Bharti Airtel’s consolidated revenues for Q2’18 stands at Rs. 21,777 crore, Y-o-Y drop of 10.4% whereas India revenues for Q2’18 at Rs. 16,728 crore have declined by 13% Y-o-Y primarily led by mobile drop of 16.8% Y-o-Y. Mobile market continues to experience value erosion and financial stress led by competitive pressure and all this has put a lot of pressure on Bharti Airtel and the company is focusing on – retaining high ARPU customers, increasing data capacity, developing app economy and dilute controlling stake in Bharti Infratel to counter Reliance Jio.
Retain High ARPU Customers: Bharti Airtel is focusing on retaining high ARPU Customers by providing excellent bundling packages to its subscribers. The company has also unveiled a new version of Airtel app for providing realtime customer experience through self care. Customers can activate or deactivate any service with the click of a button and is not dependent on call centre executives for their daily requirements. To reduce customer churn, Airtel has launched three pronged strategy – Data Roll over Promise, Family Promise and Security Promise for post paid customers. All this will help, Airtel to increase stickiness with its customer so that they do not churn to competitive network operator.
In case of Airtel, the bundled ARPU has reduced from Rs. 154 to Rs. 145 in Q2 whereas for Reliance Jio the ARPU is Rs. 156.4.
In Project Leap, the company is investing Rs. 2,000 crore for digital enablement of 2,500 Airtel stores across India all this is beneficial to Airtel customers.
Increasing Data Capacity: Bharti Airtel is planning to increase its Capex from Rs. 20,000 crore to Rs. 25,000 crore in FY2017-18. In last three years, the company has done capex investment of $3.06 bn, $3.15 bn and $2.6 bn in 2015, 2016 and 2017 respectively. For the first time, the company is looking at in investment of approximately $4 billion.
The Capex investment will be used majority for 4G and 2G infrastructure for stepping up data coverage and capacity. With adequate spectrum already in place, the Capex investment will be used mainly for building more capacities through expansion of radio network, transmission network and fiber backhaul network. Having set up VoLTE in few cities, the focus is also on deploying VoLTE in major cities by the end of this fiscal.
Gopal Vittal, MD and CEO, India & South Asia said, “The financial stress in the industry continues due to double digit revenue decline and will be further accentuated by the reduction in IUC rates in the next quarter. This will eventually force operator consolidation and exits as we have witnessed in the recent past. Airtel remains committed to its goal of increasing revenue market share in this competitive environment by providing superior customer experience and strategically investing behind building more data capacities.”
Both mobile data traffic as well as mobile broadband customers have increased in second quarter. Mobile data traffic has grown four fold to 784 Bn MBs in the quarter as compared to 178 Bn MBs in the corresponding quarter last year. Mobile broadband customers increased by 33.6% to 55.2 Mn from 41.3 Mn in the corresponding quarter last year. The focus is on adding more 4G customers as Reliance Jio has 138.6 million customers which uses 9.62 GB/month.
Developing App Economy: App download contributes around 20 million of which Wynk contributes 17 million and the focus is on building better customer experience for the app economy to subscribers. The company is focusing on revamping of Airtel TV app so that its viewership increases for mobile subscribers so that even data ARPU increases from 4.087 MB/user/month. The company also has to focus on increasing non-Airtel App under its kitty which will be helpful in the log run.
Dilute Controlling Stake in Bharti Infratel: Presently, Bharti Group has 58 per cent in Bharti Infratel and the focus is on diluting its controlling stake in Bharti Infratel.
The Board of Directors in their meeting on October 25, 2016 had constituted a Committee of Directors (COD) to evaluate selling stake in Bharti Infratel, following which 13.96% shares was sold to a Group of Private Equity Investors and to QIPs by way of market transactions. Airtel now holds directly and through its subsidiary an overall shareholding of 58% in Bharti Infratel. Airtel has been approached by a few reputed Global Investors to acquire a significant stake in Bharti Infratel which, if accepted, could result in such investors acquiring control of Bharti Infratel. The COD has recommended that such proposals be duly considered.
Any dilution of stake in Bharti Infratel is good for the company as Bharti Airtel’s consolidated net debt has increased to Rs. 91,480 crore from Rs 87,840 crore in the previous quarter. The company needs to check its consolidated net debt and we hope in Q3 we might see some announcement from Bharti Airtel.