Bharti Airtel Limited ($532454)

[Audio Gap] may include certain forward-looking statements that must be viewed in conjunction with the risks that we face. Post the management opening remarks, we will open up for an interactive Q&A session. [Operator Instructions] The participants may click this option during the management opening remarks itself to ensure they find a place in the queue. [Operator Instructions] With this, I would like to hand over to Mr. Soumen Ray for his opening remarks.

Thank you, Vaidehi. Welcome to the Q4 FY '26 earnings call of Bharti Airtel Limited. I have with me Gopal, Shashwat, Akhil and Naval. Pleased to inform you that today, we will have Mr. Sunil Bharti Mittal, Chairman, Bharti Airtel Limited. Joining us for the last 10, 15 minutes of the webinar to address queries relating to promoter shareholding. . I will now start with an update on our consolidated financials for the fourth quarter and full year ended FY '26. Post which, I will hand over to Shashwat to talk about our India business, including the strategic priorities. First, a quick round up on FY '26. We delivered another year of strong performance, our consolidated revenue crossed another milestone and came in at a lifetime high of about INR 211,000 crores. backed by strong performance in both India and Africa. EBITDAal came in at about INR 1,08,000 crores with a margin of 51.2%. India EBITDAal, including passive came in at about INR 7,272,500 crores, growing around 18% and delivered a 3.1% improvement and stood at 51.7%. Our sustained operational excellence is underpinned by our portfolio premiumization, sharp execution and tight control over costs through risk initiatives. CapEx for FY '26 for India, excluding passive, was around INR 31,000 crores. Operating free cash flow is EBITDAal minus CapEx, was a solid INR 41,500 crores plus. Disciplined capital spending and operational excellence continue to strengthen our balance sheet. Net debt to EBITDAal now stands at 1.1. The Board recommends a dividend of INR 24 per share, a significant increase over last year is INR 16 per share. This is in line with our stated philosophy of progressive increased payouts. Let me now turn to our Q4 performance. Consolidated revenues came in about INR 55,400 crores, a growth of 2.6% sequentially. Africa maintained its underlying growth trajectory. Q4 constant currency revenue growth was at 1.1% and was impacted by seasonality as well as lesser number of days. Currency tailwinds further supported growth in reported currency. India revenues, excluding passive, came in at about INR 36,100 crores. EBITDAal margins came in at about 52%, an improvement of 20 basis points. Let me now talk about the strength of our diversified portfolio and an update on our new growth rates. Our diversified and resilient portfolio continues to play well underlying performance across India and Africa was strong. Africa now accounts for 29% of revenues. India mobile 52%, India mobile at 13% and at 6%. Our investments are directed towards future proofing Airtel by building world-class digital network, sharpen the core portfolio and scaling new digital growth engines. Our strategy to further diversify our portfolio is reflected through investments in new growth bets. Let me spend a few minutes on the same. Over the year, through a very disciplined approach, we have identified new areas which we call adjacencies and operated calibrated experimentation on them. To us, adjacencies means the business must pass 2 filters. First, we have a proven right to win. And second, we can create a differentiated value proposition. We have sharpened our focus basis the result of the experimentation in these specific adjacencies. These are data centers, financial services and Airtel Talk. In data centers, we continue to make steady progress against our ambition of building 1 gigawatt capacity over the next few years. To augment this journey, Nxtra announced a $1 billion fund raise from marquee investors around side participation from Airtel. We see this as a strong validation of the scale of the opportunity and our execution capabilities in this business. In Financial Services, we reached a milestone with our subsidiary, Airtel Money Limited, driving the Reserve Bank of India's approval to operate a nondeposit-taking nonbanking financial company. We are now progressing towards commercial launch. Over the last 3 years, we have built a strong foundation as a loan service provider serving customers need through digital-first solutions. Our loan service provider business continues to deliver strong growth with monthly loan disbursement run rate now over INR 550 crores. What gives us confidence here is the combination of our digital platform, data and analytics capabilities and strong operating discipline. Together, these position us well to expand access to simple, secure and innovative financial services at scale. Within our financial service portfolio, Airtel Payments Bank delivered another quarter of strong performance. It ended Q4 with monthly transacting users of about 120 million. Annualized revenue run rate is now about INR 3,400 crores, growing 23% Y-o-Y. Deposits remained strong at over INR 4,600 crores, growing at 27% Y-o-Y. In Airtel Cloud, our telco grade sovereign cloud offering is seeing encouraging traction. We ended the year with securing 24 deals, followed by further wins in April and we are currently in conversation with multiple customers across industries. We have also made very good progress in building attributes and credentials required by our customers in this business. In these new growth bets, we are still in early days, but we are encouraged by the progress, confident in the opportunities ahead and committed to building these businesses with the same discipline, customer centricity and long-term focus that have shipped Airtel's journey so far. Now an update on group synergies. We are working on various areas, including technology, network, supply chain and talent across the group. Initial outcomes are extremely encouraging and moving as per our plan. Our tech stack has already been extended to Africa Payments Bank and Indus Towers at Arm's length pricing. This gives significant leverage across the group to shorten the learning curve, drive cost effectiveness and accelerate digital ways of working to drive growth. In addition, we have taken B2B and Homes as 2 areas for massive synergies. Within this, we are working towards significant using dependence of the by transitioning towards high-power batteries and renewable power. We strongly believe that work across these areas will provide meaningful outcomes with superior revenue growth and cost efficiencies. We will be the material transaction that was approved by the Board to acquire additional stake in our Africa operations. The Board yesterday has approved a share flat transaction between Airtel and ICI to acquire additional 16.3% in Airtel Africa. We continue to remain confident about the long-term growth opportunity in Africa, led by the new tailing density at about 45% on unit SIMs, smart to penetrations of only about 52%, very low data consumption per customer and overall demographic, young demographic profile of the market. Further, there are 2 large growth opportunities. The first one being homes, enterprise and data centers and the second being Airtel Money, where there a potential for further value unlock with listing. This is a no-cash deal and value accretive to Airtel shareholders. Before I hand over to Shashwat, I would also like to talk about the impact of the ongoing geopolitical crisis. There are a few areas of our operations, which are seeing impact, including international CapEx in account of INR depreciation, restriction on gas supply affecting galvanizing industry in turn leading to lower power build-outs. The other obverse impact is energy price increase. Africa has already been impacted by it. Having said that, we are looking at all possible opportunities to mitigate the impact with amplified efforts through our risk initiatives. With this, I will now hand over to Shashwat for an update on India business.

Thank you, Soumen. Very good afternoon to everyone. I'll start by sharing an update on our ESG plans followed by each of our business segments and then our strategic priorities. Let me start with ESG. Our ESG progress is anchored in our strategy and in the way we leverage technology and digital innovation to drive sustainable operations with enhanced efficiency. . A key focus area is increasing the use of energy from alternate to renewable sources. This is reflected in our continued expansion of solar power deployment across our network infrastructure. We ended the year with 42,000 network sites, which have solar access. Over the last 2 years, we have solarized nearly 27,000 network sites. We also made significant progress on workforce diversity. Women contribute to over 20% of our workforce today, improving from 11% that we had in 2023. This is not enough, and we believe that we must continue to work much more to improve our women's representation in our workforce. Moving on to a quick update on each of our businesses, and let me start first by rounding up the year gone by. We delivered strong performance across our businesses. Mobility sustained revenue market share gains to reach a lifetime high share. Homes affiliated strongly this year, adding 1.2 million customers, while B2B further strengthened its market share in core connectivity and delivered strong outcomes its digital businesses. Our IPTV launch last year was well received with encouraging customer adoption. We continue to invest in digital infrastructure, deploying nearly 7,800 more network sites and rolling out nearly 43,000 kilometers of fiber. Fiber deployment remains a strategic priority for us, and I'll come back to this shortly. Underpinning this our digital-first approach and relentless focus on serving customers better every day, FY '26 was a landmark year for us. We continue to deliver strong performance and seeded 3 new digital growth engines that we believe will drive the long-term growth of the company. Let me now turn to the quarterly performance of the business segments for quarter 4. Mobile, we added 4.7 million customers in quarter 4 and 5.8 million of those were smartphone customers. Our ARPU for the quarter came in at INR 257, which on an ADV basis was an increase of 3% for the quarter. We're not happy with the ARPU increase of INR 3. Part of this issue was linked to West Asia crisis and international roaming revenues, but we are now determined to doubling down on all our levers on ARPU and growing and accelerating this space. Homes, we continue to deliver another strong quarter. Our net adds came in at 1.1 million. By FW continued to expand the addressable market for us, we are deepening our footprint on FTTH with accelerated Homepass expansion. Digital TV saw a turnaround. We added nearly 0.5 million customers during the quarter, led by the IPTV adoption. Our IPTV take rates continue to improve and are delivering on our converged agenda on content. Airtel business revenue came in at about INR 5,500 crores, growing 2.6% sequentially. We ended the year on a strong note with a healthy order book and a funnel across domestic and global business with multiple wins from large enterprises. During the quarter, we secured multiple deals on IoTs, security, cloud, core connectivity and Nxtra, and we ended the year with a strong order book growth of 17% in FY '26. Digital businesses delivered a strong revenue growth for us and growing at 27% in FY '26. We continue to strengthen offerings through strategic investments across our digital portfolio, spanning cloud, cybersecurity, financial services, IoT, digital platforms and CPaaS. These investments are enabling us to build scalable enterprise grid digital capabilities and diversify our revenue mix. Let me now move to our strategic pillars and start with quality customers. Starting with Homes. I had mentioned earlier, we see a large opportunity with market potential of nearly 100 million connected homes over the medium term in India. Growing smart TV penetration, evolving content consumption behaviors of consumers and the growing need for reliable and secure home connectivity are driving a very strong demand well beyond key urban centers. Given the global environment, there have been challenged on this business with memory and chipset supply as well as prices. Given this scenario and the fact that fiber offers the superior experience and reliable connectivity to our customers, we have doubled down on all our efforts to grow our fiber business. In FY '26, we rolled out upwards of 8 million home passes to cross 45 million home passes, and we continue to expand rapidly. Another area where we see growth is driving fixed and mobile convergence. We have seen converging WiFi and customers drops their churn by nearly 50%. We are determined to leveraging our existing relationships with high-value customers and scale our converged base. We have taken a step in this direction through our recently launched 1 Airtel plans which offer customers convenience, flexibility of bundling as well as great value. Let me now switch to mobile. The focus on mobile is to dramatically accelerate our ARPU growth in the business. Overall, upgradation with data consumption in 5G, handset upgrades from feature phones and international roaming offer large headroom for growth. However, we see a very large opportunity in upgradation to postpaid and are determined to accelerating postpaid growth by driving differentiation. Our rural network expansion program continues and can contribute significantly to our growth momentum. Let me now turn to B2B. Majority of incremental growth for the industry in B2B is coming from adjacencies, including cloud, security, IoT, CPaaS, data centers. Core connectivity growth is moderate, and we continue to grow competitively. To capitalize on the growth opportunities, we are focusing on 3 key areas. First is to build a gold standard infrastructure with low latency flapless fiber networks, deeper subsea cables presence across the globe, augment DC-to-DC connectivity and expand our OPGW infrastructure. Over the last 3 years, we have deployed over 143,000 kilometers of fiber, and we believe the pace of deployment should continue to address the growing customer needs across as well as in future proofing at Airtel itself. The other area we need to strengthen is our additional portfolio capabilities while building a world-class delivery and assurance organization. We are developing a comprehensive suite of digital services to deepen and sharpen our portfolio across cloud IoT, cybersecurity, CPaaS and SD-WAN. We are strengthening our account management capabilities to deliver superior customer experience supported by digital tooling and data science platforms. The second pillar of our strategy is the obsession to deliver brilliant experience. Delivering an exceptional experience to our customers remains paramount to us and underpins everything we do from network investments to digital innovations. Our converged data engine that powers digital experience layer, accelerating our ways of working and enabling deeper customer engagement through persuasion and contextual marketing. Our network priorities are towards building a gold-plated experience, and we are investing in strengthening our transport layer and launching advanced capabilities on 5G. Our 5G network is now fully SA ready is running fully on SA, while mobile customers are transitioning in a phased manner. We continue to refine our digital tools and depth of data science to improve our experience and reduce customer churn. Customer obsession is deeply embedded in our culture that we have built over the years, and this is anchored in 2 core beliefs, ownership mindset and entrepreneurial spirit. Embodying this philosophy, we have established an annual tradition. Teams across the organization spend a day in the field with frontline colleagues directly interacting with customers, listening to them, learning and grasping their pain points. Every year, through this initiative, we gather critical insights across network, customer journeys, delivery and assurance and many other areas. These insights help us resolve issues structurally and make our network more resilient and help us serve our customers better every day. The third pillar of our strategy is to build and leverage our digital capabilities. AI is now central to our digital agenda, and we are progressively embedding AI across our platform architecture. Let me give you some flavor of notable outcomes from AI last quarter. Our fight against spam has always been powered by AI skill. In quarter 4, we added an additional 14 billion SPAM calls and over 520 million spam messages. Our next action AI model generated 135 million actions last quarter, which helps us accelerate our cross-sell on WiFi postpaid and financial services. In Q4, we processed 375 million customer interactions with our voice AI bot and processed 256 million images using our Vision AI for safety, design and work mention. AI is contributing to nearly 30% of all code written at Airtel, and this number is growing with every passing week. I want to emphasize that we are still in the early stages of our journey on AI, but we are beginning to see meaningful impact scaling up across businesses. The last and fourth pillar of our strategy is based. As there are cost headwinds on both OpEx and CapEx, I want to underscore that we have widened the funnel to identify and eliminate waste across the organization. While unpredictable scenarios are playing out globally, the cost pressures we are seeing today remain confined to a few specific areas, particularly in servers and memory spaces as well as availability of these components. Significant steps to reengineer and redesign are underway in the organization to mitigate these pressures. We've also taken significant steps to reduce our dependency on diesel consumption across our sites. These initiatives are beginning to deliver meaningful outcomes, and we believe there is a lot of work still to be done in this space of waste. To sum up, overall, we delivered another year and a quarter of strong performance, underpinned by strength of our diversified portfolio and sharp execution. Looking ahead, we continue to see large growth opportunities across mobility, led by ARPU growth through portfolio utilization and postpaid, rapid expansion of homes and across B2B. At the same time, our investments are directed to building digital businesses and new growth bets at scale to future-proof Airtel and its long-term growth. Additional acceleration remains at the core of our strategy with AI increasingly embedded across the businesses at scale. The strength of our balance sheet reflects our disciplined capital allocation, sustained deleveraging and operational excellence. This has enabled us to sustain a progressive dividend policy with our dividends in FY '26 increasing by 50% over the previous year. With that summary, let me now hand it over back to Vaidehi for the Q&A session.

Thank you very much, Shashwat. We will now begin the Bharti Airtel Q&A interactive session for all the participants. Please note that the Q&A session will be restricted to the analyst and investor community only. Due to time constraints, we would request if you could limit the questions to 2 per participants to enable more participation. [Operator Instructions] Participants are requested to limit their questions to Bharti Airtel until 1 p.m. as the management will start the Q&A discussion of Bharti Hexacom from 1 p.m. onwards. With this, the first question comes from Mr. Manish Adukia.

This is Manish Adukia from Goldman Sachs. My first question is on capital allocation, and thank you for the color around dividend payout. Now the free cash flow you're generating in the India business last 12 months more than $4 billion consol business, more than $5 billion of free cash flow. In the context of that free cash flow, the dividend payout is still as about 40% of that free cash flow generation plus for Africa, you've done like a share swap transaction. So in the context of that large free cash flow generation over the next few years, one, how are you thinking about progressively what payout made like in a steady state? And two, if you can just talk about what are the other priorities in terms of assets outside of India that you may potentially look to explore in the future given just the strong free cash flow generation? And maybe the criteria you may look to assess any asset that you may want to acquire outside India. That would be my first question, please.

Yes, Manish, let me take that. I think the -- obviously, free cash flow generation for the company has increased. And that is the reason why we have sort of stepped up and also said to you in the past that there will be a progressive dividend policy, which is the reason that you've seen step up in dividend. As far as capital allocation is concerned, I think the way we think about it is the first and primary port of call is to really invest in the core business. This is the core business in India, the core business in Africa, the core business and Indus Towers, et cetera. And I think the climate stake in Africa was was predicated on that assumption of really picking up a greater stake in a very valuable asset where the penetration of data teledensity, the penetration of smartphones is low Airtel Money is a big opportunity. So we are very excited about that. The second part of call is really to continue to deleverage to the extent that we need to. But the third part of call is to invest in some of these adjacencies, which Soumen spoke about. Data centers, you will note that despite the investments we've put in, we are a big player in the data center market. We are only at about 10% to 12% share. And for a company of our size, we're not satisfied with that kind of presence. So we really need to step up our game in data centers. And our ambition is to get to a gigawatt, as we mentioned in a few years' time, but that game will not end there. We will continue to build out. And you know the data center market has 50% to 60% of its demand coming out of Mumbai. So land will need to be acquired and data centers will need to be built. Second port of call is real-round financial services. And this is why we've announced our NBFC after the experiments that Soumen spoke about. Again, we are excited about it because we believe we have a genuine moat here to really drive the business as a whole and create stickiness for our user base. In a market where the penetration of financial services and lending generally is very low and the headroom for growth over the next 3 decades is high. Obviously, it's a business that needs to be run prudently. Collections are more important. As many of you have told us in smaller conversations, and we fully understand that. But the power of our platform is showing us that the delinquencies as well as the collection cost as well as sales acquisition costs are much lower than if you do it alone in a very fragmented market. So that's the second port of call. The third port of call is really around cloud. And here again, we are -- we haven't really started. I mean we've got 25 deals, as Soumen mentioned. These are small deals, but we've just begun. We think this could be a large opportunity, especially in a new geopolitical context where a lot of workloads. And when I speak to many companies, they tell me that a lot of workloads do need a sovereign requirement. We are fully sovereign. We are controlled by an Indian entity. So the control plane, the data plane, the jurisdiction, all of it is in India and our capabilities that we have built for ourselves, which, by the way, runs one of the largest cloud entities in India, has given us the confidence to extend into the space. All of these will require capital. So once we've concluded that, then we will look at any other areas. As of now, there's nothing to talk about in terms of additional capital being needed in any other area.

So just to clarify on that one given whatever you listed is all India assets and given the large traction in Africa, you've announced, it's safe to assume that for the foreseeable future, there are no plans for further capital deployment in non-India assets? Would that be fair to say?

For now, yes, absolutely. I think we will continue to look at bolt-on acquisitions in the spaces that we've already talked about, whether it's in towers, it's in cloud. It's in cybersecurity and B2B specifically. So those are areas that we will continue to look at. But if there's anything that's going outside, then at this point in time, there's nothing to talk about. .

Very clear. My second question, just on ARPUs. And when I look at the ARPU, while yes, growth has been weak, but even despite limited ARPU growth, you have -- you're now generating like decent returns on capital in the India business at about mid-teens. Free cash flow is improving every year. Your CapEx requirements are not material, at least in the core wireless business. So in the context of that, one, is it even realistic to assume any meaning tariff hikes in the foreseeable future? Like what would be the rationale for more tariff hikes on the business is doing generally okay from a free cash flow and returns perspective? And the related question mentioned that from here on, you're not happy with how the ARPU was in the previous quarter and look to accelerate. But what will really change the tariff? I mean, your postpaid adds have been strong. Data adds have been strong. So given the base is so large, without tariff hike, shouldn't the growth only continue to decelerate, if you can just maybe provide more color there.

Manish, I mean let me take this and Shashwat can supplement this if Shashwat got anything to add. But fundamentally, my belief is that the price architecture is countries broken. You contrast Indian pricing with African pricing. For every JV that is consumed, there is a little bit of revenue that you get. You're at fundamentally at about INR 343.50 you're capped out because you're running unlimited data plans. Now nowhere in the world do you see this capping out at unlimited data at these levels. I mean if you look at markets in the U.S., for example, these kind of plans begin you $60, $70 look at even less Europe, most of these markets, unlimited data really begin at about EUR 35, GBP 30 to GBP 35. So the fact is that it's the architecture of pricing that fundamentally is broken and needs to be repaired. You're absolutely right. The lower entry levels, the price is today at INR 199 in India. At a time like this, to take up prices on those kind of packs is something that we will need to do with caution. But if the allowances were to change and the architecture were to change, which is really moving from small, medium, large and extra large, where you have different sort of amounts of allowance going in, it allows a natural pathway to upgradation. Given the stratification in this country from the very poor all the way to the very rich, the fact is that ARPU will only go up. So it's an unfortunate situation like I've mentioned before, where the rich are paying less and the poor perhaps paying as much as they need to. So this is, I think, the thing that needs to change. Shashwat, is there anything to add?

No, Gopal, I think this is resolved. Thank you.

The next question comes from Mr. Kunal Vora. The next question comes from Mr. Ankur Rudra.

So you mentioned ARPUs coming a bit lighter than you were expecting, but it's still sort of up 5%, thanks to all the organic drivers you've been working on. I'm just curious if you think about F '27, some of the headwinds on international roaming probably are still here. Do you think there will be an additional headwind from smartphone shipment drops this year, which might lead to lower organic ARPU sanction short of any kind of tariff increases?

Shashwat, do you want to take that?

Yes, I'll take that, Gopal. Ankur, I think the only thing I would add, Ankur, is there is we have seen some bit of softening of shipments of handsets, et cetera prices going up. So we haven't yet seen any impact, but we can't rule it out. Having said that, the organic ARPU levers that we have, which we want to treat much more, and especially led by a much bigger play in postpaid as well as getting customers to their best fit plans, upgrading as much possible within the tiers itself, driven by consumption. . I think those levers still give us a good headroom for continuing ARPU growth for many quarters to come. So I think it's a combination of both. As Gopal said, the pricing architecture eventually is the biggest unlock if you're ask me. But the feature phone to smartphone space needs to be watched because handset prices have up very sharply in the last few weeks, which we have watched.

The second question is on CapEx. You did highlight several demands on capital across new initiatives, financial services and perhaps even 5G densification, if that's part of the plan. Could you maybe talk about CapEx plans for the coming year, how this will change versus prior years, particularly given the intensification on the growth bets versus the core? And maybe just a follow-up, how overall capital allocation should look like this year?

Look, I think let me qualify the capital allocation and just sort of I reassure it and underscore the point that I was making. The first and primary port of call for any capital allocation will be our core business. I think we have no right to play in any adjacencies unless our core is vibrant. So within the core radio CapEx, as I've mentioned before, is moderating. In Africa is growing, but in India, it's moderating. The core CapEx, which is a smaller component of CapEx is moderating. Transport CapEx, we are going to double down and actually do more. We've been doing this systematically for the last 4 years. Our fiber pops -- our fiber points of presence need to increase a lot more quality of infrastructure needs to be put in place. There is a big project that is underway, which we spoke about last time on resilience, just the resilience of our edge data centers. And we are focused right now on building in the next 18 to 24 months, 56 world-class edge data centers, which will really stand us in very good stead over the next 2 to 3 decades and build a strong point of differentiation for us for computation that could happen at the edge over time. So that will continue to be a focus. Data centers, we've spoken about, which will be a focus. Home business is another big area of focus. That will continue to get all of the focus. And then wherever -- the cloud business is a modular business in terms of the servers and the compute, but it goes into our existing data centers. And we are carving out space in all the data centers that we have. We currently have 3 cloud regions, and we will continue to bolster capacity in those regions as and when we need to. Financial services will require some investment. We've announced our investment plan already. We will see how this plays out. We'll do this carefully and prudently. And we will step up our growth, but we will continue to do that in a way that leverages our -- or sort of builds a culture of both collection as collection efficiency as well as compliance. So the net result of all of that, if you look at CapEx, erstwhile we don't give a guidance typically, our sense is that we will be in the ballpark of this year, give or take a little bit.

The next question comes from Mr. Aditya Suresh.

The first question is on return on capital employed. You had kind of mentioned that there's been an expansion there. To the consolidated year at about 19%. Is it possible to articulate any targets on a say, 2-, 3-year basis in light of these capital allocation bets which the company is taking? That's question one. Question two was on Nxtra. Could you articulate the business model, which you are thinking about for Nxtra? Is it the currency? Or is it going to be involving GPUs and laying out GPUs? In that context, again, could you maybe elaborate and touch on a little bit on your partnership with Google here?

On return on capital, I will dodge the boot of what our targets are. I don't think we give those targets out. I think the fact is that on our core business, given the scale that we had and given the massive amount of heavy lifting that we've seen over the years and the obsession to strip out waste, we hope to continue to see operating leverage as we get growth. That should give us additional sort of returns. On the Nxtra side, for us, the model is really around tenancy. This is a co-location model with -- specifically with Google, they are building a very large AI data center in Visakhapatnam. And we are sort of building it for them. So there's, again, a colocation-led project. We are currently not doing GPU as a service. As I mentioned earlier, we are watching the space because the GPUs that we bought for ourselves in the recent past few hundred GPUs, the efficiency of those GPUs is 10x of what the GPU is worth 2.5 years ago. And they're also cheaper. So it's unbelievable. Actually, the pace at which these chips are getting more and more efficient. So we are using it for our own needs for all the AI work that Shashwat spoke about. But our data centers are being built with the latest technologies in terms of cooling capabilities, power efficiency and also a standard toolkit on the build-out, which is really world-class. So that's an area that we're working on, so that -- it's fungible across different customers as we go and build these data centers out.

The next question comes from Mr. Sumangal Nevatia.

My first question is on the wireless. One on the ARPU since you've seen very impressive 5% organic growth year-on-year. And in our opening remarks, a focus on ARPU. How should we look at this in absence of a tariff hike? Should we further expect some acceleration here? . And then on the wireless CapEx, we've hit a decade low at around 16% of sales. Are we close to the bottom? Or should we expect further moderation before 6G CapEx kicks in, in the near coming years?

Shashwat, can you take the first one and Soumen, maybe you can take the second.

Yes. So on the ARPU, I think we touched upon this briefly, which was the fact that we see substantial headroom. There are 2 parts to it. One is really correcting the pricing architecture going forward, which as and when it happens, will happen, but within the current construct, levers of postpaid penetration in our base, which we feel needs a much larger unlock. International roaming, we'll see how that plays out the year, but even upgrades within the consumption baskets of our customers and that they are consuming, we continue to be very optimistic, and this will be our largest growth lever as well. So I think that's what I would just reiterate. .

Coming to the CapEx on wireless, I think 16% is a derived number. As Gopal said, the core would be funded completely. We will ensure it is funded. So it has moderated significantly. Yes, it is one of the lowest as percentage sales. Also in absolute terms, it's very low. But if tomorrow, we need to do higher 5G densification, we will not shy away. So we're not chasing a target, but we will be optimal and prudent in deploying whatever is required because that's the biggest of the core businesses. .

Got it. One just last small question. On the Homes ARPU, while we've seen impressive adds over the last few years, ARPU has been decelerating. So should we expect this trend to kind of continue given we are in the land grab phase in the coming years? .

Shashwat?

I'll just take that. I think on the Homes, if you see the new additions in the industry have happened from -- at a slightly lower ARPU compared to the traditional ARPU that we had. But this is flattening out. I think some of our quarter-on-quarter ARPUs are kind of bottoming out, which trends we are beginning to see in the last 2 quarters.

I think we -- just to qualify that, there are 2 ways to look at ARPU. One is the customers that you acquire the new customers and the existing customers. So the existing customers, simply because of penetration as it's grown, you had people on higher plans in the past. And so just the mix kind of drives that ARPU down. But that, as Shashwat said, the acquisition ARPU is not declining at all over the many quarters. So at some point, I think the real challenge here in Homes is to step up our penetration and really grab as much share of homes because long term, that will be a very significant mode for the company. This is a very high -- this is a business that you return that is very profitable over a period of time because the churn and the customer lifetime value of a home tends to be very low. And this is -- by the way, this is all across the world. And the moment you would drive convergence, which means content plus mobility, the lifetime value increases even more. So our metric really is to expand the base right now. That's the focus.

We are very pleased to have Mr. Mittal join us on the call today. [Operator Instructions] With this, the next question comes from Mr. Sanjesh Jain,

I think I'll take this opportunity to address. Mr. Mittal. Sir, just wanted to understand now that we have executed the Africa state and in the process, the promoter stake in the company has gone up and we also have a stated objective of having an equal stake along with the partner Intel. Now how should we see whether you still continue to have the view that it will be only Bharti Telecom, which will own market? Or do you see an opportunity to have an equal stake with and ICL also owning along with Bharti Telekom?

Sanjesh, basically, the belief remains that you must have everything through one company that should be the controlling promoting shareholder. And Bharti Telecom, as you know, historically has just not only in the founding promoter of this company has had almost all base for a long period of time, a controlling shareholding of 51%. If you really ask me, my own wish is that in the next it's hard to put in years on it. And the next decade, as I kind of come to a point where I hand over the reins to the next generation as shareholders. Bharti Telecom should get back to a controlling shareholding 51% or just over 50%. So that's 10% more to go. And for a company of this magnitude and size, you can imagine that it's not a small to. So the principal direction or vision of that I carry in my mind is all shares that we can from both ICL or Bharti family entities and Singtel should go into Bharti Telecom as much as possible. So to put a bit more granular for, Syntel had a difference of about 7% -- or rather has 7% direct stake in Airtel and it had about 6% to equalize. Now with this transaction, once this is done and share that issue, this gap comes down to 3.6%. So first and foremost, we should see, overall, this gap dramatically reduces. And, which has been on the path of the sell-down of this direct stake has to send now much less than earlier. So 3.6% over the next 3 years, so let's say, 3, 4 years as 1 less than 1% a year, gets single onto the equalization part that they are stated in the last 2 years. and that brings us to equal stake. And then it will be during this period of effort, depending on how well Gopal, Shashwat, Soumen and the entire management team delivers this wonderful cash flows. More dividends, more buybacks, idea to keep using that twin lever to get BTL above the 50% stake. That will be my cherrish desire. Our stake must go back to BTL. For that, I need a little bit more lever in the heads of BTL, which I'm hoping will be delivered through continuously enhanced dividend as you're seeing. And I think, hopefully, in the next couple of years, some buybacks in addition to the dividend. And that will give us the necessary capacity in BTL to buy more. If I could do it today, honestly, I will do my transfer to BTL. BTL needs then a little bit more room on cash.

That's very clear. So very helpful. Two questions on Shashwat, Gopal and team. First, on the enterprise business. You said the order book has grown 17%, which is quite heartening to hear. How should we see growth rate now that the commodity business, which we discontinued is behind. And the growth rate for FY '27 should be significantly better in FY '26. And will this also mean that the new business will come with better ROCE in the enterprise part of the business? That's number one. And then second, on the adjacencies, We have been seeing there's a widening gap of market share between us and Jio. We are more using fiber as a lever to grow appears to be having a lower lead time and they are able to grab that the customer base much faster. How should we see our strategy of heavily focused on fiber versus FWA for the peer? That's my first question.

Yes, Sanjesh, thank you. On B2B, the B2B business actually comprises of whole portfolio of businesses. So on the one hand, you've got a commoditized business, which is really messaging. The margins tend to be low, but there's also CapEx is just riding on the existing pipes. And this business is sort of flattish to declining slightly depending on how you skin it, fundamentally because of price pressures as well as the move to OTT platforms. So this is one part of the business. The second part of the business is really connectivity, which is growing. The industry grows at about low single digits. We've been growing faster because we've been gaining share over the last few years, and we continue to focus on connectivity. We have a leading position here in connectivity, particularly in distributed businesses, manufacturing, distribution, banking, financial services, et cetera, et cetera. We need to perhaps a slightly better job in the IT, IT services space, but we have leading positions here on connectivity. Then you come to the third part of the portfolio, which is data centers, which we've already spoken about, and the fourth part of the portfolio is our digital businesses. The digital businesses are essentially CPaaS. These are sort of value-added over the messaging -- basic messaging, where you know the kind of things we've done on spam. The first project that we started with HDFC working with a direct pipe that really cuts spam all together. No CapEx here, right? So the margins tend to be low because when you start looking at EBITDA, it's not necessarily a relevant indicator because there's no CapEx on that business. That's one type of business. The second is security. Security comprises of basically our security operations center. That's a service business. Again, very little CapEx. It's people who run it and tools that run it and then partnerships with security companies, which sell products, again, no CapEx. Then there's cloud, which has high CapEx. So when you look at all of this, if you ask me, if we have to step up growth, there will be some margin pressures, because there's just the mix of the business. Connectivity, we will always continue to have very high margins. CPaaS have lower margins and digital businesses will have lower margins. Our effort has to be to grow the top line faster and grow the absolute EBITDA faster, right? Absolute profit faster. I think that should be the focus of this business, and that's really what we are embarked on. On the home broadband piece, Shashwat will add to this. But I feel for us to comment on competitor and how they're performing is not a relevant thing to do to deal. The way that we look at it, Sanjesh, is we have various ways to look at our competitive performance. We use OTT platforms like Meta, which have very rich data that is provided on the number of sessions or the number of connections that are run on different mediums, whether it's wireless, it's fixed or it's fixed wireless access. And when I look at that over the last few quarters, and I must say that this was not true 2 quarters ago over the lap of quarters, our performance has been very, very delightful.

I think Yes, Sanjesh, the only thing to add on that is, also what we are seeing is, for us, if we can get a customer on fiber, that's the best type of customer. For us, the wireless strategy is augmenting reach a little bit. So wherever we can't get, we put in there. But we will stay fiber first, Sanjesh. I think we can -- and as Gopal said, on the way we measure it, slight differently, but we will stay focused on just building as much business as possible through fiber.

So, there's one other thing that is happening, which is the -- I think Shashwat alluded to this, that the rising prices of chipsets and memory, particularly on fixed wireless. And you can recall, like a year ago when we doubled down on fixed wireless access the cost to connect to home was more or less the same as fiber. That has fundamentally changed in the last 3 to 4 months. The fixed wireless access now become very much more expensive. So we've pivoted the whole company back to a dramatic obsession on fiber. In fact, our digital tools have been rolled out to minimize the leakage that we are seeing of installing a fixed wireless connection where fiber is available. And that has almost come to 0 now because of the digital tools that have been launched. That will -- that has actually been triggered in the month of April, and that will play out over the course of the next couple of months before we sort of really ramp this up in a very big way.

That's very clear. One bookkeeping question probably. I see the EPS translation from the EBITDA has been a little weaker in my view. The interest and finance costs have been quite sticky at INR 4,000 crores, while our net debt keeps coming down. Even I was just looking at India business, our interest and finance cost continues to remain sticky while the deleveraging effort continued. Soumen, can you help us understand what's stopping the finance cost to fall in the same pattern as our net debt? When should we see the transition?

I'll answer that quickly. There are 2 parts, the consol in India. In control, there has been a lot one-off in Africa, which will unwind. And in India, a large part of debt reduction actually happened towards the end of the quarter. The money of the rights also came in around mid of March. The payment of the AGRs happened on the last day. So there is a reduction, and you will see reduction going forth. Sanjesh.

The next question comes from Mr. Vivekanand Subbaraman..

Mr. Mittal, you shared certain aspirations like your desire to see in BTL stake to 51%. In the past, you also mentioned about a subscriber target of around 800 million. Now with this new bet in, what are the other growth areas that you may be looking at, perhaps, which could be growth engines for the group, let's say, in the next decade. That's my first question. I'll ask the other ones for.

Yes. I mean Airtel and India, the combination offers a once-in-a-lifetime opportunity to any corporation anywhere in the world with 1.5 people, young, hungry for more services than products, a growing country it's an opportunity which is very rare. I mean there are opportunities that have been available to companies in China of this scale. I mean I can't really think of any others, other than OTT players like Meta and Google and all of a halo to. And China, as you know, has been having restriction that has been confined locally home. So going into Africa, 15 years back, was a very, very forward-looking visionary move that we made. And today, that is paying dividends. And Gopal earlier alluded, Africa is the India 20 years back and got another 1 billion plus young people growing at rapid click and what India saying the last 10 years in Africa as seen in the next 10 years. So it's really a very strong to play market for us in a very, very densely populated young population. And as more AI as more technology takes routes, we become more and more relevant by the day. And in most African countries, there are only 2 operators, somewhere there are 3, but mostly 2. India has really got 3 private operators amongst which 2 are I think a very large dominant market share. It's a once-in-a-lifetime opportunity, and we should add whatever we can add that makes sense. We have been very disciplined. We have not gone into areas that do not meet with the core of our business. And we never had this good on to solve for more cash coming than what we need for our core business. I get everything to core allocate more in what is required for growing areas like data center and cloud, also look at adjacencies, but with a very, very strong disciplined lens. Financial Services has been much talked about in the analyst community and investors. Fact is we are looking for a very small controlled financial services business at the moment. If it starts to yield great results and you come back and encourage us to do more, we'll do otherwise, what are you saying? We want to give small ticket lending to our own customer base who we understand deeply well. And we have demonstrated over the last 1.5 years, 2 years that, that lending that we do is significantly superior to the best-in-class in the industry. And even people like Bajaj Finance and many others come to us to do the LSP program because we identify customers to pay significantly better than the industry benchmark. So there is a clear method behind what we are doing. And the total amount that we are looking at allocating in the next 5 years, we have stated INR 20,000 crores, of which INR 14,000 has to come from Airtel. It looks like it will be probably significantly less than that as per the work that we have been doing. It may be much less than that number. So we're talking about a very small amount over 5 years being allocated to financial services. And after 1.5 years, if we don't show you a demonstratable proof of the success that we are getting, then you will be sure that we will not be showing in money behind a business that is not making sense for us. We have spoken in the past about expanding in the other geographies. We are very mindful that we have tasks to do. This Africa exchange of shares that was announced yesterday, is akin to applying another company of a large size, a $3 billion transaction means you're making an acquisition. And you're making an acquisition of a business that you know deeply well, a business in which all of us are working day and night, adding value, we need to own more of it. Thankfully, the U.K. regulations allow you to go up to 90%. With this move in, we have gone up to now 78%. And ambition for Airtel should be whatever is allowed to go up to 90%, 1 day should get there. And that is being ably helped by Airtel Africa's own buyback program. They have been doing buybacks from time to day. Hopefully, in the next few years with the buyback program, and if some other block comes from any other investor to Airtel attention. We probably, in the next several years, get to the point of owning more of Africa, so that we can get more income flowing back to the mother ship Bharti Airtel and we'll reward our shareholders even more. Then after giving allocation to all this, if we are still less with more money, as I mentioned, we'll do more dividends, we'll do buyback programs. But we've never become like IT companies, who have done nothing but just taken money out as dividends and buybacks, dividends and buybacks, and they become a shadow of themselves. Many of those companies should have been buying leading-edge businesses, their own industry in the last 10, 15 years, they would have been in a different position today. You will probably come back and encourage us, go buy some more good value telecoms around the globe. But I think that, as Gopal said, nothing on table today is probably a medium to longer-term horizon. We'll come back to you. But I think we'll get to 800 million customers by way of mobile, home broadband, our digital services, our financial services and both between India and Africa, getting to 500 million here and 300 million in Africa is a dream, which is visible. I mean, you can look at that, it's not too far.

That was very helpful. Shashwat and Gopal, standing on your question on the pricing architecture, what will it really take for the industry to move to usage-based pricing? Because we've also seen that since the time the leading 2 telcos rolled out 5G, there is still an unlimited offer going on. And the 2 of you perhaps have not yet decided to move even 5G to meter data. So is there path that you have in mind to moving to meter data? Or is it just an aspirated? .

Vivek, I'm mindful of time. So probably this will be the last question before I hand it to Vaidehi. As of now, there is -- this requires -- it's a competitive market. We will not do anything that will hurt our business. I just mentioned that this architecture doesn't make sense. Let's see how this plays over time. Vaidehi, back to you.

Thank you very much, Gopal. Thank you, everyone, and thank you for joining us, Mr. Mittal. We will now begin with the Bharti Hexacom earnings call. I would like to hand over the call to Mr. Soumen Ray for his opening remarks on Bharti Hexacom performance. Over to you, Mr. Soumen.

Thank you, Vaidehi, and good afternoon, everyone. Welcome to the Bharti Hexacom Q4 FY '26 Earnings Call. I have with me Kartik and Naval on the call. I'll start with our FY '26 performance. We delivered strong results with continued operating leverage led by laser sharp execution and operational excellence. Revenues and EBITDAal growth came in at about 9.4%, and 17.9%, respectively. Margins expanded by 3.4% to 47.6%. Strong operating leverage is attributable to the continued efforts on portfolio premiumization and our war on waste agenda. The company further strengthened its position in both markets with sustained revenue and market share improvement. The Homes and Office business saw a stellar performance with 51% revenue growth and the highest ever net adds of 395,000. Our IPTV services launch is seeing strong traction and strengthening our convergence strategy. During the year, our CapEx spends were directed towards 5G densification, network modernization and growing our homes and IPTV business rapidly. Despite that, our operating free cash generation, which is EBITDAal minus CapEx came in at about INR 2,935 crores, a solid 27% increase over last year. Balance sheet is robust with the net debt excluding leases at about INR 2,000 crores. The Board recommended a dividend of INR 18 per share as compared to INR 10 per share last year, in line with our philosophy of progressive. Moving to a quick update on our Q4 performance. We delivered another quarter of strong performance with revenue of INR 2,414 crores, growing 2.3% sequentially. EBITDAal for the quarter came in at over INR 1,155 crores with a margin of 47.9%. We ended the quarter with mobile customer base of 28.8 million. Net customer addition for the quarter came in at about 370,000. Smartphone customer addition was strong at almost 5 lakh, about 478,000, highest in the last 4 quarters. ARPU for the quarter was INR 252 impacted by 2 days less, whilst on an ADB basis, it would be closer to about INR 257, 258. Our Home business continues to see strong momentum with record high net adds of 148,000, driving a revenue growth of about 20% sequentially. This momentum is underscored by our FWA expansion to newer pin codes continued deepening our FTTH footprint and the rollout of IPTV. CapEx for the quarter was INR 586 crores. acceleration was. Operating free cash generation, which is EBITDAal minus CapEx came in at about INR 570 crores. With that, I will hand over to Vaidehi to open the floor for questions.

Thank you very much, Soumen. We will now begin the Q&A interactive session. Due to time constraints, we would request if you could limit the number of questions to 2 per participants to enable more participation. [Operator Instructions] With this, the first question comes from Mr. Sanjesh Jain.

I got two. First, the comparison of mobile growth of Hexacom versus Airtel. In this year, on both levers, Hexacom has performed lower than Airtel on revenue, we were 8.3%, Airtel was close to 12% on an EBITDA, we were 15 Airtel was 17-odd. I thought we had a lever to grow faster than Airtel under penetration and all those early work we had. What changed in this quarter? And how should we see for the next coming years? Should this accelerate? What are the corrective measures we have taken? That's number one. Number two, on the utilization of cash flow, all the peripherals, what we are doing is at at level. Hexacom largely restricted itself to mobile and FTTH where it is fully funded. Should we see a much sharper payout ratio in Hexacom in the coming years? These are my questions.

Thanks, Sanjesh. Sanjesh, I think our impression that Hexacom is underpenetrated, the 2 circles that it operates, has grown out well. I mean, of course, we can cut the data the way we want. But we have done reasonably well. The ARPU gap is much closer. We have been able to close the ARPU gap. As I had told earlier also, the postpaid penetration bit and the IR bit, this will be a little differential. As you know, and was, I think, mentioned earlier in the call, the smartphone upgrade will see a bit of stress. And hence, we might lag a little bit because that's a very strong indicator. We'll be launching some reps of driving convergence, and we will see how best we can accelerate the growth of Bharti Hexacom. I would say it is competitive. It is not lagging the market. And we continue to look at opportunities as to how to grow faster. ARPU has certainly come out well. We will continue to look at customers as well. On the next question around utilization of cash flow, yes, some of the growth engines that the parent has is not available to Hexacom. Now it has 2 challenges, Sanjesh. One challenge is, of course, the requirement of investment is not there. But on the flip side, the growth and the new growth will be, to that extent, restricted. We have increased the dividend payout significantly, and we have been committed that we will be looking at a progressively increasing dividend payout, and we continue to remain on that. I think we have moved from 3 to 4 to 10 to 18. So I think we have been sticking to our word around progressingly increasing the dividend payout.

That's very clear. Just one, if I may squeeze. On the FWA considering the -- all the issues around chips, which Gopal spoke, do you see home growth can slightly decelerate until this entire chip situation get resolved for Hexacom?-- because that was 1 big lever for us.

Yes. So how do you look at FWA? The way we look at FWAs, what is cost of a connected home? What is the cost of connecting a home. Now in difficult terrains with fiber, cost of connecting a home is much higher than, let's say, in a plane layer. If you are in Maharashtra, it is much easier to lay fiber or in Tamil Nadu or in such place. If you go to MESA, actually, FWA creates an opportunity to go around and connect more homes, which it will be difficult with fiber. So I do not think that whilst prices will go up and we will pivot to fiber wherever we can. We are going to give up on the opportunity of acquiring more homes and offices to either FWA or fiber in Bharti Hexacom. No, we will not let up on that opportunity.

The next question comes from Mr. Pranav Kshatriya.

First was regarding the cost of the ARPU. So if I look at this quarter's results, we had a fairly good growth in the as well as postpaid. However, ARPU growth has not happened. You partly explained in the opening remarks that there was some impact of international roaming. Is that the only factor which impacted in this quarter? Or there is something else which is playing out?

Well, yes, there is something else which is played out, which is the whole as much as you can on 5G packs. That is -- the more adoption happens, that will clearly create a headwind. However, having said that, the ARPU that we give is the average for the quarter -- I mean the exit for the quarter, the quarter plays out there at 3 months. But Pranav, there is no red flags per se on ARPU in terms of is there a cause of concern. The headwinds that we have are similar to any other player in any other geography, which is lower international roaming, hence prices are slightly going up and hence, having a pressure on 2G to 4G upgrades. And the fact that we now have a pack, which does which destroys the whole price ladder, which any company should have. If you have send something, the more you consume, the more you pay, not necessarily in the same ratio, but certainly in absolute terms. With that getting broken. So those are the headwinds, which are there for this organization as well as for any player in this country.

Okay. My second question is, there has been a good addition in the homes subscriber addition. Should we expect the pace of addition to continue? Or there could be some headwind?

Pranav, first of all, I cannot give you forward-looking statements, we don't give guidance. See, the objective is to continue to grow. As of now, there is no reason for me in the earnings call to flag off that there is a concern, but it's a competitive market. So the competition part always exists. But there is no fundamental reason why we are letting up on our effort to grow homes as much or even more. So the effort will continue. In 2 months now, we will meet again 3 months from now, we'll meet again and we'll see. As I said, whilst the chipset prices have gone up, we are not relenting on our effort on acquisition, we are pivotal. If the fiber is available, we would like to fiber first and also trying to see how much we can lay fiber. As mentioned to the previous question in participant Sanjesh, it's difficult to -- it's a difficult terrain. And so to that extent, the pivoting in these 2 geographies would be a little less than some other geographies where it is much easier.

The next question comes from Mr. Vivekanand Subbarama.

Yes. I'm Vivekanand from AMBIT. Just 1 question. what does the regulatory charge this quarter pertain to? Is there any new demand from the government, which has expected you this quarter? If you could clarify on this would be great.

Well, as any prudent organization, we look at on the basket of charges and whatever is spending in the ecosystem. And we follow a very prudent accounting policy. That -- and we do it from time to time. There's a regular cadence that we do as guided by -- along with the auditors and by the Board and Audit Committee. . So we have felt that there is something that we should in a prudence take provision for, which has been disclosed. There is nothing new exceptional or unearthly which has come. It is just the interpretation of issues as time progresses and various things happens in the ecosystem, but nothing new. .

Okay. Soumen, just to understand better. This charge was earlier, perhaps part of contingent liabilities and has now been provided for. Is that how one should think about it since you're saying that there is no new demand?

Well, I will not give you specific details, but it is not a new thing. It was an existing thing. The interpretation of that existing thing has been changed and accordingly, it has been provided for. .

Thank you, everyone. Now I would like to pass it back to Mr. Soumen Ray for his closing remarks.

Thanks a lot, everyone, for joining the call for Q4 FY '26. Look forward to catching up with all of you in the next quarter. Thank you.

Thank you, everyone, for joining us today. The recording of this webinar will be available on our company website. Have a great day ahead. Bye.