Bharti Airtel Limited (532454) Earnings Call Transcript & Summary

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] With this, I would now like to hand over to Mr. Gopal Vittal for his opening remarks.

Good afternoon, everybody, and welcome to the quarter 1 earnings call. I have with me, Shashwat Sharma, akhil and Naval. Let me comment on the overall performance as well as the new [indiscernible] that we are focused on before I hand over to Shashwat. We delivered yet another quarter of strong performance across the group. Consolidated revenue was INR 58,500 crores, growing at about 5.7% sequentially. Africa maintained its strong growth trajectory with a constant revenue growth of 5.7%. India excluding the Passive infra growth was equally strong at 3.6% sequentially. Our consolidated EBITDAaL was at INR 29,800 crores. This is a growth of 4.2% and the margin stood at 51%. Our operating free cash flow, which is EBITDAaL minus CapEx, was at over INR 16,450 crores. Cash for the quarter was about INR 13, 390 crores and the operational discipline continues to remain an enabler of our strong performance with focused execution and efficiency improvements through on our War on Waste initiative. Our consolidated net debt-to-EBITDAaL improved 0.7 and India without Passive infra is now lower than 1. The strength of our balance sheet is underpinned by our prudent capital allocation, disciplined CapEx and continued operational excellence. And this is well recognized by leading global agencies with sustained rating upgrades during the quarter. Our diversified resilient portfolio continues to deliver strongly. Today, I want to spend a little bit of time on Africa, a market where we see a significant long-term opportunity. During the quarter, we completed an EPS-accretive share swap transaction that increased our Airtel stake in the Africa business to over 79%. This strengthens our participation in Africa's growing profit pool and underscores our belief in the scale and durability of the opportunity across the continent. We've invested significant time in understanding each market, building local execution capabilities and developing healthy relationships with regulators and other stakeholders. This experience has also affirmed our decision to introduce Indus into Africa. Airtel's African operations today generate an annualized EBITDA of over INR 35,000 crores. And I truly believe this is a very, very rare achievement for an Indian-based company. Africa is also, as you know, an important growth engine in Airtel's portfolio. contributing in the last one year, almost half of our consolidated revenue growth of 16-odd percent for the year. Over the last 5 years, the business has delivered constant currency CAGR growth of over 20% in revenue and over 24% in EBITDA, reflecting both the strength of our execution and the scale of the opportunity. The structural growth potential is supported by a combination of favorable demographics, low digital penetration and rising demand for connectivity, financial inclusion and digital infrastructure. I believe Africa today resembles India nearly 10 years ago, a large, young and increasingly digital population with meaningful headroom for penetration-led growth. And let me give you a few examples of this just to reinforce this. Telly Density, which is penetration is at 45%. And smartphone penetration is only 52%, showing you the headroom available. The average median age across the continent in the markets we operate in is under 18 years. And the total population across these 14 countries is about 680 million and growing strongly. Home broadband penetration is only 2%, and there are at least 30 million households that can afford a broadband connection. The enterprise and data center opportunities remain largely untapped. We have over 82,000 kilometers of fiber with access to large submarine capacity. And finally, Airtel Money has now achieved meaningful scale with quarter revenue of over $400 million, growing at 26% year-on-year in constant currency terms. And the opportunity ahead here remains significant. With 64% of adults across our footprint, still without access to a formal bank account. Given this growth trajectory and the large addressable opportunity, Airtel Money is now preparing for a London listing in the second half of 2026. We're investing with discipline to capitalize on multiyear opportunities across Mumbai, across 5G, homes, Airtel Me, B2B and data centers. And while they're still very early homes in the B2B segment, our balance sheet gives us the capacity to build a meaningful position in each of these areas. As a group, we brought significant heft to our Airtel operations in the last 18 months. Benefits now accrue across technology, across network, across supply chain and talent. And we operate far more cohesively, translating these efforts into stronger operation, execution and operating excellence. We've called out three additional areas for [indiscernible]. B2B, where both solutions and go-to-market capability is replicated across the continent. On homes, all of the lessons that we've learned in India are now extended into Africa. Energy efficiency is another key area for focus. We're working with Indus to deploy high energy efficiency power equipment and advanced energy storage solutions aimed at reducing diesel dependence across sites. We've also looked at the opportunity to extend our digital platforms, which has stepped up the execution capability within the business. So we believe going forward, there is a very large opportunity around synergy for -- across the India business, Indus Towers, AitelPayments Bank and our Africa operations. Let me provide a brief update on our new growth bets, and let me start with our financial services portfolio. We recently went live with our lending services, marking an important milestone in our financial services journey. We've done this at remarkable speed just about 9 months from the date of the application of the license. And the real reason for this, which is the secret sauce inside Airtel is that we have reused all of our digital platforms. So our data platforms, our CLM platform as well as our channel platform are now in the NBFC as the same platform that we've been using inside the telco. The momentum is building and we are excited by the opportunity as we work towards making simple and secure financial services for accessible to a wider set of customers. Airtel Payments Bank which is another engine of our financial services portfolio continues to deliver strong performance. We ended quarter 1 with a monthly transacting user base of around 120 million. The annualized revenue run rate is now over INR 3,400 crores and deposits remained strong at a shade under INR 4,400 crores, growing at 17% year-on-year. Both these businesses are integrated by what we call our storefront, which is Airtel Finance. This storefront, Airtel Finance covers lending through our NBFC as well as some partners, transacting, which is our payments bank, some early moves on savings through fixed deposits and more such engagement options are planned. In fact, the total loan disbursement cycle finance is now at over INR 750 crores per month. Using our digital capabilities, we've proven -- we have a proven model to deliver lower delinquencies, lower cost of acquisition and lower collection costs. We believe these capabilities will help us scale our NBFC and the payment stack. The second growth bet is data centers. The business is on a strong growth trajectory with sustained revenue growth. We believe that our market share here at about 12% is clearly low for the large heft and size that we have as a company. We're working towards our ambition to build 1 gigawatt in the next few years. Many of those contracts have been stitched up. We're also in the process of acquiring more land in the right locations. And in the coming quarters, as you -- as we have finalize some of these landmark deals, you will hear more progress more progress update from us. The other area of focus is Airtel Cloud. We continue to see a strong momentum here. with almost all critical services now live on our platform. Over the quarter, we've added 11 new customers, taking the total customer count to 33. The strength and readiness of our platform is reflected in all of the certifications that we received from [indiscernible], amongst others, which will further strengthen our go-to-market proposition. We believe this business needs four things to really succeed, the right talent, capital that we have already invested the go-to-market capabilities that we have and right solutions for continuing to build out what customers need. We are stepping up significant investments to continue to invest behind this in order to scale this. With this, let me hand over to Shashwat for an update on the India business.

Thank you, Gopal, and a very good afternoon to everyone. I'll first share an update on each of our business segments in India, followed by [indiscernible] our strategic priorities. Let me start with Mobile. This quarter, we added 3.3 million revenue earning customers and 5 million smartphone data customers. We added 1 million customers this quarter, which is the highest ever addition in any quarter for us. Postpaid customers now account for 8% plus of our total customer base. Our ARPU for the quarter came in at INR 264, which also had a benefit of an extra day during the quarter. Home, we delivered an [indiscernible] of 473,000 which is a moderation over our previous few quarters trajectory. I will talk about this in detail in the strategy section. Digital TV, we added 6,000 more customers during this quarter, led by a strong adoption of our IPTV. IPTV take rates continue to improve and deliver on our convergence agenda that we have been driving the business. Airtel business revenue came in at about INR 5,670 crores, growing 3.2% sequentially and nearly 12% over last year. The quarter for large deal wins across core, core continuity and digital portfolio as well as we have a visibility on sustained growth in the quarters to come on B2B. Our additional businesses [indiscernible] in a quarter of solid performance with revenue growth of nearly 6% sequentially. We are seeing strong traction across our portfolio, including Cloud, Cybersecurity, IoT, Digital Platforms and CPaaS and we are seeing some notable deal wins during the quarter. Let me now move to the strategic pillars and start with quality customers. In the whole segment, we still see a market opportunity, which remains very significant. Demand for high-speed connectivity continues to be supported by rising Smart TV penetration, higher concurrent usage within households and rapidly evolving data consumption needs. Majority of this demand is concentrated across the top 1,000 towns, and this is shaping where we invest and how we serve this market. Our strategy in Home is centered on building a high-quality customer base through differentiated services and a seamless experience across touch points. Over the last couple of quarters, we have drawn important learnings from our FW expansion. While low entry-level pricing helped attract customers, the outflows were not consistent with the quality of customers franchisee wanted to build, with a higher churn and bigger continuing in certain cohorts. In addition, driving global memory and chipset pricing have also challenged [indiscernible] economics. We have responded to this with discipline. We have tightened acquisition quality, doubled up on improving our churn and driving towards a healthy business outcome. Our conviction and sustainable growth in Homes is to accelerate fiber and deploy FWA with sharper precision where the economics and customer quality are not [indiscernible]. This has already been to show momentum through the last few months and as we have gone through this. Leveraging fixed mobile convergence on top of this is central in our Home strategy. Our One Airtel plan brings these services together through a proposition that offers greater convenience, flexibility and value for our customers, and we are seeing promising adoption. Convergence will be an important lever to deepen our relationship with customers and reduce churn. Let me now switch to Mobile. Our focus remains on accelerating ARPU growth through portfolio premiumization on Mobile, while continuing to maintain a competitive share of customer net additions. Postpaid is a key ARPU growth lever for us with significant opportunity ahead of us. Our recently launched [indiscernible] technology, leveraging network slicing on 5G is delivering the differentiation on postpaid, which is driving an activation of the business. For upgrading customers here, we are focused on driving persuasion, simplification of our [indiscernible] and superior value discovery across all our channels. Within prepaid itself, we continue to see a large opportunity to move customers to their most relevant plants by using customer context and next best action capabilities that we have developed on our visual stack. In addition, handset upgrades from feature phones to smartphones, rising data usage, 5G adoption and international roaming provide meaningful headroom for ARPU expansion going forward. I do want to reiterate that the longer-term pricing architecture of the industry still needs to be repaired and the industry must charge for data consumption. This is Paramount for sustained ARPU growth in the longer term. Let me now turn to B2B. Enterprise demand is moving beyond traditional connectivity, creating significant opportunities across our portfolio. We are approaching this opportunity with a clear execution plan across three areas. First is to build a world-class infrastructure. expanding our fiber availability, termining quality to deliver [indiscernible] networks augmenting our subsea capacity, deeping our data centers and data center data center connectivity with the OPGW infrastructure. Over the last 3 years, we have deployed about 1,39,000 kilometers of fiber, and we believe sustained investments in this infrastructure area is critical to meeting our enterprise demand. Second, we are scaling up our digital services portfolio across cybersecurity, IoT, CPaaS, SD-WAN and Cloud. And third, we are raising the bar account management as well as our delivery and assurance. And all these initiatives are beginning to deliver positive outputs and are helping for us to accelerate our business. The second pillar of our strategy is the obsession with offering brilliant customer experience. Customer experience remains at the heart of our strategy and underpins [indiscernible] from network investments traditional innovation. We are investing in upgrading our transport layer and building advanced 5G capabilities. Network slicing is a key enabler of this strategy, which is helping us improve our 5G network efficiency, expand effective [indiscernible] and deliver differentiated experience for our customers. Our [indiscernible] engine, which powers the digital experience layer, enabling faster execution and customer engagement with greater precision is at the core of our growth. By bringing together customer context, data intelligence and digital tools, it allows us to deliver more personalized and contextual interventions across the life cycle of the customer. The third pillar of our strategy is to build and leverage our digital capabilities. And here, we are using AI to reimagine how work gets done across [indiscernible] from customer engagement, network operations to frontline productivity and product management. The focus is on combining data, intelligence and automation in ways that improve speed, precision and consistency across the business. I will share a few highlights from the quarter that's gone by. We continue to progress in AI for personalization, span production and call center operations. This is something I called out last quarter as well. [indiscernible] context-based decisioning has now expanded to 7.7 billion next best actions. And this is now lit up across all our channels, led by [indiscernible]. Since its launch, our AI anti-spam solution in our [indiscernible] 93 million spam calls and 4 million spam messages and blocked over 1.4 million [indiscernible]. Come interactions through our call center voice bot has increased to 309 million in this quarter. I'm happy to report that this quarter, we are able to make a meaningful difference in our delivered book manship across 30,000 field engineers that we had of with a patented technology that allows influencing on the endpoint device rather than the cloud, we are now leveraging real-time image processing to standardize workmanship in our operations. This is leading to a step change in quality of installs in [indiscernible] and enforcing adherence of safety measures on ground, which remains a very important priority across the business. All of this transformation is led by a homegrown agentic platform, with a clear focus on creating cost-efficient automation and compute and having clear guardrails for customer safety, privacy and sovereignty of what we do. The fourth pillar of our strategy is War on Waste. This remains a core pillar to drive cost discipline across the outage. Over the last 5 years, we have optimized over INR 11,000 crores from our network OpEx, reflecting the depth and consistency of this program. We have further sharpened our focus on identifying and eliminating the waste across the portfolio. This includes redesigning our best and taking decisive actions to mitigate cost pressures, including redesigning redesigning our tower operations to eliminate diesel consumption and making sharp choices in the way we deploy CapEx in Homes business. These efforts have helped us in navigating the sways of global cost headwinds in the business. At the same time, we recognize that there is considerable growth ahead to be done to building a more efficient, resilient and sustainable operating model. So to sum up, overall, we have delivered another quarter of strong performance, supported by the strength of our diversified portfolio and sharp execution across all our businesses. Looking ahead, we continue to see significant growth opportunities across our businesses, which is the growing mobility ARPU, accelerating growth in Homes and scaling our B2B businesses. We are investing across our additional portfolio and new growth engines, that has strengthened Airtel's future readiness and support sustainable long-term go. Obsession with drilling customer experience remains our driving force. And now we are imagining our processes with the world of AI to enhance productivity, step change our experience and drive operating leverage. With that, let me hand it over back to Vaidehi to open up the Q&A session. Thank you.

[Operator Instructions] With this, the first question comes from Mr. Piyush Choudhary.

Is Piyush from HSBC. Two questions. Firstly, on the Mobile ARPU. What led to strong improvement quarter-on-quarter? Was there any product revamp or some specific plan adoption roles like fast lane? Any color over there would be useful? And should we expect this trend to be sustainable in absence of tariff hike? Secondly, on Airtel business, you've levered a very strong growth year-on-year. Can you break down the levers of such growth into various subsegments, like connectivity, cloud, data center and if you can discuss the outlook of that. Is this kind of number sustainable?

Shashwat, why don't you take the first question and I'll take the second one.

Yes, sure, Gopal. So thank us for that question. And I think on Mobile ARPU, CVCs, as we said, we see substantial improve within the current customer base itself, the way we are structured because there's enough upgrade that's happening, which is driven by consumption of data, moving to unlimited plans as well as an acceleration on the postpaid with the differentiation we have brought with faster technology. So I think it's a combination. We see reasonable headroom in front of us to continue this momentum in the midterm. Long term, as I spoke, I think the pricing architecture will have to repair with charging for [indiscernible] consumption becoming the norm if you have to see this kind of a long-term sustainment. But I think in the midterm, there's enough and more we have here.

Piyush, I think on the B2B side, like you mentioned, I think our portfolio comprises of three types of businesses. One is the connectivity business. Second is our wholesale business, which tends to operate at low [indiscernible]. And the third is the digital businesses that we have within B2B, which is our data center cloud, CPaaS, IoT, cybersecurity and so on. Over the last couple of years, we have seen sustained growth in our digital businesses, and it's now beginning to accelerate. The problem that we've had in the business in the past has been that we have had a large dependence on wholesale, which is subject to a lot of price pressure as also movement of messaging away from SMS to things like WhatsApp and so on and so forth. The connectivity business has been sort of -- the market grows at low single digits. So what we have seen in the quarter is a step-up in our digital businesses as we are continuing to make investments across all of these areas and also step up in the connectivity side of the portfolio, particularly on the global side, as we won some of the -- some larger deals, which has impacted the quarter. And I think that bodes well even for the underlying margin of the business this quarter.

Next question comes from Mr. Vivekanand Subbaraman.

I'm Vivekanand from AMBIT. I have two questions. So the first one is on the CapEx. So I understand that your annual CapEx is likely to be in the [ $4 billion ballpark ], just to drill down a bit further on this, how much reallocation of this CapEx is happening towards projects like AI infrastructure, which include data centers, subsea cables and sovereign compute. And how does 5G stand-alone also play a role in respect to the overall CapEx number? That's the first one. The second one is on the B2B revenue mix. So Gopal, thanks for giving color on Piyush's question. Just to look at this business a bit further down the line with increased share from digital services, which are let's say, asset light and low margin like CPaaS or digital, how do you expect the overall Airtel business EBITDA margins to trend over the next 2 to 3 years? And if you can talk about, let's say, the conversion cycles for the recent deals that you've signed in Airtel Cloud and translation into revenue, that would be great.

Well, so I think with detail on the CapEx, Soumen can come in. But we have -- I would just say that the radio CapEx has moderated across the portfolio over the last couple of years. So I think that is scale. Yes, there will be some step-ups based on what happens in the competitive sphere, but broadly, it is sort of moderated. Core CapEx is small. A large part of our CapEx is going on transport as well as switching clouds all of the stuff around fiber and it's fibering up the country and so on and so forth by the way, includes Homes as well. So I include that as part of the transport. We -- for 5G stand-alone, the CapEx is very modest because it's largely software, like we've said, it's just a switch of a button. And many of these -- the investments over the next couple of years, we will now continue to rapidly sort of scale up our data center portfolio as we are building out from the 120, 130 megawatts all the way to 1 gigawatt over the next few years. So there is going to be a period of rapid CapEx spend that all that you will see. And within that, the overall CapEx pool, we will have to start to see how do we moderate it. I think my message would be that wherever we think that there's a legitimate need for the business in order to step up growth, in order to be competitive or to actually plant some of these new bets as a company, we will not hold back on CapEx. On the B2B revenue mix, the -- your question was on margins as the portfolio tools I think the fact is that this business is a clutch of different businesses. When you look at areas like cybersecurity and CPaaS, margins are low because as you rightly pointed out, investment is low. But however, if you look at the connectivity side, the margins there are very healthy. IoT, the margins are very healthy. But in Cloud and Data Centers, there is a significant investment as well. So it's not that these are light investment sort of options. So there is a real investment. And again, the margins are commensurate with the kind of investments. I think longer term, as the portfolio reduce, we think the margins will be in this ballpark, maybe sort of trend slightly downwards as we see the step-up in the digital portfolio. But the real metric for us that we should be looking at is faster revenue growth. because ultimately, this market, as we've repeatedly stressed is very large, and all of it depends on our ability to execute. So whether it's data center, whether it's cloud, these are very large markets, very fast-growing markets. And it is our ability to execute that is the limitation, which requires not just capital, but requires talent, it requires the right kind of solutions. And of course, it requires replicable business practices -- go-to-market practices. So that is the way we see this business. Soumen, is there anything else to add on the CapEx?

No Gopal, you have covered CapEx well.

Just one follow-up. We saw that you raised $1 billion at Nxtra to accelerate the investments in that business. So Gopal, just to understand your CapEx strategy since you are stepping up and raising external funding at a relatively early stage in data centers, is it fair to say that year on what -- wherever you see any meaningful step jump in CapEx, you will look for external sponsorship? Or do you lean on your own balance sheet what are the considerations on whether to use Airtel's own balance sheet to step up versus a targeted fundraise at an entity level?

I think we crossed that bridge when we do it. The fact is that Nxtra will need funding, and that funding will be -- obviously, there's some equity inclusion, but there will also be debt that will be raised at Nxtra, whether it comes on our balance sheet and goes into Nxtra or it comes from outside. I think that's a decision we need to take over time. But the fact is that Nxtra will need to lever up in order to build out what is required over the next few years. Soumen, anything to add on this?

No, Gopal, I think, as you said, we will take this call as and when it appears. There was an opportunity presented itself in Nxtra and we have used that opportunity.

The next question comes from Mr. Sanjesh Jain.

I got three questions and one bookkeeping question. First, on the fast lane, the has been the experience of the customer or if we would have steadied, how much improvement has the customer felt by moving on to the fast lane and will this opportunity attract even more customer and does it offer an opportunity for us to grab higher market share in postpaid? That's number one. Number two, on the data center business. Gopal, when you mentioned that we are scaling up Nxtra from 130 megawatts to 1 gigawatt hour. This also includes the contract we signed with Google or this is purely the colo, which Nxtra is looking to do? That's second. And one on the NFWA, Shashwat, you mentioned that there is an increase in churn, and we are making a change in terms of the customer activation strategy. What was the churn rate? And does this really materially change the growth rate because when we talk about the churn, that means they have a customer which was slipping also. Fairly, we should be able to maintain the run rate which we have been doing in the FWA despite churn rate. These are three questions. And one on the bookkeeping. Finance costs in Africa, particularly does Airtel Money what it pays interest on the leverage, which it does that also get captured in the interest cost? These are my four questions.

Gopal, I'll take the fast lane and FWO one and then I'll hand over to you for the and finance cost. So Sandeep, thank you. On the fast lane, I just want to touch upon the fact that, look, what happens with the pricing technology is we are able to the pricing technology will more efficient. We are able to generate more capacity in the network. At our empty network level, it does not make a substantial tangible difference. But when the new books get ingested, when you are in a crowd, those are the kind of places where it starts showing up in a differential experience. We have had some places. But overall, net-net, we have been able to demonstrate that the customers on fast lane see differential experience technically. But in reality, in empty network, it may does not make a difference. Having said that, the interest of getting customers to upgrade using fast lane as the reassurance of a superior experience is working well for us. And we have seen positive signs of that. We have seen some acceleration in interest in the business, and we continue to see this as a large pillar for us going forward. On fixed wireless access, Sanjesh, I'll just touch form that set. I think the real issue there is was the fact that we went down on very aggressive lower acquisition pricing in the market. And that led to some [indiscernible] and quality of acquisition deteriorating. That we have to pull back, Sanjesh, in terms of what we are seeing there. So I think that's where we are seeing constant month-on-month improvement. Whether we come back to old rates and all we'll see -- the more important thing for us right now is to constantly grow the business, grow to the right unit economics, and we want to double down much more on fiber and use FBWA with the right outcomes. I think that really is the focus for us right now.

You want to pinch the finance cost space, Soumen?

Yes. So yes, Airte Money added into mobile or Airte. But you must remember that Airtel Money Limited is a net cash positive comp. So there is no net interest cost. And whatever level cost is there is a part of cost of goods sold. Having said that, there are some derivative and some upstream costs, which appears in interest cost and get a solid [indiscernible]. Over to you, Gopal on the data center.

Yes. I think the data center is a simple answer, yes, the Google one is also included. I just want to come back to the fast lane. I think what we have seen is that very clearly for customers on the slide, they're getting better speeds, right? But the fact is that for all customers, the speeds have improved because the network has become more efficient. So it's a combination of both things that we're seeing. And then, of course, there is the additional piece that there is a very large opportunity of customers who are sitting on what we believe should be postpaid but are sitting on prepaid, where the headroom for growth for postpaid is very, very large. And I think this is something that we need to get right over the course of the coming years.

Just one on data center again. What gives us confidence of scaling up to a 1 gigawatt hour? Are we seeing that kind of demand in India, which can allow -- because there are multiple operator and everybody is talking of 1 gigawatt hour. And today, India is at roughly 1.65 gigawatt hour. So what gives us the confidence? And do we have a strong pipeline, which gives this confidence for us?

Yes, we do. The short answer to your question is yes, we do. And just to give you a little bit more texture to it. The data center market comprises, as you know, of both hyperscalers and domestic enterprises. Within the hyperscaler segment, a very large part of the workloads run of Mumbai. And therefore, one of the key considerations for building -- getting to 1 gigawatt is the right land parcels in Mumbai, which we are in the process of sort of finalizing. So that is the first piece. The second part is the existing contracts as usually to do on Google. The third is upcoming build that is already well underway, and that will be a couple of hundred megawatts over the course of the next couple of years. And then there is a small gap of the need to fill the balance with the land parcels that we are looking at in Mumbai, where we believe that with those parcels, we should be able to fill it. So the reason we have gone out on a length to say that we will -- our ambition is to get to 1 gigawatt in the next few years is because we have very clear line of sight to actually get that.

The next question comes from Sumangal Nevatia.

This is Sumangal from Kotak Securities. Firstly, congratulations to the team on another stellar quarter. I have 2 or 3 questions. First, on the Homes. So if you see margins are under pressure, and it's been the lowest in the recent past, suits also been lowest in the past 7, 8 quarters. So just want to understand, is it a conscious slowdown given the cost inflation which you touched upon initially? Or is it a high base catching up or some other increase in competitive landscape here? That's first. Second, on overall data sub addition is continuing very strongly. So with regards to the issues of price inflation in the smartphone is the underlying trend too strong to have an impact here or something which could be an issue or a headwind going forward given the inflation in the smartphones? And lastly, you've touched upon this, but just some more color on the B2B CapEx -- I mean it's been quite volatile, still around mid-teens in terms of revenue. So given our plans, is the actual spend pick up more medium term and not near term? If I can get some more color on the cadence here.

I think on the B2B CapEx, I think the large -- the material difference that will actually take place is the rapid build-out on the data center side. On Cloud, we already finished the investments in the first round across the three regions that we operate. And as it fills out, we will keep adding that a modular investment. The data center will be lumpy as the build of large tracks of land are acquired. So that's -- that will sort of show up over the coming quarters. Let me just finish up the point on the Home. I think Shashwat has already sued to it. The fact is that we were there was four acquisition quality that's been tightened substantially and therefore, that has led to a reduction in the customer adds. We're already seeing traction in the last couple of weeks on this being repaired because this is obviously a short-term bit, but it at least builds the business for the future. And we believe that we should start seeing momentum coming back from here onwards. And where it ends up, we look at. On the data side, it's just -- there's a lot of refurbished phones that are still being circulated. That number has gone up with inflation. So we see strong sub additions. But over time, house inflation impacts the customer wallet is yet to be seen. But at this point, we see no impact on that.

The next question comes from Mr. Gaurav Rateria.

This is Gaurav from Morgan Stanley. I have a couple of questions. My first is on your B2B portfolio. Is it fair to say the largest TAM there will be for the cloud business? -- what has been our USP to win those 30-plus customers that you talked about? And at what point in time it will start making a difference to the overall growth rate in the portfolio? Second question is around home. Is there a market share target that you're looking at from an FWA perspective? I know that you look at the consolidated home broadband portfolio as a one portfolio, including FWA and the fiber, right? But is there a target market share that you're looking at? Or you will start caring about the market share below a certain threshold? And the last question is on your Airte finance portfolio. Like how are you trying to manage the conflict, if at all, with your other partners that you have in the Airtel Finance app versus your own NBFC, which has also becoming one of the partners in your business?

Yes, I think on the B2B side, we've had a lot of lessons learned in the last few months as we've gone out to the market. I think the first lesson is that the decision-making in a business like this has longer gestation. And the reason is quite simple. These are important workloads and for customers to move from whether it is the premise or whether it is repatriating from hyperscaler cloud, or whether it is to move from a private to co-located cloud that they have, the integration effort and the task involved is quite high. The second, of course, is that if you are already on a different cloud player, then sometimes you have egress costs which are high, which also become barrier. So the gestation paid for a decision is large. The second is that we find that commercialization, which really is a function of the ability to move those workloads because a lot of this gets paid on a per use basis is a muscle that needs to bid. And I think those are the two lessons. The third lesson is how do you package this and bundle this release intelligence. So where we are seeing traction is around simple propositions which can be easily bought, for example, disaster recovery, backup as a service, storage as a service. These are video surveillance as a service. These are where we won a lot of the deals that we've won over the last quarter. The one place where the deals are large is the need for sovereign clouds where there are more sensitive workloads. This is largely in the regulated sales or in the PSU spheres and these are the areas where a lot of the certification work that is going on is underway. And finally, what the business needs is, it should be incubated separately on the model that we've got is that is that the incubation is being done within the business. We have tried to build a top notch talent group within that business to actually build it, but yet depends on the B2B go-to-market teams to open the door so that all of the rest of the stuff on this technical sales solution architecting can be done by the cloud team. On Airtel Finance, yes, there could always be -- you can always argue there will be a perceived conflict, but we don't believe there's any conflict because even if you look at some of the very large NBFCs in India, you do find that they also have an SSP or a storefront, and they work with partners. So we are -- and then there are also obviously some RBI regulations, which dictates the way that we need to operate within the LSP segment. And therefore, we will abide by that and make sure that we are totally meeting all of the compliance requirements that the business needs. We do not set a target for FWA. We only set a target for home broadband. And we don't believe that we should have a target for our technology. We believe we have a target for a customer and a business, and that is really our focus.

The next question comes from Aditya Suresh.

Two questions. First on Africa. So Gopal, maybe in very broad terms, your thrust on the Africa business. Could you maybe speak about what sort of contribution you see Africa scaling to over the next, say, 3 to 5 years, whether it be EBITDA invested capital, any other frame of reference you'd like to use. The second question is something we have tried to ask before, but I just want to be your return on average capital employed -- per your kind of data pack, we're now above 20%. As you kind of drive your top line, there are several levers, as you pointed out, is there any reason why you think that the ROACE would not expand at least 500 basis points over the next 3 years?

On Africa, I think like I said, I think the structural factors that are prevalent in continent make for a very, very compelling opportunity for our business. And we're very excited about the fact that the business is now on a sustained momentum of 20% plus CAGR growth. We believe the headroom for growth continues to be high. And my sense is that all of the things that we have learned as a group, are now being cohesively driven. So whether it's the bottom base program, whether it's the technology platforms we transferred, whether it's talent fungibility, whether it is procurement, all of these are now deeply embedded into Africa. And over the last 18 months, Soumen I have worked very closely with the Africa team to make sure that all of this is now very, very deeply embedded. And you can see the results of that already translating into the marketplace. I think the step-up in growth is because we bring the same rigor and the same deaveraging that we've seen work so very well in India over the last few years. I mean suffice it to say that Africa, we expect it to punch above its rate. So today, if you look at the contribution of the Africa business to our portfolio, we expect that the contribution to growth will be substantially higher than the base contribution to the business, which means that the contribution of Africa will keep growing in the overall portfolio. And the second thing I would say is that the investments into Africa will continue to step up. We've already stepped it up, as you know. But that said, remember, Africa operates with a very different environment because the market structure is typically two to three players in most markets, two players, in some markets is three. Spectrum is quite cheap. We get large font pools of spectrum. And that means that your investment really is on the network, is on transport because in some countries, it's landlock so you need to build a lot of fiber. So that's where the investment is going. And of course, there is also investment going in the Homes business. On return on capital, I think I would just simply say that, look, our focus right now is if we can continue to grow the business, extract operating leverage, then those are outcomes that come out. And we don't set those as targets because there are different ways of actually meeting that, including making short-term decisions on reducing CapEx, and that is something that we don't do as a business. So we will fund whatever is required to grow this business, our focus is growth and yet operate in a fiscally prudent way on both cost as well as CapEx spend so that we continue to drive growth across our portfolio.

The next question comes from Mr. Manish Adukia.

This is Manish Adukia from Goldman Sachs. I have two questions, one on India and one on Africa. On India first, and Shashwat, going back to your earlier comments around ARPU that in the medium term, you do see enough headroom for growth from organic levers, and it's only maybe in the long term -- or maybe over the long term, you do see the pricing architecture get resolved. So first, part of the question is are you suggesting that in your own opinion assessment in the near term, you don't see that pricing architecture gets corrected and all growth in ARPU will be organic and over midyear, slightly longer time period, you could see that pricing architecture correct? And unlike in the past where we used to see maybe, let's say, a tariff hike every couple of years, it's like safe to say that now we may be in a more infrequent tariff hike cycle? And the second related question on that particular topic is again, going on return on capital for the India business now at mid- to high teens post tax return on capital. And I get the part about pricing architecture not being correct. But why then you're already seeing decent growth in the business with good operating leverage, do you really need price hike at all when your organic return on capital continues to improve quarter on-quartar? So that's my first question. I'll come back on the Africa question after that.

Go ahead, Shashwat. I just -- I will just comment very briefly on pricing and Shashwat, hand over to you. I just want you to know that -- the most important thing is to rebid the architecture. So when we talk about this repair or we talk about lack of repair, it is actually the architecture, which means that for a very low level of pricing, you get unlimited data and that means ARPUs is capped. That, to me, is not a healthy way to operate because if you look at -- and we've talked about this before, any market that you look at, you have you have an architecture which goes from small, medium, large to extra large. And so if you just operate with a more sensible price architecture, my view is, in the next 5 to 7 years, you will see sustained growth just on account of ARPU as India gets more affluent, et cetera, for $0.04 to $0.05, maybe slightly higher. That I think will be a good place to go. And there is no need to touch the entry-level pricing. Because entry-level pricing is, I think, is good enough. And so I think the way we need to think about price architecture and industry needs to fundamentally change over the next few years. Shashwat, over to you.

Yes Gopal, nothing much to add. I think that's the reality. I think how this played out in the future, where is [indiscernible] comment on honestly. We use as soon as we can correct this architecture will be great, but it needs like time we had single app. That's the larger point. We have to watch it. So no more, I think nothing else to add here. Gopal, do you want to take up higher [indiscernible] , why should you worry about pricing?

No. I mean, as I said, I think there are outcomes. And what's more important is to have a more sensible architecture.

Sure. No, helpful. My second question on Africa and partly also related to Indus. Now Indus today is expanding to three markets in Africa. From a Bharti Airtel Africa perspective, first, can you just talk about some of the advantages that you would get at Airte Africa by having Indus? And how does that impact Airtel Africa's own OpEx and CapEx by having Indus versus using somebody else's towers? And again, a related question on that is Indus is starting off with three markets in Africa, but is it safe to say that over a period of time and maybe given your -- or let's say, whatever feedback you get from your first three markets, that over a period of time, Indu should logically also expand to the remaining markets where you operate in Africa?