth continues to be high and my sense is that all of the things that we have learned as a group are now being cohesively driven. So, whether it is the War on Waste program, whether it is the technology platforms being transferred, whether it's talent fungibility, and whether it is procurement, all of these are now deeply embedded into Africa and over the last 18 months, Soumen and I have worked very closely with the Africa team to make sure that all of this is now very, very deeply embedded and you can see the results of that already translating into the marketplace. I think the step up in growth is because we bring the same rigor and the same deaveraging that we have seen work so very well in India over the last few years. Suffice it to say that Africa, we expect it to punch above its weight. So, today, if you look at the contribution of the Africa business to our portfolio, we expect that the contribution to growth will be substantially higher than the base contribution to the business. On return on capital, I think I would just simply say that, look, our focus right now is, if we can continue to grow the business, extract operating leverage, then those are outcomes that come out and we do not set those as targets because there are different ways of actually meeting that, including making short term decisions on reducing capex and that is something that we do not do as a business.

On India and Shashwat, going back to your earlier comments around ARPU, are you suggesting that in your own opinion assessment, in the near term you do not see that pricing architecture get corrected and all growth in ARPU will be organic and over maybe a slightly longer time period you could see that pricing architecture correct? And why, when you are already seeing decent growth in the business with good operating leverage, do you really need price hike at all when your organic return on capital continues to improve quarter-on-quarter?

Gopal: the most important thing is to repair the architecture. So , when we talk about disrepair or when you talk about lack of repair, it is actually the architecture, which means that for a very low level of pricing you get unlimited data and that means ARPU is capped. That to me, is not a healthy way to operate because if you look at, and we have talked about this before, any market that you look at, you have an architecture which goes from small, medium large to extra-large and so, if you just operate with a more sensible price architecture, my view is, in the next five to seven years you will see sustained growth , just on account of ARPU as India gets more affluent, etc., of 4% or 5%, maybe slightly higher. That, I think, will be a good place to go and there is no need to touch the entry level pricing because the entry level pricing is, I think, is good enough. Shashwat: Ya, Gopal, nothing much to add. I think that is the reality and , I think, how this plays out in the future is very difficult to comment on , honestly. As soon as we can correct this architecture, it'll be great, but it needs, like, we cannot do it single handedly. I guess that is the larger point.

Now , Indus today is expanding to three markets in Africa. From a Bharti Airtel perspective, can you just talk about some of the advantages that you would get at Airtel Africa by having Indus and how does that impact Airtel Africa's own opex and capex by having Indus versus using somebody else's towers? And is it safe to say that over a period of time, Indus should logically also expand to the remaining markets where you operate in Africa?

Ya, so Manish, first of all, yes, there are a lot of benefits on Indus going into Africa. If you see the Africa tower co. industry, very high costs, very high rentals and so on and so forth. Indus presents a very viable alternative to the current players because they bring the low cost architecture , which has been developed in India, they replicate that , a lso whatever improvements, whether it is on construction, whether it is on digitization, whether it is on energy management, the observability of the performance of the towers, everything gets immediately replicated to Africa from day one , so it is certainly better for Airtel Africa in terms of opex performance, both on rentals, IP fees as well as, possibly, even on energy and the sheer observability which will tell them to get more efficient. About getting into more countries, that is a future thing I cannot comment, but if this goes well and remember, it is a very lean structure. Indus is not building a whole organizational setup they are running it very lean with remote monitoring , so if that works, why not to some of the markets as well , but as of now we are focusing on getting it right on these three markets , but it is a very, very exciting opportunity.

First question is your commentary about FWA, wherein you said that increased memory prices are, sort of, impacting the unit economics of that business. Memory/chip prices have been pretty high and they might continue to be so whereas we are seeing the competitions of expanding, can you quantify how much is the impact of the customer acquisition because of chip prices going up? The second question is on the international roaming. In the previous quarter you hinted that West Asia crisis led to certain decline in the international roaming, how that has trended? My third question is regarding, Shashwat, your comment on the AI, you said that you are using an endpoint device, which does inferencing locally does that mean that you have developed some sort of small language model which is run on the field engineer's device?

Shashwat: first of all, on this AI piece and international roaming there are straightforward answers. I think yes, on the AI piece, we are putting a small language model which works on the endpoint device of the engineer which runs on a regular handset, and this is a breakthrough of engineering team , which we are using in house. On international roaming, we are seeing improvement , I think, obviously from previous quarter, we have started seeing some repair improvement of international travel. Nothing more to report there beyond this. On FWA, I do want to call out that the customer acquisition number and memory prices are, in a way, we have to look at it separately because the numbers you are seeing is linked to the correction of quality of acquisition and the acquisition prices that we have. It is also coincided with a phase where memory prices have gone up and therefore , we are finding it much better to run one , fiber has much better economics, lesser churn, and lesser cost. Gopal: I think we are very consistent that, for us, the first port of call is fiber. We have said this for the last few years, like fiber has, actually, greater longevity, greater permanence, concurrency, uplink and downlink work, the churn tends to be lower because it just works brilliantly right and that is , like, long term. Fiber is the best place to go. On fixed wireless access, there are two challenges. One is, installing it in the wrong place actually leads to problems. So , you then have poor experience. Installing it with poor quality of acquisition leads to a double whammy because now you have to run around collecting that box back rather than actually like putting it in the right place and sustaining the business. So , for a variety of reasons , we have decided to pivot to fiber and make sure that fixed wireless access only goes where fiber is not accessible. And just to add to what Shashwat said on the endpoint piece, fundamentally what is happening is we were spending, let us say Rs.30-35 Crores on these workloads being run on the Cloud. Now that it is being done at the device , through the small language model on the device itself, the cost has gone down to zero , so I think it is a very big breakthrough and we feel that actually this can be extended into our stores and many other areas.

Further building on Gopal's commentary with respect to the relevant FWA or FTTH homes market being 400 cities, how many cities fall in the circles of Bharti Hexacom and what is the kind of opportunity in terms of absolute number of homes that you see in Hexacom? And are there any areas where you think you can reinvest capital so that you can achieve improved revenue growth versus the industry more from a strategic standpoint?

How many cities of that 400 cities are in these two circles, we can get back to you on that. My sense it would be close to about 15 or 17 of them, but what is important is to understand the demographics of these two circles. Northeast is a circle which is large and a difficult terrain. Rajasthan which is a little more developed than some parts of Northeast possibly is also a difficult terrain. So, reaching through a combination of wireless and wired line is a very good strategy for these two circles as opposed to a much more developed circle like, let us say, Maharashtra or Tamil Nadu. Coming to your question of capex, I think 5G densification is a big objective that is there. Fiberization continues to remain a big job to be done. So, my sense is yes, we do not have the large B2B play, which the parent entity has in terms of Cloud or more importantly data center, but I think data center is a separate entity, it is just that it gets consolidated in the overall India. Like it was mentioned in the previous call, whatever is the ask of the business to maintain a healthy competitive and profitable growth, that will be attended to.

Firstly , on the mobile side, the mobile subscriber net add trends have been relatively weaker this quarter when you compared to historical trends of the Company and also the sequential growth witnessed in Pan India Numbers, wanted to understand what drove the same and is there something circle specific that played out this quarter? Also, just a follow up on the home broadband, given the changes in acquisition policy and the rising chipset, has management relatively revised its midterm outlook on the home broadband segment growth internally?

on the mobile, I think if you look sequentially over the last, I do not know, maybe 16 to 20 quarters, you would see a certain seasonality in customer depletions both in the industry as well as in each operating Company. So, I think we will leave at that. We see a higher trend of customer additions towards the second half of the year, which has been a pattern demonstrated over the years. Home broadband continues to remain a ver y large opportunity and there is no relenting on trying to seize that opportunity. As was mentioned in the previous call, there are two technologies and we are giving a whole broadband Wi-Fi experience to the customer. We have found out that there are some reasons why we have to become more tighter in the quality of acquisition. So , what you see in this quarter is an effect of a correction in the way we acquire customers. There is no fundamental change either in the assumption of how big is the market to how we need to gain share and three, how we need to price our offerings and give converged solutions. Either it is home broadband with content or it is fixed and mobile convergence, so underlying, nothing absolutely has changed.

The first question is around the higher diesel prices. For Hexacom, we are seeing the energy costs are actually lower on YoY basis can you help us understand like what led to this is there some timing difference or like there are certain efficiencies that have been there in the system?

Karthikeyan: Primarily one is about the seasonal impact because of which solar based towers are giving us some benefit and there are also some one offs in the quarter, so on a trend basis, it is more or less trending in the same direction. Soumen: The diesel terms, that is it is not the full quarter, it is part of the quarter and so on and so forth and you do not empty y our tanks completely, so you do have some stocks of diesels lying in the DG sets which run for some time. I do not think we have seen the full impact of diesel in the quarter, but as Karthik mentioned, the seasonality allows for more solar energy generation and we have ramped up our solar sites, which has helped a bit, but underlying sequential trend is more or less planned.

First, on the depreciation there was a sharp jump sequentially, 4.9% quarter-on-quarter, any particular reason for that sharp increase in the depreciation? Second on the EBIT margin for the home segment that tends to be negative or immaterial , when should we see revenue translating into a profit growth in the home segment for Hexacom?

The depreciation that you see a little higher is, first of all, there is one day extra, so you see a little more. Also, the IPTV rollout has led to some increasing depreciation of Hexacom. Coming to EBIT margin, see, whenever we start CPE based business, until we reach a critical mass, there are certain costs which do not get leveraged. I cannot give you a number as to when or a forecast as to when it will become positive, but you can rest assured that the unit economics is no different. It is just t hat, once we get into a reasonable size and scale, this will naturally turn positive.