Bharti Airtel: Strong Signals

Bharti Airtel is the third-largest mobile operator globally in terms of subscriber base with 324 million-plus consolidated subscribers across various businesses in India, South Asia and Africa. The company says 16 per cent of the addressable population across 20 countries is connected through Airtel network. The key to its success lies in its vast reach and growing customer base. The company’s customer acquisition and retention strategy has yielded significantly reduced churn, thereby contributing to it being among the most respected companies for its customers, investors and stakeholders.

However, as the entire telecom space is marked by its own set of challenges, including high investment, network and connectivity issues, and lower average revenue per user among others, Airtel comes in at 40th place in the Most Respected Companies survey.

Network Modernisation
But brand Airtel is growing in strength, as demonstrated in its recent announcements pertaining to network modernisation. The company has invested over Rs 68,000 crore in spectrum auctions till August 2015. It has also announced the investment of another Rs 60,000 crore towards overhauling the network and last mile connectivity.

The company has responded well to the growing uptake in data consumption. According to its chairman Sunil Bharti Mittal, Airtel India has been a clear bright spot for the company. “…we not only wrested back revenue market share, but improved profitability as well. With enhanced investment in data networks — both 3G and 4G — and strategic initiatives like ‘one touch Internet’ to attract new customers to the Internet, we experienced a pronounced uptick in data services, which now account for over 17.6 per cent of our revenues in India,” Mittal said in its latest annual report.

Standard & Poor’s ratings services said that its rating on Bharti Airtel (BBB-/Stable/--) is unaffected by the company’s plan to spend Rs 60,000 crore over the next three years on transforming its network in India. “Although we anticipate that the investment will slow down the improvement in Bharti’s financial ratios, the ratios will still remain in line with our expectations for the rating,” it said in a recent statement.

Commenting on why Airtel as a brand has been a success and how it is taking steps to offer differentiated customer experience, Gopal Vittal, MD and CEO, Bharti Airtel (India & South Asia) said: “Our large customer base covers rural, urban, homes and enterprises and we are obsessed with delivering an exceptional experience for each one of them so as to win them for life.”

Project Leap will involve the deployment of over 160,000 base stations over three years, effectively doubling its presence from what it has today on the ground. But for the current financial year, Airtel aims to deploy over 70,000 base stations making it the largest deployment in a single year since its inception.

The company estimates that by March 2016, over 60 per cent of its network will be mobile broadband-enabled. It is aiming to provide ‘broadband for all’ in India and that too with a better indoor experience across every city. As part of the project, Airtel will expand its mobile broadband coverage to all towns and over 250,000 villages by March 2016. In three years, Airtel plans to offer mobile broadband to over 500,000 villages in the country.

Also, as part of its strategy, Airtel plans to deploy over 1,00,000 connectivity enablers through a combination of Wi-Fi hotspots, small cells and indoor solutions. To serve the growing demand of data services in India, Airtel aims to cumulatively deploy more than 550,000 km of domestic and international fiber to drive down latency, improve customer experience and serve the growing demand for data services.

“We are confident that Project Leap will help Airtel build a smart and dynamic network that will significantly improve the quality of both voice and data services across the length and breadth of the country,” said Gopal. “More importantly, we are excited to share the Project Leap plan with each customer in their specific locality. This, we believe, will help us serve our customers with transparency and clarity,” he added. However, call drops remain a concern for the company even though the incidence has come down in Delhi between July and October.

Strong Financials
On the financial front, Bharti Airtel has posted strong results with growth in net profit and its consolidated revenue. In the first quarter ended June 30, 2015, the company reported a 40 per cent jump in its first quarter profit led by higher data usage and sale of some of its tower assets in Africa. Net profit rose to Rs 1,554 crore in the quarter ended 30 June from Rs 1,108 crore in the year earlier.

Profit was boosted by a one-time gain of Rs 458 crore from the sale of tower assets in four African countries for about $1.3 billion. Total revenue grew 3.1 per cent to Rs 23,671 crore from Rs 22,962 crore on significantly higher data usage. Mobile data revenue increased 56.9 per cent to Rs 3,458.6 crore.

For the second quarter ended September 30, 2015, Bharti Airtel’s consolidated net profit rose 10 per cent to Rs 1,522.70 crore as compared to Rs 1,383.20 crore in the same quarter last year. On the consolidated basis, total income of the company increased by 4.33 per cent at Rs 23,851.90 crore for quarter under review as compared to Rs 22,861.70 crore for the quarter ended September 30, 2014. In the second quarter, the consolidated mobile data revenues grew 49.8 per cent to Rs 3,806 crore, boosted by data traffic growth of 76.3 per cent.

ashish.sinha@businessworld.in; @ashish_BW

(This story was published in BW | Businessworld Issue Dated 11-01-2016)