Bharti Airtel Ltd’s average revenue per user (Arpu) for the March quarter (Q4FY25) was flat sequentially at ₹245, but management clarified it would have been ₹248 had it not been for two fewer days in the quarter. It sees future Arpu growth coming from tariff hikes for higher-end subscribers, who use more data, while the entry-level tariff is likely to remain flat or increase only slightly.
Explaining this in detail, management said if entry-level plans in India are indexed at 100, then the top end is at 250. This rises to 500 when compared to Indonesia, a market that’s similar to India in terms of geographical size (India is 3 million sq km; Indonesia is 2 million sq km; China is much larger at 10 million sq km) and population density. In short, this is the level of tariff repair the industry needs, provided all players (especially Reliance Jio) come on board.
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For now, Bharti’s Q4FY25 mobile service revenue in India grew 1.3% sequentially to ₹26,617 crore, in line with subscriber-base growth of 1.4% to 361.6 million. Ebitda increased 2% quarter-on-quarter with a 35 basis points margin expansion to 59.2%.
Africa business outperforms India
Bharti’s Africa telecom business, which is about 40% of the size of the Indian mobility business, has outpaced growth in the latter in both rupee terms and USD constant-currency terms (calculated using the currency rate at the end of March 2024). The revenue growth rate for the Africa business in rupee terms was 6.3% quarter-on-quarter to ₹11,376 crore, while constant-currency growth was 3.4%. Ebitda grew 7% quarter-on-quarter to ₹5,381 crore, with constant-currency growth at 4.5%.
As the Africa telecom business reported faster growth compared to India, Bharti could consider increasing its stake in the business further from the current 56%. African currencies, though stable over the past few months, are typically volatile, and any further depreciation could pose a business risk.
Capex to slow down
Bharti’s total capital expenditure of ₹14,400 crore in Q4FY25 was up by a staggering 56% sequentially, mainly due to investments in the enterprise business – data centers and cloud services. Management indicated that the capex should not be seen on a quarterly basis as some quarters are lumpier than others. Its capex intensity in India is likely to be lower in FY26 as the rural rollout is largely complete.
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Management intends to use free cash flow to reduce debt and increase the dividend. However, the company has not yet formulated a dividend payout policy. Also, exactly when it plans to increase its stake in the Africa business and Indus Towers remains uncertain.
Bharti has not yet decided to convert adjusted gross revenue (AGR) dues into equity to be allotted to the government. It has only asked the government if that option is available in view of Vodafone Idea Ltd opting for it.
Satellite internet threat
What about competition from satellite internet? Bharti clarified that its arrangement with Starlink would not harm its telecom business as Starlink is likely to be used in places where terrestrial connectivity in the form of mobile towers is unavailable.
Nuvama Institutional Equities has a target price of ₹2,130 for Bharti based on a sum-of-the-parts valuation. Though there has been talk of scaling up the non-mobility businesses, almost 90% of the valuation is ascribed to the mobile service business in India, valued at 13.5 times estimated Ebitda for FY27. The stock could remain range-bound until further tariff hikes for mobile services are announced.
On Thursday shares of Bharti Airtel rose 1.58% to ₹1,863.10. The stock is up about 17% so far this year, and a massive 242% over the past five years.
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