skip to main content
Close Icon We use cookies to improve your website experience.  To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy.  By continuing to use the website, you consent to our use of cookies.

Omdia view

Summary

Bharti Airtel’s 2Q20 results show that mobile networks are proving to be a critical infrastructural backbone for many emerging markets. The operator reported strong growth in service revenue for the quarter, driven by mobile services and enterprise segments.

Bharti emphasized its digital tools as it continued to support customers during the crisis. The impact of Bharti’s efforts was visible as the utilization of digital channels for service recharges and customer support activities doubled during the COVID-19 crisis lockdown.

Over the years, Bharti’s relentless focus on digital innovation and customer satisfaction has made it a strong competitor in the Indian market. Even with the changing market dynamics, Bharti must pursue a selective approach to identifying its next opportunities. It is well positioned to continue its dominance in the urban high-value customer segments. Its presence in the enterprise segment is expected to pay off as both small and medium enterprises (SMEs) and large enterprises accelerate their digital transformation efforts over the coming years.

Bharti Airtel continues to improve revenue from India, but net losses have widened

Despite the COVID-19 crisis, Bharti Airtel has seen its revenue expand in the second quarter ended June 2020. Although Bharti’s consolidated revenue increased marginally by 0.9% quarter on quarter (QoQ) to INR239bn ($3.2bn), its revenue has expanded 15.4% on a year-on-year (YoY) basis. Most of the growth is driven by a strong rebound in Indian operations where mobile and enterprise segments have outperformed other business units. Bharti’s India operations contribute 73.5% of its overall revenue.

Mobile services revenue in India increased 18.5% YoY to reach INR128bn in 2Q20, driven by 21.3% YoY growth in service ARPU. Bharti took significant measures to improve mobile ARPU through the introduction of minimum recharge plans, tariff increases, and content bundling. Bharti’s efforts have been tied to acquiring and retaining quality customers as its mobile subscriber base in India declined from 341 million in 2Q18 to 279 million in 2Q20.

The enterprise segment is becoming increasingly important for Bharti and contributes 19.9% of India revenue. Airtel’s revenue from B2B services increased 9.2% YoY reaching INR35bn during the reported quarter. Bharti also launched an integrated solution, “[email protected],” which combined enterprise-grade connectivity, collaboration tools, and security services for enterprises as they moved to flexible working models during the lockdown.

However, the operator has been struggling to attain profitability, largely due to the provisioning for statutory dues. For the quarter, Bharti reported a net loss of INR159.3bn, which expanded from INR28.6bn in net losses in 2Q19. EBITDA for the group was up 25.3% YoY to INR106.4bn. Capital expenditure for the quarter was INR39.7bn, down 21.2% YoY, bringing the capital intensity ratio to approximately 17% from 24% a year earlier. Indian operations accounted for 86.6% of the group’s total capex.

Bharti emphasized digital tools as it continued to support customers during the crisis

While Bharti has maintained a clear focus on its digital transformation journey – internal processes as well as rolling out digital tools and services for its customers – the impact of its efforts was highly visible during the COVID-19 lockdown. The operator achieved 70% online penetration of recharges during the lockdown period compared to 35% during normal business operations.

To facilitate this, Airtel launched a campaign, “Airtel Superheroes,” which allowed peer-to-peer top-up for prepaid accounts utilizing Airtel’s payments app. In return, it offered subscribers a commission on every transaction as a reward for using the digital channels. Among other initiatives, Bharti worked with multiple banks to enable service top-ups directly through ATMs.

For the business segment, the operator enabled enterprises to purchase broadband services on behalf of their employees. A specialized service desk was set up for businesses that handled end-to-end processes from procurement, ordering, and arranging delivery (to individual employees) for devices and other hardware. For many other prepaid customers that were affected by the lockdown, the operator extended validity for more than 80 million prepaid service packs while crediting an additional INR10 to each of those accounts.

The operator also beefed up its interactive voice response (IVR) system and self-care app as its call centers were running at a reduced capacity. The utilization of self-care platforms (IVR and Airtel Thanks) doubled during the lockdown period. Bharti also advanced network investments to meet the increased demand for data during this period. Most of the front loading of capex was observed in 1Q20 as Bharti added substantial capacities to its core and transport networks.

Relentless focus on digital innovation and customer satisfaction has made Bharti a strong competitor in the Indian telecoms market

Recently, Bharti has concentrated on acquiring and retaining quality subscribers that it achieves through a well-rounded strategy to please customers. The operator’s digital efforts are centered on improving customer experience and customer value with the introduction of digital tools and services. This approach is consistent across both the consumer and enterprise segments that Bharti serves. For retail customers, the operator has built a recommendations engine capable of delivering highly relevant, personalized, and contextual service offers, as well as loyalty benefits through the Airtel Thanks platform. To keep up with the competition, Airtel has concluded content partnerships with a range of over-the-top (OTT) providers to secure access to engaging content, which is accessible through Airtel’s Xstream platform. As a result, Bharti commands the highest industry ARPU, around 12% more than the largest operator in India. The steps have also helped the operator to minimize the impact on subscription losses during the first few months of the COVID-19 crisis.

A lot has changed in the Indian telecoms market, even during these uncertain times. Indian operators have managed to maintain a positive outlook, with the likes of Facebook and Google making huge investments in the country’s digital infrastructure. These developments have strengthened Reliance Jio’s profile, making it a formidable competitor that has not only raised billions of dollars for future investments but now also has access to the right technology partners to capitalize on India’s digital opportunity. For Bharti Airtel, it must focus its efforts where they matter most. It should pursue a selective approach while identifying and selecting its next opportunities. A strong hold in the pay-TV and fixed broadband market makes a natural fit as Bharti continues to emphasize serving high-value customers. Its presence in the B2B segment is expected to pay off over the coming few quarters as both SMEs and large enterprises accelerate digital transformation efforts. Even in the enterprise segment, Bharti must continue strategic partnerships and alliances to help position itself as a digital enabler for business customers. Singtel, Bharti’s strategic investor and leading provider of enterprise ICT services in Singapore, already has significant experience in serving the enterprise segment.

Table 1: Bharti Airtel 2Q20 vs. 2Q19 comparison – Key metrics

2Q20

2Q19

% Var.

Total revenue (INR millions)

239,387

207,379

15.4%

EBITDA (INR millions)

106,392

84,926

25.3%

EBITDA margin (%)

44.4%

41.0%

3.4 p.p

Net income (INR millions)

-159,331

-28,660

-455.9%

Capex (INR millions)

39,753

50,468

-21.2%

Mobile subs (000s)

394,117

379,061

4.0%

Fixed-line and other accesses (000s)

19,287

18,369

5.0%

Source: Omdia, Bharti Airtel

Appendix

Further reading

Bharti Airtel Update, GLB007-000391 (June 2020)

Author

Inderpreet Kaur, Senior Analyst, Asia Pacific

[email protected]

Recommended Articles

;