Bharti Airtel

Bharti Airtel offers mobile, voice, data and cloud-based solutions to over 500 million customers in 17 countries across Asia and Africa. It is India's largest integrated telecom solutions provider to the retail and enterprise markets, and also the No.2 mobile operator in Africa, after South Africa's MTN Group.

We believe that Airtel is the most commercial and financially disciplined service provider in an Indian telecom landscape that has undergone significant market repair. The market has consolidated down from close to 12 companies just five to six years ago to less than a handful of players today, in what is now effectively a duopoly between Jio and Airtel.

Thanks to the market repair, Airtel turned free cash flow (FCF) positive for the first time in 2022. The company has also demonstrated its ability to raise capital, with a rights issue of up to 210 billion rupees (£2 billion) in September 2021 and most of the proceeds yet to be used. Airtel's capex will also start to taper off as its rural expansion slows, easing the funding needs and potentially improving the FCF outlook, which could lead the company to consider paying down debt or even paying dividends. Most recently, the company also listed its Bharti Hexacom subsidiary, the group's first IPO in over a decade.

While Airtel continues to deliver consistent growth across all its businesses with an industry leading average revenue per user (ARPU), its return on capital employed (ROCE), however, remains low at 9.4% [1]. The management indicated that tariff repair was critical to ensure the industry's health, and it was confident that tariffs would rise over the next two years. This would also help raise its ROCE.

The market's structural dynamics are in Airtel's favour. The market remains underpenetrated, with mobile penetration standing at 69% as of FY22, indicating room for organic growth. Mobile spend as a percentage of GDP is low at 0.95% in FY22, which is much lower compared to other ASEAN markets at 1.2-1.8% [2].

As smartphones become more affordable and subscribers migrate to 5G, the uptake of data services is increasing; for Airtel, data services are growing rapidly and the group expects this trend to be sustainable [3]. The other key growth area is in home broadband services, which is doing well with healthy subscriber additions and improving ARPU, supported by the rollout of its high-speed Xstream AirFiber network across the country.

On the sustainability front, the group continues to make progress on its ESG agenda. Airtel has committed to reduce absolute Scope 1 and 2 greenhouse gas emissions by 50.2% by FY 2030-31 from the base year of FY 2020-21. It has also committed to reducing absolute Scope 3 GHG emissions by 42% over the same time frame.

[1] Bharti Airtel Limited - Media Release February 05, 2024
[2] abrdn research
[3] Bharti Airtel Limited - Integrated Report and Annual Financial Statements 2022-23