Bharti Airtel Getting Set for Bigger Battles

Bharti Airtel “remains a healthy” free cash flow (FCF) generating company and its plans to raise the funds was “not necessary” at this time.


  • Bharti Airtel balance sheet “not as strong” as Reliance Jio’s balance sheet, say analysts.
  • Mittal sees “growth triggers” in 5G, FTTH.
  • Mittal says Rs 200 ARPU needs to be touched “very quickly.”

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Bharti Airtel Bigger Battle
Bharti Airtel, the second-largest wireless operator in India is “building a war chest for upcoming growth opportunities” but its plans to raise the funds was “not necessary” at this time, say multiple analysts. The operator on Sunday announced that its board in a meeting approved its plan to raise up to Rs 21,000 crore through a rights issue. In an investor call on Monday, Sunil Bharti Mittal, Bharti Airtel chairman said that the fundraising plan will offer the operator an “opportunity to really accelerate” its growth path.

Bharti Airtel Balance Sheet

However, multiple analysts highlighted that Bharti Airtel “remains a healthy” free cash flow (FCF) generating company. Motilal Oswal Financial Services in a note highlighted that the operator in the past four years with its India mobile business recorded a 40% earnings before interest, taxes, depreciation, and amortization (EBITDA) growth. The Indian diversified financial services firm said that the EBITDA growth “created a healthy” Rs 120 billion to Rs 150 billion FCF generating capability for Airtel.

“The specific use of the rights issue money may not be clear, given that Bharti remains a healthy FCF-generating company,” Motilal Oswal said in its note on Monday. “Nonetheless, the call revealed the management’s thought process towards the market outlook, 5G, capital allocation, and leverage strategy, along with tariff outlook.”

Similar sentiments were also shared by Edelweiss Research in its note on Sunday, with the firm highlighting that the balance sheet of the operator was “well funded.” However, the leading domestic institutional brokerage house in its note said that the balance sheet of Bharti Airtel is “not as strong” as Reliance Jio’s balance sheet.

“While we believe the fundraise was not necessary at this juncture, it does provide Bharti with the necessary ammunition in case of aggressive 5G rollout,” Edelweiss Research said. “Reliance Jio’s (RJio’s) stronger balance sheet, impending 5G spectrum auction and related capex may have prompted Bharti to raise funds and we see it positively.”

Meanwhile, Mittal said that the operator “imminently” sees the “growth triggers” in 5G along with the “need to roll out more fiber” as compared to what it has rolled out in the past. Bharti Airtel chairman said that the spectrum auction for 5G is “likely to happen sometime early next year” with the next generation technology going live across key cities in late 2022. Additionally, Mittal also said that the fiber-to-the-home (FTTH) services have “picked up a lot of momentum” in the past 12 months with “more and more people” joining its Xstream Fiber services.

“The number of fixed broadband connections are now truly rising exponentially,” Mittal said. “We cannot let that opportunity be missed out by Airtel which has been in a leading position other than BSNL to serve India's connected needs into homes and offices. That will require capital as well.”

ARPU Needs to Touch Rs 200 “Very Quickly”

Crucially, Mittal said that the average revenue per user (ARPU), a key financial metric, needs to hit Rs 200 “very quickly.”

“If I have to say this industry needs to survive, this industry needs to thrive [then] we need to get to Rs 200 within this financial year,” Mittal said. “I would say we should aim to be at Rs 200 by the time we end this financial year. Eventually, this industry needs to be at 300 rupees per customer per month.”

In its first quarter of the current financial year, Airtel recorded an ARPU of Rs 146 with the operator highlighting that its ARPU in its prior-year quarter was at Rs 138 “on a comparable basis.”

Axis Securities, a subsidiary of Axis Bank on Tuesday said in its note that the operator has managed to “deliver industry-leading ARPU without increasing the tariff hikes.”

“The management also indicated ARPU to reach 200 per month by the end of this fiscal and eventually to 300 per month levels,” Axis Securities said. “We believe in Airtel track record of delivering profitable growth in a tough environment thereby reaffirming our confidence in management’s ability to deliver in the longer term.”

ICICI Securities, a subsidiary of ICICI Bank, on Monday, highlighted that the operator has already tweaked its tariffs across multiple segments including corporate postpaid and prepaid base pack.

“We note Reliance Jio has recently launched Freedom plan where it has cut data allowance by 45% which is moving towards tariff hike,” ICICI Securities said in its note on Monday. “Tariff hike has been anticipated for [a] long now, but competitive intensity has kept tariffs stagnant since Dec’19.”

Reported By


Born in India, Yogesh loves to travel and has lived in multiple countries including New Zealand and Canada. His bylines can be found on various newspapers and blogs throughout the world, including Vancouver Sun, Surrey Now-Leader, Daily Hive , Investing News Network and Rach F1.


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