After managing to have a profitable quarter (albeit with a large drop), against predictions saying that Airtel will post a loss, CEO and MD Gopal Vittal thinks the company has held well in the given environment. “After two years of industry mayhem and regulatory hits, we have held well in terms of market share and margins. For us, the most important measure to track performance in this period of heightened competitive intensity is getting more customers,” he said during the conference call of Q4FY18 results.
Bharti Airtel has reported a net profit of Rs 82.9 crore and a consolidated revenue of Rs 19,634 crore last quarter. You can read more about the results here.
Five-pronged strategy
Global CFO for Airtel Nilanjan Roy announced the company’s five-pronged strategy for next year while counting the progress in the previous one.
- 4G was the most crucial aspect for Airtel, with emphasis on it throughout the call. Airtel said it intended to win the 4G game by gaining subscribers by driving upgrade from 2G and 3G to 4G in the network. “With lowering of prices, large chunk of our customers will upgrade over the next few years which presents a massive opportunity for us to be the primary 4G provider.”
- “Each year, 130 million 4G devices are shipped to the country, with upgrade driving most of the shipment.” The company said it is partnering with handset manufacturers. “In future low-end smartphone can replace feature phone—for this we have partnered with Google to launch Android GO-powered phones.” One of the reasons why Airtel is focusing on 4G is that it has a higher ARPU.
- Airtel said that high speed network is the backbone of any operator. “We have deployed 107,000 mobile broadband based station and launched VoLTE in 8 circles with plan to go national shortly.” The company is also conducting 5G trials. The company invested massively in rollout to create high speed broadband in India in 2018, and Capex was Rs 24,000 crore. Roy said that similar amount can be expected for the next year, as the company pushes to provide widest data coverage in line with its growth and revenue ambition.
- The importance of new revenue sources especially over-the-top services has grown for the company, as its relevance in user experience increase. “Consumption of video in India is undergoing a tectonic shift, becoming more personal in nature, instead of community or group based consumption.” The Airtel TV app currently acts as a content aggregator and has partnerships with Eros Now, Alt Balaji and Hotstar. “The TV app is built on a highly scalable video delivery architecture integrated with our 4G network.”
- Later during the call, a representative said that the app has 26-27 million monthly active customers and growing. On the question of its monetisation, Airtel added that the focus as of now is to get customers, have them spend more time on the app and consume more content. “Once we get that behaviour going, charging a price for that content will be easier. How will it be charged is a question that remains to be answered—subscription-based, monthly, half-yearly, annual?” Airtel has announced that the app will remain free at least till June this year.
- “War on waste” or simply cost efficiency will continue to be a company-wide focus. (This is a key measure for the company to maintain profitability amid low ARPU and high Capex).
- Africa business continues a steady growth in top and bottom line on the back of twin-engine of data and mobile money. Net revenue grew 13.4% YoY this quarter. “Business has entered a sustainable positive cash flow era. Strategy in Africa has focused on strengthening distribution model, financing consumer experience via network modernisation.”
Airtel is also exploring the option of listing on an internationally recognised stock exchange in Africa.
Other notes from the con-call
Strategy for future: Pricing bundles are good as consumers demand it and are moving to it. The only problem with them is that they are artificially low levels should have been at a higher level. Because pricing is low, ARPU gets capped. At the same time, low prices are unleashing greater consumption, which require better network capacities and investment. “So the pain we are going through in this financial anomaly of revenue and CAPEX, is for the fight for the industry in future. If you don’t do it you come out weaker at the other side because you don’t have customers.”
Upgrade: we have recently launched Project Jump for mobile, where we offer free data for a month to customers who move from 2G to 4G on our network, which has given us some decent results. “When a customer shifts from 2G to 4G, we see a near doubling in ARPU,” an official said.
VoLTE: Small amount of traffic is being carried on VoLTE, but the challenge is that devices have to be certified. New devices are certified on our network and have the same specifications as our VoLTE design, but they also need 4G sims.
Data consumption: Daily data on mobile has increased to 20 petabytes per day for Airtel, an exponential increase from the 1-1.5 petabyte consumption 6-7 quarters ago. Airtel said it added 15 million data customers in the last quarter.
Spectrum: Utilisation remains low for the company. It has not “gotten the spectrum in some circles from the Tikona acquisition”, which remains to be used. Airtel will also get Telenor spectrum once the merger happens—1800 MHz in 6 circles. It will also acquire Tata’s spectrum in three circles.
Distributors: Airtel has consolidated its distributors in the past 2-3 years into larger parties. When asked about the revenue streams for retailers, a company representative said they make money from customer acquisition is a which cannot be done online. Further, only 16-17 % recharge online. He said that the shift from offline to online will be gradual change so we prepared to make changes in the model.”
Acquisitions: Telenor merger is expected to be completed in Q1FY19 and is awaiting approval from the DoT. Tata merger is expected to conclude by Q3FY19. As per company officials, the consolidation of the two companies will not cause dip in Airtel’s margins.
