Bharti Airtel Limited (532454) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining us on this webinar to discuss Bharti Airtel's Fourth Quarter and Full Year FY '21 Results. Before I hand over to Gopal, I wanted to quickly highlight that we will be conducting a Q&A session for the participants on this call. [Operator Instructions] With this, over to you, Gopal, for your opening remarks.

Thank you, Komal. Good afternoon, ladies and gentlemen. Thank you for joining us today for this webinar to discuss our results for the fourth quarter ended 31st March 2021, which we announced yesterday. Present with me are Badal, Harjeet and Komal. As you know, we're passing through a devastating second wave of COVID. Our communities and the customers we serve have all been profoundly affected. Within the company, too, over the last 45 days, we have seen almost 12% of our people go down with COVID. That is almost 5x more than we saw in the previous peak of September 2020. Sadly, we also lost 13 of our colleagues. Yet, in spite of the difficult circumstances, our teams have demonstrated commitment to Airtel's overarching purpose of serving our customers and the country. Nothing makes me prouder than to be leading this amazing team. Every day, I come across inspiring stories. Let me just share 3 of them. In Mumbai, when every other service provider refused to install a broadband connection in the home of COVID-positive customer, the team of Manoj and Sanjay from Airtel bound their PPE kits, followed the strictest of safety protocols and did it. Sarfaraz is a store executive in Lucknow, didn't just home-deliver a SIM but also organized urgently required medicines for the customer's pregnant daughter since the family could not step out. Our Manoj from Mumbai spot management team ensured -- to ensure that no customers were inconvenienced, worked on a war footing to repair a site inside a residential society, even though it was a containment zone. Each of these employees were committed to our purpose. For us, it's a matter of pride that we provide an essential service. In fact, our service is the oxygen for the digital platforms that are enabling customers to work and study, consult doctors, help others and be entertained. Now on to our performance. In the fourth quarter, we delivered yet another quarter of strong performance. Our consolidated revenues grew sequentially by 2%, while the underlying India business grew by 3.4%. Our consolidated EBITDA margins for the quarter were at 48.9% compared to the preceding quarter of 45.9%. This consistency and performance can be seen across the board in almost every part of our portfolio. As a result, we've grown market share -- revenue market share in each of our businesses. Our business is driven by a simple strategy, a relentless obsession with customer experience and a sharp focus on quality customers. There are 4 additional enablers to these choices: the first is digitizing the core to improve experience and eliminate waste; second, modularizing these capabilities to drive new revenue streams to products and partnerships; third, bringing together the power of Airtel through a unified customer view and integrated channel approach; and fourth, doing all of this with financial discipline while waging a war on waste. This strategy is a thread that ties all our businesses together and creates alignment and cohesion across the team. Let me now comment on each of our businesses in the portfolio. Let me start with Airtel business. Here, we continue to gain market share, not just annually but quarter-on-quarter. In fact, as per Frost & Sullivan, from a 23% revenue market share in December 2018, we are now at 31% share in December 2020. This represents an 8% share gain in 2 years. We've now closed the year with an annual revenue run rate of $2 billion. The fact, however, is that only 20% of our customers contribute to 80% of the business. So there is a massive opportunity to go wide in order to grow share to tap into the 80%. There's also a big opportunity to go deep with the 20% to gain a higher share of wallet. So wide through hunting and deep through farming. To tap into this opportunity, we are retooling our channels as well as our product portfolio. Here, we're doing 4 things. First, we are in-sourcing our entire SME sales force, which was earlier outsourced. This will lead to upgradation of our SME channel capabilities, helping us gain share. Second, we are building our omnichannel digital capabilities. Today, more than 95% of the new orders for the product lines where we have begun this effort are coming through digital channels. This will also help us expand, reach and gain share in the SME segment. Third, we've entered adjacent areas, so we can go deeper with our customers to farm more effectively. And these new areas include data centers, Airtel SECURE, Airtel IQ and Airtel Cloud. I've spoken about these earlier. All of these are building traction and are helping us grow share of wallet. This quarter, we also launched Airtel IoT. Airtel IoT is an integrated and end-to-end platform with the capability to connect and manage billions of devices and applications in a highly secure and seamless fashion on Airtel's 5G-ready network. Finally, our teams have now been given differential and separate targets and incentives for both hunting and farming. This will allow us to meet our twin objectives of growth in share and growth in share of volume. Now to our homes business. The broadband business has grown to 3 million-plus customers on the back of strong demand for home broadband. During the quarter, we expanded our footprint in new towns and cities through our unique LCO partnership model, adding 1 million-plus home passes there. We're now present in 200-plus cities. As a result, our net adds this quarter at 274,000 have been the highest ever. In our DTH business, we've now become a clear #2 in the market. From a revenue market share of about 22% in December 9, 2018, we believe we are at a 27% share in December 2020. We've, in fact, outpaced all other players in terms of performance consistently over the last 8 quarters. With full ownership of the DTH entity, we have even more flexibility to drive this business. As a result, we have now combined our large mobility distribution system with DTH to create one mass retail channel, which will drive all businesses: mobility, DTH and the payment spend. This should give a flip to our DTH business. Second thing we've done is to have a dedicated channel for high-value homes. We believe there are 50 million high-value homes in India, and we already have relationships with over than 30 million of them through at least one of our services, postpaid, DTH or broadband, bringing the full power of Airtel to the home by combining all our services together for the customer with an opportunity waiting to be tapped into. As part of this, we now take one view of the customer and have one integrated channel strategy. As a result, we have combined our 2,000 retail stores, along with our broadband sales organization to create one integrated direct-to-customer channel. This channel now delivers and installs all Airtel services in the home. The unit around which this whole channel revolves is our store, the owner of the micro catchment as we call. Let me now turn to mobile. During the quarter, we acquired precious spectrum. We now have a pan-India footprint of sub-GHz spectrum that will help us cover an additional 19 million customers as we turn on the spectrum in India. We've also substantially strengthened our mid-band spectrum bands across 1,800, 2,100 and 2,300. This will help us to continue delivering the best network in India as far as customer experience is concerned. In fact, I'm pleased to say that within the country, we have 33% of liberalized spectrum -- 33% share of liberalized spectrum, strongest holdings in India. Much of the spectrum can also be seamlessly refarmed to 5G over time. We've also accelerated our coverage footprint in the quarter by adding 8,300 sites, which put a little bit of pressure in terms of network OpEx. We've also substantially strengthened our transport network as we ready ourselves for a 5G rollout. Based on our estimates for quarter 4, we believe we'll gain market share at a new lifetime high. This performance is on the back of strong 4G net adds of 13.7 million. In fact, over the last year, we've added 43 million 4G customers to the network and 1.9 million net adds to the postpaid segment. It's all been driven by our focus on experience. In addition, we are raising our execution bar by sweating our assets on the ground. We do this through a combination of smart deployment, based on data science and go-to-market efforts that consider our unit performance at an individual site level. During the quarter, the reported revenue and ARPU was impacted by a combination of the move to the bill and keep regime as well as fewer days. For ease of comparison, we report lower numbers on a comparable basis to reflect the underlying trends in the business. Based on this, our mobile revenue grew sequentially by 4.2% and ARPU moved from INR 146 to INR 148 on an equated day basis. While this ARPU is the highest in the country, it also shows the massive headroom for ARPU growth. I say this for 2 reasons. One is a very low level of tariffs in India, which we all know about. Second is the fact that we have 140 million users on our network who are not on 4G and whose ARPU is less than half of the average business. Now to our digital platforms. We've reached a significant milestone at 200 million monthly active users. Wynk has 72.5 million, Airtel Xstream has 37.5 million and Airtel Thanks is at 96.3 million. As I've said before, we have a 3-pronged digital flywheel. First, it allows us to get more efficient and deliver a better omnichannel experience on the core business. Second, it allows us to build new revenue streams on our core foundational strengths of data payments, distribution and network. And finally, it allows us to create an ecosystem of partnerships that leverage constraints. A quick word on 2 of our digital businesses. Airtel Payments Bank is now rapidly gaining scale. We already have 54 million active users and a monthly throughput of around INR 22,000 crores. Our distribution footprint is across 290,000 outlets. There is great synergy between the bank and Airtel. After all, customers who have an Airtel Payments Bank account with us see a lower degree of churn. On a stand-alone basis, we are on the road to profitability, and we expect to achieve that in the next year -- in the coming year. During the quarter, we also launched a first-of-its-kind innovation, Airtel Safe Pay to differentiate our bank even further. Airtel Safe Pay leverages Airtel core telco strengths to provide the highest level of protection to Payments Bank users from potential online frauds. We've also announced an attractive 6% interest rates on savings account deposits over INR 1 lakh. This quarter, we also launched Airtel Ads. Airtel Ads is a brand engagement solution that allow brands of all sizes to curate consent-based and privacy-safe campaigns to one of the biggest pools of quality customers in India. This is a massive and growing market. In the beta phase itself, we have worked with over 100 banks and are beginning to clock meaningful revenues. Finally, I want to touch on 3 additional pieces of information. First is on our balance sheet. We're now in a more improved zone to an optimal capital structure and well-timed fundraises. We raised almost $12 million in the last year or so and have also recently refinanced high-cost debt at attractive rates. Despite the AGR liability, leveraged at 2.95, it's comfortable versus global peers. In fact, if we break the average overall debt, DoT and AGR debt itself account for 56%. In addition, accounting leases contributed to 19% of the debt. It's also heartening to see that our investments in Bangladesh and Africa are now becoming attractive. Our new corporate structure, we believe, will also help us sharpen our focus in driving our different businesses: India, international, infrastructure and digital. Second, we have successfully monetized some of our assets, including Airtel Money and tower assets in Africa. In addition, we've also monetized the unutilized 800 megahertz spectrum in 3 circles in India by entering into a trading arrangement with Reliance Digital. Third, let me provide some updates on our ESG initiatives. On an environmental impact, we are aligned with the Paris Climate Accord. We have proactively implemented clean fuel-based power solutions for our towers, our data centers, our switching centers and other facilities. We commissioned a 14-megawatt captive solar plant shortly after the quarter ended to meet the energy requirements of our core and EDGE data centers in Uttar Pradesh. Another similar plant is expected to be commissioned in the coming months. On the back of all of these initiatives, we aim to meet more than half of our FY '22 power input through renewable energy sources. In fact, over the last few years, we reduced our carbon emission per terabyte by 78% against a self-imposed target of 80%. Sustainability is a mission-critical priority for us, especially since we have been in the business of delivering an essential service. Every day, over this period of this pandemic, along with the Airtel Management Board, I personally take stock of the health of each of our employees who have been impacted. There are several things we've done in the last few months to confront the challenges of the pandemic. We have stepped up both life insurance and medical reimbursement for our frontline employees. We now have 26 doctors on our in-house panel to allow employees and their families access to medical advice. We provide access to oxygen concentrators and access to hospital beds, where possible through our COVID care team. There are stress and mental health counselors that help relieve people of challenges as they face a new normal. Almost all our support staff work from home. We're also rolling out an extensive vaccination program for all employees and associates, partner employees in partnership with Apollo Hospitals. Here, our priority will be to first vaccinate our frontline teams: network engineers, installation and fault repair staff, floor executives who are out there helping us serve customers in these difficult times. Finally, we continue to raise our standards of transparency and reporting and governance. Let me give you a few examples. We always restate our numbers in the event of any major changes, whether regulatory or otherwise. We do the same when we're taking exceptional provisions. This quarter, for instance, We've restated our numbers, and in particular, our ARPU, given the abolition of the IUC regime. To make the ARPU definition even more stringent, we have eliminated the interconnect revenue as also the inter-license settlements between circles that were related to the historic interconnect regime. What it, therefore, means is the ARPU is now a true measure of customer revenues of the mobile business only. Equally, we've given your like-for-like comparison with previous periods, allowing you to assess our intrinsic performance. Second example of our standards of transparency is our customer definition. We have a very stringent definition of customers that we've used within the company. One of the definition is active customers, also known as BLR customers. This refers to any customer who simply latched onto the network regardless of whether she gives any revenue. The active customers for us in March 2021 stood at 344.4 million. The second definition is revenue-only customers. These are customers who actually delivered some revenue to us in a rolling 30-day period. This number was 321.4 million. The active number of 344 million will always be slightly higher than the revenue earning number of 321 million for obvious reasons. This is due to what I mentioned already. The active number also includes those customers where we latched onto the network but have not recharged. So they don't give revenue. Such customers include those who are perhaps not recharged at the end of their validity period. They also include international in-roaming customers, who may be latched on, but don't necessarily give us revenue in the preceding 30 days. These definitions, we believe, are stringent. They are directly linked to revenue, and they allow me to make a transparent assessment of our performance. Third, if you look at our accounting for depreciation or spectrum amortization, we do it on the basis of globally accepted practices that every top-notch telecom company follows. We would also love to hear your input on our transparency standards so that we can continue to raise the bar always. Finally a word on our Board. We have an exceptionally qualified Board with a diverse skill set that includes expertise across public policy, finance, risk, private equity, technology and telecom. There are 3 women Directors on our board. And there is a clear separation of responsibilities between a Promoter Chairman and a professional and empowered Managing Director, backed by a highly professional and diverse management team. In sum, this quarter has demonstrated our strong execution across the portfolio. Our digital capabilities are now formidable. Our experience continues to be the best in the industry. And our brand remains the most aspirational brand in India. With this, we open up for Q&A.

Thank you, Gopal. The first question comes from Kunal Vora of BNP Paribas. In fact, he has 2 questions. I'll take them one by one. The first one is that Airtel has added almost 16,000 towers in second half of FY '21, which is the highest addition in a 6-month period. Airtel has also enhanced its spectrum holdings. With these investments, will we be able to lower our CapEx in FY '22? And if you could also share your thoughts on CapEx in the medium term? I'll ask the second question maybe after you answer this one?

Yes. I think -- thank you for this question. We still have -- if I look at the overall CapEx profile for -- I've mentioned that our peak CapEx was hit sometime in FY '18. Since then, we've kind of been hovering around the same number, and we believe that FY '22, we'll see CapEx around the same level as this year. The composition of the CapEx is, however, beginning to change. There is more and more money being spent on transport. There is larger amounts of capital allocation that we're doing towards our broadband business, towards our enterprise business, which includes our data center business next stop. There's a rollout of sub-GHz spectrum that we will need to deploy across and that's the radio CapEx. And then, of course, there's transport CapEx. Now, why is it -- all of this is important? The transport CapEx is important in the runup of 5G. Nonwireless portfolio is important, and it's going to get more and more meaningful over time and needs to be funded well. The 4G radio CapEx, I think, will begin to moderate. Having said that, this year, we need a rollout of sub-GHz spectrum, which is linked to 4G radios as well as additional deployments to fill our entire coverage across the country, particularly in deep rural areas.

Thanks, Gopal. The next question from Kunal is that his check seem to indicate that competition to acquire customers has increased in the market, specifically with operator offering attractive incentives for M&B. So he wants to know if there's been any increase in competitive intensity in the marketplace as far as 4Q is concerned?

Yes, definitely. I would agree with that. I think we did see an increase in competitive intensity, particularly when it came to things like sales incentives and channel commissions in the west to attract more customers. This is actually not a great and healthy development because what happens is a lot of customers do tend to buy a SIM and throw it. But having said that, I think our effort continues to be really razor sharp in terms of customers to buy and where to widen. Of course, with the onset of the pandemic in April, we saw a moderation in that competitive intensity because many of the states are now seeing varying stages of lockdown. So in the quarter 4, we did see some increase in competitive intensity, not on tariff, but more on acquisition and channel commissions.

The next question is from Vivekanand Subramaniam from AMBIT Capital. He also has 2 questions. The first question is, what is the reason for 1.4% Q-on-Q ARPU growth adjusted for the number of days versus the 2.5% to 2.7% growth that we've seen in the previous quarter? And didn't the 4G upgrades result in ARPU growth similar to previous quarters? Secondly, he also wants to understand what is causing the operating expenditure to grow by about 9% to 10% year-on-year on the mobility and Airtel business side of it?

Yes. I think we saw a much bigger ARPU jump in quarter 2. If I recall, we almost saw INR 5 jump in ARPU in quarter 2. And that came on account of the opening up of the lockdown, which happened towards June. We saw a stronger flow-through in the quarter 2. Importantly, we saw about INR 3.5 ARPU offside. And in quarter 2, we're seeing a INR 2 ARPU increase. As you know, ARPU is an outcome of several things. It's an outcome of the mix of customers, the customer additions. So I would not really read too much into INR 1 difference. The underlying trajectory of the upgrades that we're seeing on to our 4G base continues to be solid. We have another 140 million users on our own network who need to be upgraded to 4G and will happen over a period of time. Plus, of course, there is an opportunity to upgrade users of other networks on to 4G, some of them could be 2G customers. So I would say -- I would not read too much into the INR 1 differential between quarter 3 and quarter 4. Sorry, Komal, I missed the second part of the question.

Yes. The second part of the question, Gopal, was that, what is causing the operating expenditure in Airtel business and mobile to grow by 9% to 10% year-on-year?

But I think if you look at the sequence and maybe Badal can add a little bit more texture to it. But if you look at the sequential growth in operating expenses, the operating expenses on the face of it looked a little higher in terms of sequential growth. That had this coming on account of 2 reasons. One is the massive rollout of network that we did. We rolled out almost 8,300 sites in quarter 4 and about 5,000 sites in quarter 3. Now these 8,300 sites, obviously, have a knock-on impact in terms of cost in quarter 1. The second is increase in prices of diesel. But having said that, remember, in this quarter, there are also 2 days less. And what happens to most of these costs is that we have monthly costs that hit us, whereas recharge cycles on the prepaid side particularly are 28 days or 56 days. So they're not really typically a month, which is why you -- if you look at the revenue, it's understated by 2 days, but the cost is overbooked by 2 days. So that's the way I would look at the underlying CapEx. The real question to ask is what is the marginal EBITDA from the incremental revenue that we have developed -- that we've delivered. I would say that is in the ballpark of 45% to 47%. You would have been happier for it to be around 55% to 60%. But that, as I mentioned, is on account of the diesel price increase as well as the flow-through impact of network costs. Other costs have more or less been under. Badal, is there anything else? Or have I covered most of the issues?

No. Gopal, you have broadly covered. The 45%, which you talked about, is for mobile services adjusted for the 2 days, okay? At an overall, at a portfolio level, as India, our reported number is around 40% EBITDA margin -- incremental EBITDA margin. And if you were adjust for the 2 days, it will be north of 55%. So it's -- one also has to look at the entire portfolio together. And as far as Airtel business is concerned, if you look at the margin profile, whether it's an EBITDA and EBIT, it has been consistently stable and increasing. So the costs, which are there, which is primarily linked to the cost of doing business revenue, whether it is cost of goods sold or network costs.

Thanks, Badal. Gopal, the next question is from Ankur Rudra of JPMorgan. He wants to ask that, can you please share any early indication of success of the One Airtel strategy and packages in terms of its penetration within the existing customers? And how are we trying to expand this? He also has a second question, maybe I'll ask that after you answer this?

Yes, I think that's a good question. Just so that I -- just so that I'm clear, the One Airtel plan that we launched was in beta form over the last 6 months. And the reason we launched it in a beta form was that the different businesses that we have, mobility, broadband and the DTH businesses, each operate with a different billing stack, and there's a maze of underlying complexity at the bottom of the stack. Our engineers have built a platform on top of the stack in order to stitch all of these systems together and go to market in a seamless way. But with any beta, you will find a lot of bugs. So the reason we went in for beta is that we were anticipating a lot of bugs and some of that has been corrected in the last 60 to 80 days. We expect that the revised version of this now will go to market in the coming 4 to 5 weeks. Having said that, while we don't report out the numbers, we've already seen pretty good traction. In fact, we have slow down the acceleration of the One Airtel plan. We see almost a INR 500 to INR 600 ARPU increase for the overall account when a customer comes on to the plan between broadband, postpaid and DTH because they add under this additional service. And we have close to 0.5 million users who have adopted the plan. But like I said, we have personally -- we have ourselves gone slow in order to fix the bugs because we didn't want to have a broken experience. And when we go back in the next few weeks, we'll go back to the plan.

And Gopal, the second part of Ankur's question is that it's great to see the skill across digital assets, but does the recent carve-out of digital assets indicate that these are at a scale where they're ready to be monetized? And if we can share any plans of monetization? Or at what scale would this become meaningful enough to be monetized?

I think when you talk about monetization, you're talking about unlocking value, but the way we are looking at monetization to unlock revenues. I think fundamentally, each of these businesses now need to start delivering revenues. And if you look at the digital business across B2B and B2C, we are now in a position where they're beginning to deliver sequential growths of anywhere between 15% and 20% every quarter, and we are now pleased with the trajectory. There's still a lot of stuff to be done, and it's still very modest compared to the overall scale of the telecom business as for obvious reasons. But this is a business that requires very low capital. The marginal EBITDA of these businesses are very attractive because the real cost is really around people, the engineering talent and the product talent that you need or the data science talent. And that's where we have made all our investments. We have about 1,600 people working in the digital side across both the core and these digital services. We also have an interesting model to build these digital businesses. We incubate them to start with. They are very small. They run by an empowered team. And then once they get to a certain scale, we are now beginning to actually separate those teams to create a little bit more capacity in those schemes, a little more investment in those schemes in terms of people. So that's the stage that we are in right. And I think it's [Technical Difficulty] we will share with you the progress on our digital business in terms of revenues and so on. We'll do that when we believe the time is right.

Thanks, Gopal. The next set of questions are from Aditya Bansal of Nomura. The first set of questions are around home broadband, and maybe I'll ask them together. Firstly, do we have any medium-term targets in terms of home passes that we want to achieve? Secondly, how much of the sequential ARPU decline would we attribute to down trading versus new users coming in at INR 499 sort of price point? And what is the difference in CapEx per home pass between Bharti connecting it versus the LCO model?

Badal, do you have the ARPU numbers?

Yes, so ARPU, what we have reported this quarter is around INR 684. There is a sequential drop, but this is all because of the pricing intervention which we had taken in early part of Q3. And we feel that the entire impact of pricing has been now fully baked in. We are not seeing any ARPU -- for all our new acquisitions, we are not seeing any further ARPU dilution from these levels despite us having a plan of INR 499, and we think we have a healthy mix of customers being added across the spectrum of brands which we have. INR 799 is one of the most attractive plans, which we have. On home passes, which you've talked about, cost of home passes, I think the differential between what LCO does and what we does will be close to around 25% to 30% from a CapEx perspective, differential cost of production. There are CapEx, which we shared partially, but overall, on the cost of delivers, this will be close to 25-odd percentage points.

Thanks, Badal. There was also a question on any medium-term targets?

The other question was on home passes, and I'll just pick that up. I think we expect that in another couple of years, with the combination of our own rollout as well as the LCO rollout, we would like to see ourselves in -- with about 20 million to 25 million home passes.

Thanks, Gopal. The other set of questions from Aditya Bansal around the enterprise business. What do you think is the market potential for the enterprise segment? And are we seeing any impact of Jio's launch in this space?

I think if I look at the enterprise business -- let me kind of split this into 2 parts. One is the connectivity business. The connectivity business, market size is about INR 40,000-odd crores. And this is a business that, as I mentioned, we've moved market shares from about 23% to 31% if we go by cross-selling over a 2-year period. Given that 80% of our revenues comes from 20% of our customers, we think there's a real headroom here to continue to grow market share and move this 31% upwards. So that's one opportunity. But actually, the other opportunity is beyond connectivity. And if I look at that side of it, that's another INR 50,000 crores. And that includes -- and I'm just talking about the adjacent areas. Now the margin profile of all of these businesses are a little different. But let me just kind of give some texture to each of these business. There's a cloud communication business, which is where we went in with Airtel IQ. This is really core to telco because it's delivering voice, video, messaging, chat and so on through APIs on the underlying telco infrastructure. We're doing that in a completely value-added way and being able to actually compete with many of the software companies. The second business is cybersecurity. Again, we feel this is very integrated with the connectivity side because when you go to a home or a business and you -- they don't just look in connectivity, they also look for secure connectivity. So bundling secure connectivity for SMEs, leveraging the security intelligence center for large enterprises with the trust that people give us in these large enterprises is the second area that seems very attractive. The third area is Airtel IoT. This is a connectivity platform or a full end-to-end platform that's been built by engineers. We've launched it in the last couple of months. We already have a few million customers on it, meters, so on and so forth, fleet managers, different meters and so on. And we think that could be another very interesting opportunity over the next 5 to 7 years. The fourth business is cloud. Now cloud is actually in 3 parts. One is the public cloud, which is where you're reselling on behalf of the larger hyperscale cloud players. And this is where the margin profile is a little lower, but then there is no CapEx form. There's also private cloud, which is our own cloud in our own premises for regulated entities like banks or government and so on, and this is where the margin profile is better. And then, of course, there's the telco EDGE cloud, which is our 120 MSCs, and then of course, at some stage, we have 500 EDGE data centers over the next few years as 5G rolls out, which again comes with a good margin profile. So if you look at all of these businesses, they are, in a way, very squarely linked with connectivity, but they are adding value and really approaching customers to solve their real problems, whether it is cost, whether it is experience or whether it is cybersecurity. And that's really what our strategy is to address the full addressable market of INR 90,000 crores. And by the way, we got to do this -- in order to do this, there are 2 enablers. One is the channel and the go-to-market capabilities have to really be strengthened. Because I have been talking to many of the very well-run B2B companies just as learning expeditions to see what is it that we can learn from them. One of the big things that we need to get right is our go-to-market capabilities. So our in-sourcing of our own field force, our upgradation of channel capabilities, digitizing those capabilities to make sure that solution selling becomes easy is a very important part. The second part is having product expertise and product specialists who will be able to sell those businesses when you meet a customer. And the third is actually building out the future sets in the technology in each of the areas. For example, if you take cloud communication or Airtel IQ, we need to build our several feature sets. Today, we are in voice and messaging, but tomorrow we're going to be in video. At some stage, we'll get into the call center space because all of that is the cloud communication suite. Now these will need to be built out, and that's the other part that needs to be focused on.

Thanks, Gopal. The next question is from [ Tara ] Agarwal. His question is that on an ex IUC basis, our ARPU has been about INR 145, INR 150 and actually growing for the last 20 quarters. Subscriber addition has been strong and significant, but pricing increase remains elusive, specifically in the background of INR 200 sort of -- or up to INR 300 ARPU in the long term. In this context, do we believe that lack of pricing growth has more to do with industry dynamic? Or more on account of underlying subscribers affordability?

No. I think that -- obviously, I think I've mentioned this before, that we have seen markets where we've had periods of even price wars in markets with 3 players in markets, with 2 players like Philippines; 3 players was Thailand or Indonesia, which, in some parts of the country have 5 or 6 players, but in many other parts, basically has just 1 or 2 players. And it is about the relative ambitions and the relative aspirations of each player. So there is an industry dynamic here. Having said that, I think the good news is that, as you know, we are down to a 3-player market, which is in a large market like India, that's great. And at some stage, I think pricing will happen there because this is the only way in which you can return a reasonable capital -- return on capital employed.

Thanks, Gopal. The next set of questions are on the debt and balance sheet, and maybe I'll request Harjeet to take those. Firstly, what is the -- how does the management see the debt reduction plan for Airtel over FY '22 to '23? Is it fair to say that debt has actually peaked out as of now? Secondly, what are the conversations that we're having with rating agencies? And thirdly, is there a plan to raise funds by a QIP or [indiscernible]?

Thanks, Komal. So I think the question to ask is, what's the debt underlying trend, both what we are seeing and what we have visibility of? If you see the last 12 months, frankly, I think our net debt has increased by about $3-odd billion. And our AGR liability itself, which we have accounted for as debt, is about more than $3 billion. And we've also paid about INR 80,000-odd crores under the AGR liability as upfront payment. So really, the core, ex of AGR, despite our spectrum of front load has actually gone down. It is because of the AGR, both the upfront payment and also the new load that has come up, these net debt seems to have increased. The upfront payment of INR 60,000-odd crores will more than that was done in March. It's factored into the March net debt. That reflects the underlying business, both in Africa, by itself, which has been reflective to the dividend policy and the free cash flows they have, is also now building free cash flow pool in India. This will continue, clearly, 2, 3 reasons. Gopal mentioned briefly while the composition of the CapEx is changing, but the CapEx had peaked out. So in a way, the EBITDA is growing, both through net adds and also expansions through outtrading, et cetera, and obviously, non-telecom business is growing, Africa growing. So there's a free cash flow pool in India, which will continue to grow. There are dividend-paying subsidiaries, including Airtel Africa and Indus Towers, our company. That reflects that the debt should continue to go down from where we are. And obviously, if there's anything nonroutine, which we're happy to talk about, that's more a at-the-then moment decision point, whether it's 5G or something else. Mind you, some of these increases that we have seen over the last 1 year are also despite some bit of acquisition of new stake into towers company. If you wind that off, there's a little more debt reduction. The other piece in leverage is essentially how the core EBITDA is performing. I think if you see in a dollar billion sense, about $1.7 billion of EBITDA in this quarter for the company, which is about maybe close to $7-odd billion of annualized run rate, and at that, what the current net debt is fairly comfortable in terms of overall leverage ratio. Gopal mentioned sub-3, and frankly, if you deal off some of these DoT and AGR-related areas, which are not traditional debt pools, neither the FLOs, you will see the ratio is even more beneficial. By the way, in India, which is where the dominant DoT AGR pool is, if we have INR 1,05,000 crores of -- or a little more of DoT plus financial lease obligation. And our debt is more like INR 1,20,000 crores. So essentially, it's only $2 billion of dollar bond debt, et cetera, that we have got. So leverage, comfortable. Free cash flow pool, there, growing. Dividends from the subsidiary is continuous. There is an annuity growth there. CapEx stabilized to marginal reduction as we go through. And core leverage ratio is comfortable. Within the leverage ratios, the debt composition is really not much towards external debt. And that's why I think rating agencies are fairly comfortable. There is no pressure that we are seeing from any of them. In fact, our efforts have always been and they will continue to say that what we see as this AGR and DoT debt is more of very different debt-like items rather than debt. And thereby, some of the rating agencies are seeing all of that. But that said, current situation, we need to go through the fundamentals of the country, fundamentals of the industry, overall situation for our country's economic growth and our own countries rating, et cetera. So I don't see any large substantial positives on the rating, but there's no reason on the rating side for us to be really worried on in terms of any adversity of that.

Thanks, Harjeet. The next set of questions, Gopal, are around the impact of the second wave of COVID and what are some of the early indicators that we are seeing as far as this wave is concerned as well as the next quarter is concerned? And do we feel that the impact this time could be much stronger than what it was last year, specifically given that the incremental 4G penetration is happening amongst the more lower ARPU customers?

That's a good question. I think we have seen -- firstly, with this devastating second wave, we are seeing a lot more of fear and insecurity, relative to what we saw last time. I think last time was -- in fact, within the company, if you look at the COVID cases, the previous peak that we saw or active cases within the company was September 2020, which was about 246 cases. And in April, we hit a new high of almost 1,400 cases, so about 4.5x jump in the number of cases that we saw. The partly -- like I said, partly, it's fear and insecurity. There's also a varying stages of lockdown. I would say almost 90% of India is now almost in full lockdown and the balance 10% is either a night lockdown or weekend lockdown. So there has been a reduction in economic activity as...

Komal, can you hear Gopal?

I think I can't hear him.

I think we have lost him. Let's give him a minute to join back.

Yes.

I think maybe just while Gopal dials in back, just wanted to follow through on the last question that I was thinking through. I think maybe we were also asked whether there are any monetization plans deleveraging on an inorganic basis. I think that historically, we've maintained our stance that we will be opportunistic on the subsidiaries. We've seen towers play off for us. Last year, we saw data centers and minority stake monetization, which happened with Carlyle. And I would say it has to build up. But the good news in Africa, both the residual towers portfolio that was waiting to be sold out of the balance sheet that we had, the deals have been signed with Helios Towers, as also a minority set of investments from the financial investor, which is TPG, and a strategic investor, Mastercard and Airtel Money business. That is also bringing down the debt in Africa. So overall debt will also reduce over time. And more importantly, that also sort of provides a valuation framework for Airtel Money within the Airtel Africa franchise. So I would say, while the core is also deleveraging, by itself, and EBITDA is improving, so that's giving you debt head capacities and there is monetization flows also expected as we do some of these activities.

Gopal is just dialing back in. We'll just give him a minute.

Yes. I think he's just joined back as a presenter.

Sorry. I don't know what happened. That's happened for the first time in my [Technical Difficulty]. Sorry, I don't know where I dropped off. But let me take that question again. I'm assuming that I did drop off. So I think we are seeing some impact of the second wave of COVID. This impact is both psychological and emotional, which is related to the fear and insecurity amongst customers. The second impact is financial pressures. As migrants go back to villages, their incomes and livelihoods have been destroyed and so some of them are now consolidating their SIMs, using one SIM between the family, maybe the wife, the child had a SIM. Now they're using one SIM. And the third impacted forces on acquisitions because of reduced walk-ins into our stores or [indiscernible] as well as our own stores. All of this is having an impact. We saw the same impact last time. We also did see a sharp recovery in June last year as the markets began to open. Remember, 90% of India is now on lockdown. The other 10% is either on a night lockdown or a weekend lockdown. So it's really we are operating in a lockdown situation. I would say that we are -- so given that softness that we've seen in the month of April, we are currently preparing also for potential recovery as we see markets opening up. We saw that strongly coming through in June of last year. This will mean readying our go-to-market efforts, readying our network. So all of that is underway. For the time being, we are putting a lot of emphasis on business continuity. So this is being done through a real great focus on alternate channels, such as chemists, such as grocers, which are open, and of course, online, which has now become really meaningful with almost 65% of our business going through online. Our broadband, generally, has been pretty good. So because, at this point in time, people do need a lot of broadband. So we saw a reasonably good April. And while there's been some softness, I think broadband is looking strong. The B2B business continues to look strong. And so, it's the mobility business, particularly amongst lower-income consumers, migrants and so on, that seem to have been more impacted. So I would say that's the broad state of how we are currently confronting the pandemic.

Thanks, Gopal. The next set of questions are on our digital business. Firstly, a couple of people want to know that in all of the areas that we operate in, such as cloud, security, et cetera, they're very focused domain players, who customers would ideally like to prefer. So what is it which is differential in our offering, which allows us to scale these businesses? And a related question is, we [Technical Difficulty] good talent for these adjacent businesses?

Yes, I think that's a great question. I think we've had a lot of soul searching to really go in here. And I think we've come to the conclusion that we do not want to be -- have our own cybersecurity product or our own cloud service compete with AWS or Google, or in fact, develop our own content, for example. And I know that a few years ago, we were sort of thinking through the strategy, but I think we've come to that conclusion. Like I mentioned, I think our strengths are the data that we have with our customers, the ability to collect money, payments, the fact that we can access 300 million mobile customers, 20 million homes, et cetera, and of course, the network that's the underlying fabric on which a lot can be built, which is location and things like that. So if you look at these businesses, just to come back, let's take cybersecurity. Airtel SECURE is really in partnership with 5 or 6 of the top cybersecurity companies, but we have made our own investment in the security intelligence center. We have several -- almost 100 customers now on this platform, which is enabling us to expand our cybersecurity offer. In the case of cloud, we're actually partnering with Google and AWS in the public cloud. Our private cloud, we run for our own needs because for regulation, we do need a private cloud and we're able to orchestrate this. We're able to take this same cloud to the regulated entities, like banks, financial services and so on and so forth. And the third is EDGE cloud, which is a unique strength that telcos have because telcos have the strongest EDGE infrastructure in the world where more latency applications can be delivered. So that's as far as clouds. If you look at Airtel IQ, this is in the core business. Because this is really about -- if you're making the call to your food delivery agent on a Swiggy app, then the underlying technology that is being powered for that call to APIs inside the app with privacy and all masking features is Airtel IQ. And this -- our teams know how to sell because this is a core of our business. But by the way, this actually gives you great stickiness and actually opens up a new revenue stream. So that's another example of how -- or you take ads, in Airtel Ads, we're using our 200 million digital assets to actually monetize on top to advertising for a base of customers that's very attractive to most players in India. So I think the way we see it is, we see this as leveraging our trust, our access, our relationships, our data, our payments capability. The second part is that a lot of this still needs to be developed with strong emphasis on technology and talent. And there, I think we made a really strong progress. Some of the talent that we've been able to acquire have come from around the world, from the best companies, combination of startups and large technology and Internet companies. And they've come to Airtel for a very simple reason. They come here for a job that they are empowered. They come here because they have canvas that is large and they can create and solve problems at scale. And I think today, we have about 1,600 people. The competition is intense because it's tough to attract talent. But our perception of our capabilities amongst talent has increased dramatically in the last 2, 3 years. And a lot of it is on account of the leadership team that we've been able to put in place who are able to then bring people at the next line who are as good, who are then able to bring people to the next line. So I think that's the virtuous cycle that happens when you get on to this pace. So I think that's really what it is. It's not that our attrition is not high. Attrition continues to be high, but this is the way it is in this tech industry. Attrition in the tech industry is high, and you have to deal with it. And as long as people spend more than 18 to 24 months, then stay with you and grow with you, then you're okay. Some of them may leave earlier on because they are young developers just looking for a higher compensation.

Thanks, Gopal. The next set of questions are around DTH, and Badal perhaps you want to take. Is -- what caused -- what explains the reduction in DTH slabs in ARPU? Is it an industry-wide phenomena?

The way I would -- sorry, Badal, I'll just take this and then I'll hand over to you. The way I would look at it is that if you -- yes, we did see a softness in the customer base in a quarter 4, but we had a strong recovery in April. So I would kind of discount that a little bit. And I would look at it as saying what was it in full year '19, full year '20 and full year '21. We had 1.2 million users that we added in FY '19. We had another 1.2 million in FY '20. And we've added close to 1.2 million, 1.1 million besides in FY '21. So underlying trajectory is not a source of concern. The challenge in DTH because of regulatory reasons, the ARPU is now more or less fixed. So a lot of the growth really has to come from new users. And this is why we have made a bold call to actually integrate the channels, both mass retail and the direct to customer. And we were expecting to have a really very, very solid quarter 1, but then the lockdown hit us. My own sense is that some of these capabilities on the One Airtel plan as well as the mass retail integration, we think there's still a very strong upside for DTH to gain share from cable and expand its presence.

Gopal, one question is on 5G. What is our view on the 5G outlook of the timing of its rollout? And any expectations around auctions this year?

I think we were earlier under the impression that auctions could happen by December. This is what we were informally -- was mentioned. It's not formal. It is not explicit, but we thought that this would happen. And the reason I think also is that, today, if I look at the last month, 6% of our device shipments -- just consumer device shipments are already 5G-enabled. So it's beginning to start to move and the price of these devices come down to 20,000 as well. Having said that, with the pandemic that has hit us, my own sense is that this may get delayed by a few months. So whether it happens in this fiscal or next year is something to be seen. I think we have to wait and see what the demand is.

And Gopal, in the interest of time, I'll probably take one last question. Are there any plans of any of the promoters to sell any stake in it?

No, I think that, that was a surprising speculation that I heard this morning, and I just want to emphatically state that both the Bharti family as well as Singtel have absolutely no intention of any selling or sellout or any stake sell down or any block sale that is happening. So this is just speculative activity and just rumors flying around the place. So I just want to reassure everybody on this call, there is no such intention, whatsoever.

And Gopal, in the interest of time, that was the last question. I'll hand it back to you for any closing remarks, please.

No, I do want to thank you for this. I think we are in an exceptional time with the pandemic. So my only wish for all of you to stay safe, take care of yourselves, and hope to see you soon, basically, sooner rather than later. Thank you very much.

Thank you, everyone, for joining the call. We will also make...