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Informist, Friday, Feb. 7, 2025

By Rajesh Gajra

NEW DELHI – Bharti Airtel Ltd. has decided to exit the low-margin global wholesale voice messaging business within the overall products offering under its business-to-business segment, the management said Friday in a post-earnings management call with investors and analysts. The management said the decision was taken since a significant part of the particular business is very low margin business and "what it does is it clutters management focus." The management anticipates the move to have an impact on the top line of the B2B segment in next six months, but does not see any impact on operating profit due to a "very negligible margin" in the particular business.

In the December quarter, the revenue from the Airtel Business operations, which is the brand under which the company's B2B segment operates, declined 0.2% sequentially to INR 56.46 billion. The earnings before interest, tax, depreciation, and amortisation in the segment declined 1.8% on quarter to INR 19.85 billion, while the EBITDA margin contracted to 35.2% from 35.7% a quarter one.

The company management said there are three parts to its B2B products portfolio. "There's data centers, there's global and there's domestic...our data center business is growing steadily," the management said. "Within the domestic segment, we are seeing strong growth on digital as well as sustained growth on connectivity," the management said.

The management said that the global segment part of its B2B portfolio includes wholesale voice and messaging, and cable investments. There was a slowdown in the cable investment business to the extent of interest from over-the-top movie and TV content players, according to the management. "But we are beginning to see some changes in this in the current quarter in terms of the order book," the management said. 

The impact on the earnings numbers due to exit of the wholesale voice and messaging business will be triggered from the current month, the management said. To a question on what caused the B2B EBITDA to decline in the first nine months of 2024-25 (Apr-Mar), the management said it was on account of hardware sales bundled into the sales of convert solutions that included connectivity, services and also hardware.

For the India mobile services segment, which is business-to-consumer and contributed 58% to the total revenue of the company in the December quarter, Bharti Airtel's management said all the drivers for the growth in average revenue per share were intact. In this segment, the sequential growth of 5.8% in revenue for the December quarter was substantially below the 10.3% growth in the September quarter.

This indicated a revenue growth normalisation for the segment as the September quarter was the first when the tariff hike effect was seen. Mobile tariffs for domestic retail consumers were hiked by the company in July. Going forward, according to the management, the growth in average revenue per user for the segment will be similar to the growth trajectory in the past during the period when tariffs stayed constant.

The management said in the investor call that the India mobile services segment EBITDA in the December quarter increased 9.1% sequentially due to the impact on revenue from the tariff hike and not due to lower operating costs. The operations costs are largely fixed in nature and didn't see any change sequentially in the December quarter, the management said.

Commenting on the company's capital expenditure plans, Bharti Airtel's management said the total capex in FY25 will be lower than FY24. In the December quarter, the capex was INR 91.61 billion, while for the first nine months of FY25, it was INR 278.9 billion. In the whole of FY24, the company's capex was INR 489.27 billion. The management said the capex moderation will continue in FY26, given that the expansion of network and mobile towers rollout in India is "by and large complete."

Rural rollouts made up for a good share of the rollouts. According to the management, rural markets account for over 65% of the telecom industry growth. The company's substantial investments in the last two years were "towards seizing this opportunity" and it has delivered results, the management said. "Going forward, we expect to fill gaps in a couple of circles while we continue to sweat the sites deployed till date to give us gains into this year," the management said.

The management also commented on the rationale of the decision taken Thursday to sell around 12,700 telecom towers to subsidiary Indus Towers Ltd. by way of a slump sale and for a consideration of INR 21.75 billion. The management said this will free up management bandwidth within Bharti Airtel and also create greater efficiency from the economies of scale.

In a separate post-earnings conference call with investors and analysts Friday, the management of Bharti Hexacom Ltd., a listed subsidiary company of Bharti Airtel, also commented on its decision to sell 3,400 telecom towers to Indus Towers on a slump-sale basis for a consideration of INR 11.34 billion. In response to an analyst's question, the Bharti Hexacom management said there may be "some dilution" in EBITDA due to the towers sale but did not expect the net profit to be hit. Bharti Hexacom offers consumer mobile services, fixed-line telephone, and broadband services in Rajasthan and north-eastern states including Manipur. Meghalaya, Mizoram, Nagaland, Tripura, and Arunachal Pradesh.

Friday, shares of Bharti Airtel ended at INR 1,676.75, up 3.5%, while shares of Bharti Hexacom ended at INR 1,465.80, up 11.9%, on the National Stock Exchange of India.  End

Edited by Akul Nishant Akhoury

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