Wireless revenue growth has fallen below 10% for the first time in five-six years; until what extent of deceleration would you wait before pushing for tariff repair, and how do you see revenue growth accelerating absent tariff repair?
Wireless market growth has been averaging about 6% for the last couple of years, and the underlying drivers of premiumization (feature phone to smartphone, prepaid to postpaid, data penetration, international roaming) remain intact. Absent tariff repair, the company has to find more creative avenues to push ARPU through ongoing experiments and A/B testing across geographies.
Update on Data Center ambitions and capex plans, plus the rationale for calling the remaining rights issue amount?
The rights issue was called because the three-year window had ended with no provision to foreclose, and proceeds will be deployed for long-term value creation. On Data Centers, current 12% market share with 120-130 megawatts is unsatisfactory; the company targets about 1 gigawatt capacity (about 25% share) over three to four years and will step up investment, though no specific capex guidance is given.
On AGR, with Vodafone Idea getting AGR relief and your own AGR payments starting in March, how are you thinking about repayment liabilities and potential outcomes for lower cash flow pressure?
Letters have been sent to the DoT requesting parity on the treatment of AGR dues and the company is awaiting their response. Once the DoT responds, the company will then decide its next steps.
On capital allocation and use of rights issue money, given improving FCF and deleveraging, is there a probability of a special dividend or stepping up dividend? On Data Centers, could there be opportunities for Airtel and STT GDC in India to partner together?
A progressive dividend policy will continue to play out as it has over the last couple of years, and the rights issue is unrelated to that. Capital allocation priorities are core business first, then adjacencies (Data Centers, Cloud, Financial Services), with Africa as an excellent past example. On STT GDC, opportunities like that keep coming but it is too early days to report anything.
On the Perplexity Pro offer, how many customers are using it, what is data usage, and are you seeing increasing uploads from AI users that could warrant changes in network upload-capacity design?
It is too early on AI-driven uplink network design changes; the impact is too small at this point in India and globally. Exact Perplexity numbers are not disclosed but uptake has been very significant (a few millions in the first few days), with monetization expected via revenue share on paid Perplexity packages.
On AGR, are we also in discussion for reassessment of our dues, given how large and critical that is?
The company has asked DoT for treatment of parity, including correction of computation/arithmetical errors and errors of commission/omission, on the basis of the Supreme Court verdict. Airtel is waiting to hear back from DoT and will then decide next steps.
On portfolio strategic actions over the next three years, given the Airtel Africa and Indus moves over the past 18 months, can you outline what to expect?
It is premature to outline specifics, but Africa has been a phenomenal investment because it was undervalued and has roughly doubled in the last five-six quarters with consistent 20%+ constant currency growth. Currency volatility (typically 5-7% devaluation per year) is the only risk, but the continent offers tremendous opportunity given young population, low penetration, good pricing structure and sorted industry structure where Airtel is #1 or #2 in almost every market.
On capex, after the elevated Rs.28,000-34,000 crores range during 5G rollout, do you think capex will moderate in absolute terms over the next three years given accelerated 5G is behind us?
Radio coverage capex has clearly slowed as most of the country is now covered, and over the next 4-5 years 5G device penetration enables refarming spectrum away from 4G to more efficient technology. However transport capex will continue to get its fair share to fiber up more towers, and Data Center investments will step up significantly over the next two to three years; final capex figure cannot be given but spend will be prudent and disciplined.
Can we expect leverage to come back to two times if opportunities don't materialize, in which case you might want to return capital?
The company is not at that point at this stage; there is still a lot of growth in this market and that is the focus right now.
With Rs.50,000 crores of free cash flow from India business after normal capex, even Data Center scaling to 1 gigawatt absorbs only one year of FCF - are we running out of investment avenues like developed-market telcos?
There are three ports of call: Data Center, Cloud, and opportunities in Financial Services. The CEO succession (Shashwat running India business, Gopal having more time for these areas) is partly aimed at deploying capital for growth, and it is a good problem to have.
On Bharti Hexacom operating leverage from a potential tariff repair this year or next, how should we think about incremental EBITDAaL flow-through? On the conservative balance sheet versus Bharti Airtel, how do you think about capital structure and reinvestment for FY27 and beyond?
Tariff flow-through is not a simple percentage given customer base adjustment, market consolidation impacts and continuity effects, though variable cost is just selling/distribution and license fees so most flows through. On capital structure, the strong balance sheet allows the Board to evaluate deployment, particularly toward homes/FWA-led Wi-Fi penetration in these difficult-terrain circles where 5G handset and coverage growth make FWA viable.
Absolute capex has been falling since FY24; with reinvestment in homes and 5G coverage expansion, what is the guidance/direction for FY27 capex?
Hexacom does not give capex guidance as a rule, but the strong balance sheet means the company will not shy away from investing where growth is required - including putting up sites in new urban peripheries with 5G radio if 5G handset penetration warrants. Sequential 10% homes growth from a small base will be supported with continued investment as the company aims to drive growth even faster.
Can we think of more differentiated 5G versus 4G pricing given recent adoption, and can spectrum slicing/priority-based 5G services drive premiumization, or are there regulatory hurdles?
Differential 5G versus 4G pricing creates customer confusion; the focus should instead be a differential pricing architecture where customers pay more for more, supported by tariff repair to drive ARPU. Slicing and network-on-demand capabilities are becoming reality globally and will play out over the next few quarters in India.
Are there any regulatory hurdles like net neutrality on 5G slicing/priority services?
5G slicing is a standard intrinsic feature of the technology globally (e.g., T-Mobile US first responder slice for police/defense, Singtel in Singapore) and has nothing to do with net neutrality since it does not discriminate any content. The notion of a regulatory hurdle is a myth in some misplaced quarters.
On Data Centers, given government tax sops for cloud providers, are we in discussion with global customers and how do you see that opportunity for Data Center business?
It is early days, but the demand for Data Centers will certainly be fueled, and Airtel has a role to play given its land, green power availability, capital heft and deep customer relationships. The company will pursue this and find ways to step up the Data Center business as a major area of focus.
On enterprise revenue growth scalability now that low-margin wholesale voice has been shed, how should we think about three-year growth trajectory and capex opportunities outside Data Centers?
B2B comprises core connectivity (growing well above industry's 5-6%), digital businesses like Cloud/IoT/Cybersecurity (growing about 30% but needing to accelerate further given small share in a large market), and commodity businesses (low margin, incoming voice, commodity messaging) which are flat. Underlying growth ex-shed-low-margin business is at 10% this quarter, with acceleration to come from digital scaling and continued core outperformance, while commodity contribution diminishes.
On Cloud, the recent Xtelify Cloud wins were telco clients - are you also in conversation with non-telco clients for solutions like Xtelify Work, and who are you competing with?
Two distinct businesses are being conflated: India Cloud is for domestic enterprises (16 deals signed, hundreds of conversations with no telco solutions), and digital platforms (telco software) are sold globally to telcos with two deals won, one deepening with repeat business and another couple in final stages.
On 4G/5G net adds, the industry pace has slowed from 30 million to about 20 million YoY - what is driving that and is it temporary or structural? On FWA incremental market share, do you look at it including UBR with room for improvement?
On net adds, hardening tariffs over two cycles likely caused some SIM consolidation and the bottom-end feature phone funnel has shrunk, but Airtel's share of 4G/5G net adds continues to hold. On FWA versus UBR, the right framing is Wi-Fi net adds with a fiber-first approach, augmented by FWA for supply gaps and UBR judiciously brought into the mix; Airtel is leading the market on Wi-Fi net adds based on Meta data.
Balance sheet has never been stronger at 1x net debt to EBITDA versus optimal 2-3x, leaving Rs.1.5-2 lakh crores of capital available - is Data Center an inorganic opportunity, or could there be a return of capital, and how should we think about capital structure over the next 2-3 years?
External net debt ex finance leases and DoT debt is almost down to nothing, making Airtel one of the lowest leveraged telcos globally. Capital priorities are stepping up Data Center investments (including potential consolidation of fragmented industry at right value with right partner), Cloud (with sovereign cloud certification potential and 160+ product features built), and selective B2B portfolio additions, in addition to the core business.
What is the churn rate in 5G FWA so far - closer to wireless or wireline - and is there progress on eventually upgrading 5G FWA homes to wired connections?
Churn by sub-segment is not disclosed, but FWA churn was modestly higher initially due to wrong-place deployment which is now getting behind; theoretically FWA should see lower churn since there is no fiber cut. The strategy is to eventually shift FWA to fiber where smartphone density is high (as captured in million micro-market planning), with the only constraint being in-home wiring adjustments, but that shift is not the current phase which remains a land-grab.
As FWA scales up, do we see a scenario where we need to step up infill towers or additional spectrum to service these FWA customers?
Not at that stage at all - headroom for supply is very high, with 2 million fiber home passes being rolled out per quarter. Today's 45-46 million broadband homes will become 100 million in maybe 4-5 years, and the focus is to get fiber into every nook and corner of those homes.
On revenue growth, Hexacom mobile growth has underperformed Bharti Airtel for the second consecutive quarter despite Q3 tourism in Rajasthan - any reason given the underpenetrated circles should benefit?
A previously called-out customer drop issue with another partner is still not fully resolved and continues to drag, though both partners are aligned to fix it. Inroamer dynamics are beyond control, but on underlying ARPU/penetration of in-state customers Hexacom is trending with the national average within 20-30 bps - the one-quarter aberration is primarily driven by the unresolved interference.
What is the FWA opportunity size narrowed down for Hexacom (versus 100 million for pan India)?
State-cut data isn't available, but India has 250-300 million households with 100 million target in 5 years implying about 40% penetration. Given lower mobile ARPU in these two circles, a 30-35% household penetration is something Hexacom can easily aspire to.
On capex and new business apart from FWA and mobility, are there any plans for Hexacom or will it all be done through Airtel side?
Hexacom does small-and-medium business but not large enterprise B2B (top 500 companies don't have head offices in these states). Data Center is done by Nxtra (independent company) anywhere in India, and IPTV under Digital TV has been launched in both circles with very strong adoption rates given best-in-class converged-home interface.
Why is the bump up in homes capex disproportionately higher for Hexacom (>100% versus Airtel's ~56-60% of full year)?
Spike is purely a function of the small base - homes as a percentage of mobile in Hexacom was only 1-2% versus 4-5% for Airtel pre-FWA, and FWA expansion has done much more here. The higher percentage growth is a direct function of customer acquisitions and stock carried from a low base, with no other reason.
On the 250 million homes/100 million broadband potential, is 250 million the addressable home universe?
India has about 1,400 million people which translates to 250-300 million homes; cross-checked via TV homes (cable, satellite, FTA) which lands around 200 million. Geographical-cut data isn't reliably available so country-level forecasts are easier, but a discount factor for affordability/disposable income is applied to derive sub-national estimates.
Given Shashwat mentioned fiber/5G/FWA/UBR for Airtel, would Hexacom be more open to using UBR given lower interference likelihood in these two circles?
The technology preference order is fiber (gold standard), then FWA, then UBR (least best due to interference), but the company will use whatever delivers home Wi-Fi where demand exists. In areas with low 5G handset penetration and affordability where FWA isn't viable, UBR will be deployed if customers are willing to pay Rs.400-500 per month for home Wi-Fi.
Is this a nuanced shift versus the earlier less-enthused stance on UBR a few quarters back?
There is no rethinking - technology cannot drive product, consumer demand drives product and thereby technology. The reason for evaluation is not to offer a poor-experience product; UBR will be deployed where customer demand exists and the technology can consistently deliver more-than-acceptable customer experience.