A telecom giant’s Everest moment

Bharti Airtel’s market cap milestone mirrors India’s data boom, the telco’s pursuit of higher ARPU, and its steadfast industry leadership.

On 19 September, Bharti Airtel, one of India’s two major private telecom operators, reached a landmark milestone of scaling a benchmark market capitalisation value of Rs 10 lakh crore, or USD 120 billion. While this pales in comparison with the staggering fact that relatively new AI upstart, the US-based OpenAI, hit a market cap of USD 157 billion in its USD 6.6 billion funding round on 3 October, Airtel’s achievement is no mean feat; it is now only the fourth company ever to reach this lofty milestone.

It also speaks volumes that, of all industries, Bharti Airtel operates in the much-debated telecommunications industry—where the margins are wafer-thin. Still, the volumes are equally high to compensate for the competitive landscape.

The company continues to report strong revenue and EBITDA growth, backed by continued healthy growth in the Indian mobility business.

On this note, it is interesting to break down Airtel’s growth story in India—which offers a grand narrative of where India’s telecom industry is headed.

The Context of Airtel’s Growth

At the centre of Bharti Airtel’s meteoric rise is India’s surge in data traffic. Ever since the advent of Airtel’s rival, Reliance Jio, in the market, data costs have declined exponentially. As per a recent press conference by Union Communications Minister Jyotiraditya Scindia, data services have become cheaper by nearly 97% over the past decade.

Yet, over the past year, telcos have consolidated to ward off newcomers in the telecom market and also continue on their stipulated growth trajectory.

The vitality of Airtel’s growth in India is denoted in its numbers. In the June quarter of this fiscal (Q1FY25), Bharti Airtel announced operating revenue of USD 4.58 billion, against net income of USD 495 million after taxes. Compared to the year-ago period last year (Q1FY24), Airtel’s operating revenue rose 2.7% this year. Net income, meanwhile, went up by nearly 2.5 times after Airtel won a one-time taxation relief from its revenue-adjusted licensing fee share to the Centre.

In the June quarter of this fiscal (Q1FY25), Bharti Airtel announced operating revenue of USD 4.58 billion, against net income of USD 495 million after taxes.

This is substantial growth for a telecom operator within one year, which Managing Director Gopal Vittal elucidated as a direct impact of tariff hikes implemented in this period. “The industry saw much-needed action on tariff repair, which is positive for the industry’s financial health amid ongoing large network capex. We continue to believe that industry needs over Rs 300 ARPU at the minimum for financial stability,” Vittal said in a post-earnings statement in August of this year.

The ARPU parameter, or average revenue per user, is a crucial indicator of the industry’s direction. Earlier this year, Airtel hiked its tariff by as much as 27% in select plans, a factor Scindia backed up last month.

“If you look at it, you realise that data costs have declined by 97%, while this new tariff hike will only see it go up marginally. Given that telcos also need to earn to invest in telecommunications infrastructure, this marginal hike should not be a major deterrent for anyone,” Scindia said in a review of the first 100 days in governance for the current National Democratic Alliance coalition government.

In one year, the ARPU has grown 5.5% to reach

Rs 211, on the way towards Airtel’s target of Rs 300. This could grow even further with further tariff hikes, increasing data consumption, and onboarding new users onto the network. As of June this year, Airtel had over 350 million net customers on its network, with over 250 million data subscribers.

Where Does Bharti Airtel Stand?

India Ratings and Research, a Fitch Group financial analysis and ratings firm, offered Bharti Airtel a credit rating of ‘A1+’ in July this year.

“The rating affirmation reflects Airtel’s established market position in the Indian telecom industry and a robust business and financial profile. The company continues to report strong growth in revenue and EBITDA, backed by continued healthy growth in the Indian mobility business. The latter factor has been indicated by increasing revenue market share and subscriber market share, along with growing homes services and enterprise business,” the rating note said.

It further added that Airtel’s fundamental business health continues to remain robust. “Apart from the huge investments and high capex intensity in FY23 and FY24, the company’s credit metrics remained comfortable. The company’s strong financial flexibility, expected growth in the revenue and EBITDA in the medium term and a likely improvement in credit profile backed by reducing capex intensity in the medium term continue to support the rating,” it stated.

Going forward, it remains to be seen how well the telco’s growth pace can be preserved. Most brokerage firms have taken a positive approach to Airtel, and as of now, its market cap looks poised to go well beyond the Rs 10 lakh crore that it scaled last year. In fact, on its way here, in just one year, the telco overtook Hindustan Unilever, Infosys, and ICICI Bank.

Today, it is India’s fourth largest company, with only Reliance Industries, Tata Consultancy Services, and HDFC Bank ahead of it.

Shares of Bharti Airtel closed at Rs 1,675.80 apiece on Thursday, 3 October, before the time of print—down 1.37% in intraday trading but up 81% compared to last year.

By Vernika Awal

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