Recording in progress. I'm Devi Sharma, the moderator for this webinar. Welcome to the Bharti Airtel Limited and Bharti Hexacom Limited First Quarter Ended June 30, 2024 Earnings Webinar. Present with us today is the Senior Leadership Team of Bharti Airtel and Bharti Hexacom Limited. I must remind you that the overview and discussions today 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. Interested participants may click on the raise hand option on your Zoom application to join the Q&A queue. The participants may click this option during the management opening remarks itself to ensure they find a place in the queue. Upon announcement of name, participants do kindly click on Unmute Myself in the pop-up screen and start asking the question post-introduction. With this, I would now like to hand over to Mr. Gopal Vittal for his opening remarks. Gopal? Gopal, you might be on mute. Good afternoon. Good afternoon, Good afternoon, and welcome to the earnings call for Quarter One. With me on the call, I have Soumen, Harjeet, Naval, and Akhil Garg. This quarter's earnings call focus will be both on our performance as well as a quick update on the development of our strategy. A quick background on ESG and an update on ESG. We continue to get recognized for our ESG efforts. We received an A rating in 2023 on the CDP Supplier Engagement in the leadership band. This rating is higher than the Asia regional average of C and higher than media and telecom and data center sector average of B-. We have stepped up our solarization agenda with over 15,000 sites solarized in the last fiscal and over 6,000 sites solarized in this quarter alone. Nxtra is the first data center company in India and the 14th Indian company to join RE100, which is a global initiative led by Climate Group in partnership with CDP, which is a carbon disclosure project. In FY2024, Nxtra saved 156,600 tons of CO2, which is the equivalent emission by sourcing renewable energy through PPAs and captive rooftop solar plants. A quick update on our recent Spectrum purchase, as we guided you earlier. We successfully renewed Spectrum that was expiring in six circles and further solidified our mid-band Spectrum holding in six circles with a total purchase of about INR 6,850 crores. With this purchase, we continue to enjoy the largest mid-band Spectrum pool in the country. Let me turn to our financial performance. We delivered yet another consistent quarter, consolidated revenues just over INR 38,500 crores. India delivered a steady growth of 1.9% sequentially with INR 29,046 crores of revenue. EBITDA margins came in at 53.7%. We had a strong operating free cash flow, which is EBITDA minus Capex of about INR 8,800 crores, and Capex for the quarter was just about INR 6,780 crores. Our balance sheet strength continues to be solid and improving. During the quarter, we fully prepaid an advance payment of the spectrum dues pertaining to 2012 and 2015 auction. In the last one year, we prepaid over INR 24,250 crores of high-cost spectrum dues. With this, the India net debt to EBITDA stands at 2.75 compared to 3.19 a year ago. In recognition of our efforts, CRISIL has upgraded our debt rating from AA+ to AA+ positive. The strength of our performance is predicated on solid execution. All our businesses are delivering consistent growth and market share gains. I want to reiterate our simple strategy, which has given us consistent outcomes: a focus on quality customers, really trying to deliver for them the best experience we can, digital at the core, and a relentless focus on eliminating waste. We continue to expand our network. We rolled out over 6,327 network sites and about 9,030 km of fiber in the quarter. Let me turn to an update on each of our segments. In the mobility business, we added 2.3 million customers and 6.7 million smartphone net adds in the quarter. Postpaid net adds are beginning to climb up further, and we're at 0.8 million for Quarter One, contributing to 36% of the total net adds for the company. Our ARPU at INR 211 compared to INR 209 in Quarter Four, again outperforming the industry. This is driven by a continued focus on feature phones to smartphone upgrades, prepaid to postpaid upgrades, data monetization, and driving international roaming penetration. We continue to expand our 5G coverage. We ended the quarter with a 5G customer base of 90 million, and 5G shipments continue to grow, and we continue to gain share there. The industry undertook a round of tariff repair in early July, which was much needed for the financial health of the industry. The early signs from this repair are encouraging, with a full flow-through expected in two quarters. I do want to underscore that the industry needs a minimum of INR 300 ARPU for long-term sustainable investment and respectable return ratios. On the broadband business, we added 350,000 customers. In line with our strategy, we continue to expand our availability. We also launched fixed wireless service across India. On this one, we were a little late for various reasons. With this, our Wi-Fi services, which is really fiber to the home as well as FWA, are available in over 1,300 cities. In the DTH business, our strategy of proposition simplification, we offer just three plans to customers. Our focus on the three key geographies, the southern states, Maharashtra, and Bengal, as well as the focus on convergence, continues to deliver for us. Net customer additions were over 1.9 lakhs, the third consecutive quarter of positive net adds, despite industry challenges and decline. We continue to gain market share as a result. The metros are also starting to see green shoots on the back of our differentiated converged offering, which is driving customers to Airtel Black. On Airtel business, revenue growth in Quarter One was 1% sequentially. This is adjusted for currency. Global business continued to be muted, although we are now seeing some green shoots in the order book, which needs to translate into revenue over the next few quarters. We saw multiple large deal wins. For example, we signed a multi-year contract with the Central Board of Direct Taxes, where Airtel will serve as CBDT's network and connectivity partner, providing advanced solutions, including dual connectivity with SD-WAN, which is software-defined wide area networks, and secure LAN. Large deals were also won in the global business. EBITDA margins were impacted due to seasonality as seen in previous years and will unwind in ensuing quarters. On our digital businesses, our focus on CPaaS, financial services, IoT, security, and cloud continues. Airtel Finance is scaling up well, with an annualized loan disbursement of just under INR 3,000 crores and a loan book of INR 3,300 crores. Our digital platform, starting with the converged data engine, is seeing some traction. We are in discussions with a few global telcos. On the payments bank, our monthly transacting users stood at 71.4 million, and the annualized revenue run rate now is over INR 2,400 crores, growing 52% year-on-year. Deposits remain robust at over INR 2,900 crores, again growing by over 50% year-on-year. A quick update on the five pillars of our strategy. First is the portfolio that we have, which gives us resilience. As you know, Africa accounts for 25% of revenues. India Mobile is 59%, and India Non-Mobile is 16%. Going ahead, we see strong growth potential in our non-mobile portfolio, homes, B2B, despite the immediate term softness and the digital portfolio. Africa continues to perform well on underlying basis, with 4.6% sequential growth in constant currency terms. Our second focus is really to win quality customers. Let me talk about our strategy and growth drivers in each of the segments: homes, postpaid, rural, and B2B. On homes, as I've mentioned before, the top 60 million homes in the country account for almost 35% of industry revenues. Of these, broadband penetration is only about 40 million. Each of these 60 million households has some relationship with Airtel but do not use all our services. To address this opportunity, our strategy continues to be to expand our Wi-Fi availability, drive penetration of our converged offers, to build in stickiness, leverage our digital targeting capabilities, and deliver a brilliant experience to the customers so as to retain them for longer. With the launch of FWA, which is fixed wireless access, our Wi-Fi services, a combination of FTTH, which is fiber, as well as fixed wireless access, are available in 1,300 cities. To address this opportunity, we've also streamlined our go-to-market approach. We now have, in the month of July, we launched this, we now have a single pricing across fixed wireless access and fiber. Our sales teams and stores are tuned to selling just Wi-Fi irrespective of technology, and we've expanded our delivery teams to cater to the expanded geographic availability. Having said this, we continue to believe that FWA will only complement FTTH and expand the addressable market by opening new markets for growth. The other part of our strategy is to leverage entertainment as the hook to get more customers. This overall agenda is driving results. Nearly 50% of customer additions on broadband are now happening on Airtel Black. In addition, with the launch of FWA, the strategy is showing good green shoots. July has begun extremely well on our broadband net additions, and we will see more of that as we talk about our performance in the coming quarter. On postpaid, the opportunity is large. We have 80 million credit-scored prepaid customers who we believe could move to postpaid. We've now launched simple one-click upgrade journeys for these customers. This, coupled with the strength of our family proposition and a deep retail penetration, is helping us see strong gains. We've delivered over 4.9 million customer additions in the last six quarters, contributing to 25% of our total customer additions. In rural, our expansion program, where we rolled out more than 37,000 sites, is delivering on action standards. As I mentioned earlier, there are still five circles where our market share is weak, primarily due to lower network coverage. Network rollout to reduce this coverage gap is underway. We are seeing promising results from this expansion as well, in line with our plans. All of this has been possible with extensive use of digital tools and data science, as well as our razor-sharp execution. The key focus here is to spread investments optimally to accelerate the share gains. In B2B, the growth opportunity is large, with adjacencies driving the majority of growth. As I mentioned here, there are three structural actions we have taken to address this opportunity. First, we revitalized our go-to-market. As a part of this, we are training our account managers to be able to sell solutions as well as focus on industry verticals, creating what we call virtual vertical teams so that we can learn from some in the team and transfer that best practice across all our accounts. In addition, we are expanding our coverage of small and medium businesses across the country by investing in our sales capacity and digital tooling. The second area of focus is to improve our network infrastructure to deliver a better network experience. A number of actions are underway to develop a flapless network and increase demand from very, very top-quality customers or high-value customers. Some of this includes rolling out OPGW fiber changes to build a more resilient network architecture, as well as on-ground infrastructure recall and improved hygiene. Third, we are building our capabilities on digital products. In addition, we are also doubling down on core connectivity by offering network-managed services, which gets us more stickiness and higher wallet share. We are co-creating an end-to-end managed service offering with a few global partners, as a part of which Airtel will bring in connectivity, and partners will bring in SD-WAN solutions, tools, and practices to manage the network. An area of major focus for us is the cloud, where we are currently underway in terms of drawing the blueprint for investment so as to step up our overall presence in the cloud segment. The third pillar of our strategy is the obsession to deliver a brilliant customer experience. As I mentioned earlier, we look at experience from two lenses. First, the digital experience. Here, our platform approach for our four key platforms, buy, bill, pay, and serve, have harmonized customer journeys in an omnichannel way. These platforms are fully integrated in our B2C operations and are rolling out for B2B as well. The second area of focus is network experience. This time, let me throw a little more light on how we are planning to deliver a brilliant experience to our customers on fixed wireless access by leveraging the standalone technology. Let me recap our decision to deploy 5G on NSA architecture, which is non-standalone, which was predicated on our very strong portfolio of midband along with the 3.5 GHz. We also had a lot of learnings from other telcos on NSA, delivering a superior experience, as well as driving down a lower cost of total ownership. As I explained earlier in NSA, 3.5 GHz band is used only for the downlink, which enables it to deliver 30% more coverage and high speeds. This fact has been validated now by our crowdsourced reports, and our NSA network is consistently seen in the marketplace as delivering the best experience. We've achieved this while avoiding paying for the expensive sub-gigahertz spectrum band on the 700 band, as well as deploying a lesser number of radios, which also lowers our operating cost and carbon footprint. Let me give you some texture on the technology and why SA makes more sense in fixed wireless access. First, for the uplink performance. In the NSA mode, phones are connected to 4G and 5G band simultaneously, which gives a coverage advantage but limits the uplink as compared to a handset connected only to the 5G band as an SA. The trade-off works very well for 5G mobile use cases, where uplink speeds are significantly faster than needed. However, for FWA, where multiple users are connected to the Wi-Fi powered by the 5G FWA modem, uplink becomes a limiting factor for customer experience if you use the NSA mode. Second, for capacity, FWA data consumption is almost 15-20x of mobile, which needs a dedicated network layer for downlink and uplink to serve this multi-device connectivity across mobiles, TVs at the home. In such a scenario, network slicing with SA enables a superior experience to customers. We are well positioned for this, as we will be able to use our 3.5 GHz spectrum along with the large pool of mid-band spectrum holding through carrier aggregation to roll out SA in an effective manner. Hence, our belief is leveraging SA technology for FWA becomes important to deliver a superior experience to customers. We are ready and are planning to go live with SA technology for FWA within this quarter that we are in. While we will run FWA on standalone, we will continue to operate mobility network on non-standalone. Over time, and it's very common to have a hybrid network of both non-standalone and standalone. Over time, with 4G traffic moving to 5G and 5G time on technology increasing for the device, we will configure changes to switch our mobile users to our 5G SA network. All of this will be done without additional Capex and purchase of expensive sub-gigahertz spectrum. It should be noted that our core transport and radio networks are all SA ready. We have been running trials of 5G SA network in select regions for many quarters now to optimize our performance. The fourth pillar of our strategy is to leverage our digital capabilities to incubate new revenue streams. We see, as I said, Airtel in three parts: the infrastructure layer, which is both the network and data layer, the experience layer, and the services layer. Our portfolio on digital services includes IoT, cloud, security, SD-WAN, and Airtel Finance, all of which are getting substantial focus and investment. I do want to reiterate that we would continue to look for bolt-on acquisitions in these adjacencies to strengthen and build capabilities to address growing customer needs. Let me provide more texture on cloud. Cloud has what we believe is a huge growth potential, and we are absolutely committed to participating in this growth. The public cloud market is about $4.9 billion and growing at 35%. In addition, the private cloud market is about $3.6 billion, growing at 16%. Enterprises are moving more and more towards a hybrid cloud approach. In addition, there are certain industries like banking, which have regulated sovereign requirements on cloud. As Airtel, we believe our strengths lie in leveraging our data centers to cater to such private and sovereign requirements, as well as leveraging our deep partnerships with major cloud players like Google and others to offer a hybrid solution should the customer want it. This, coupled with enterprise-grade connectivity and security between cloud regions, positions us well in the space. We're already seeing some traction with some wins under our belt, and over the course of the coming year, we are going to make substantial investments in this area. The fifth and the last pillar of our strategy is water and waste. This is, in many ways, integral to our ways of working. The initiative we started around two years ago to optimize our site running costs has delivered a strong outcome, leading to per-site reduction in cost in quarter one after declining in the whole year of 2023-24. Despite the historic network rollout in the last two years, there has been a reduction in our absolute diesel consumption. We've also stepped up our solarization agenda, as highlighted earlier in this call. We've also kicked off a pilot to leverage benefits under the open access program in Karnataka. Based on the learnings from this pilot, we will look to extend the model to other circles going forward. To sum up, overall, it's been yet another quarter of consistent delivery along with share gains. Homes, which is fixed wireless access, convergence, and structural network infra connections are being done to accelerate growth in the homes segment. Postpaid has a strong headroom for growth. B2B momentum is expected to gain pace going forward. We continue to be financially prudent and unwind our leverage. Tariff repair, we believe, should support improvement in financial health and a modest improvement in return ratios. We continue to invest in our infrastructure to win quality customers, deliver a brilliant experience to them while accelerating digital at the core. And all of this is done with a focus on water and waste and prudent capital allocation. With that, let me hand back to the moderator. Thank you very much, Gopal. 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 number of questions to 2 per participant to enable more participation. Interested participants may click on the raise hand option on your Zoom application to join the Q&A queue. Upon announcement of name, participants do kindly click on "Unmute myself" in the pop-up screen and start asking the question post-introduction. Participants are requested to limit their questions to Bharti Airtel till 3:30 P.M., as management will start the Q&A session on Bharti Hexacom from 3:30 onwards. With this, the first question comes from Mr. Vivekanand Subbaraman. Mr. Subbaraman, you may please unmute your side, introduce yourself, and ask your question now. Hello. Thank you for the opportunity. I'm Vivekanand Subbaraman from Ambit. Two questions. One, how are you thinking about capital allocation here on? It seems that Capex is already moderating and your net debt has fallen around INR 58 billion this quarter. You announced that you don't want to call the residual rights money and you are postponing it. So how should we think about the capital allocation here on? That's question one. Secondly, you spoke about your portfolio resilience and growth potential in non-mobile businesses. You recently increased your shareholding in the tower utility business. There's also prior announcements that you made on infrastructure businesses like data centers. Do you see any opportunity to step up investments in data centers? You spoke about this in the opening address. And could you help us understand how to think about the capacity ramp-up from here on and if it does make any sense to have all that infrastructure in one umbrella like Indus? Thank you. Let me take both of these questions on capital allocation. Firstly, we are in a capital-intensive business. Capital will continue to be deployed on just strengthening our infrastructure, our network, both a combination of radio transport, which is getting increased emphasis in terms of capital allocation, and of course, our core network. The network's part will remain. There are also investments, as I mentioned, that we'll be making on the cloud area to start with. We will see how that plays out. The third area of capital allocation is around data centers. This is the portfolio that we have. With the financial health improving, we will also generate a lot more cash. Then the question is, what do you do with that cash? A combination, as we mentioned, of deleveraging as well as dividends is really something that we will continue to look at. On the portfolio part of it, let me talk a little bit about the infrastructure side and the Nxtra side, and then maybe I'll hand over to Harjeet on the tower side. As far as the infrastructure part is concerned, data centers continue to get a lot of attention. We're still a small player in data centers. I mean, while we are the largest, it's a very fragmented industry. There are a multiple number of players who are actually in here leveraging their land and power banks to really play in the space. The advantage that we have is that we have deep relationships with the top customers, and therefore we serve almost all the hyperscalers in addition to many of the domestic players that we do. This business will continue to get attention. We bought both land as well as we're in the build-out phase of multiple data centers across regions. This will continue. On the tower side, before I invite Harjeet, let me say that the tower business is central to our portfolio and our business. They are very, very important in terms of the stability of that company. And this is the reason that we had climbed up in shareholding earlier. At the time, there was a bit of uncertainty as to what was happening in the market. But now, with the third player having raised capital and hopefully raising debt as well, I think there is stability in terms of the industry structure. So that's really how we see the tower company. Whether Nxtra goes into Indus or not is a separate question altogether. It has many considerations. The go-to-market capability that Airtel brings, the quality of the management and the teams that actually understand the space, much of it needs to be addressed. So it's highly speculative for me to comment on that side. Harjeet, is there anything you want to add? So, Gopal, pretty comprehensive. I think you covered most aspects well. The small supplement I might do on the Nxtra and Indus combination that Vivek you were trying to suggest. Obviously, all these things are possible. At a broader level, they're all infra assets. But as Gopal mentioned, the key thing is to have an absolute clear delivery to the relevant client set. Tower companies have two or three large clients, that's it. And data center companies have a mix of enterprises, hyperscalers, and a very different set of style of both sales cycles and deliveries. So one has to be very clear why they need to be necessarily combined, not just for financial management. Also, because there is a limited set of only two or three large customers on the tower side, it's more a yielding story rather than data centers where you yourself talked about growth, and it has a large differentiated pool of customers. It's got a growth story. So these really need to be thought well through before creating any inventory trust or a combination infra pool. And lastly, I would say it's always good to keep assets a little more flexibly unbundled. It always helps, both delivery as well as any times when cycles to the markets are not running in favor. So that's probably the only supplement I had to do, Gopal. Thank you. Just one follow-up. It's been 3 years since you last gave a guidance on the data center investments. You had said, I think in the end of 2021, that you'll invest around INR 5,000 crore over a 3-year period. Any further guidance? We're broadly in line with that kind of investment. So we're broadly in line with those numbers over a 3-year period. Right. No, I'm just looking ahead and trying to understand the magnitude of opportunity and investment in research over the next 3 years. Thank you. I think that the demand for data centers continues to be strong. There is both from global customers as well as domestics. So we will continue to invest in data centers. I think that's really what I'm so the guidance would be more or less around the same level over the next few years. Understood. Thank you so much and all the best. The next question comes from Mr. Aditya Suresh. Mr. Suresh, you may please unmute your side, introduce yourself, and ask your question now. Thank you, Gopal. Congratulations on a fantastic progress which Bharti has seen in the past couple of years. The specific question, Gopal, was on incremental operating leverage. As you kind of spoke about the trajectory towards INR 300 of RPU, how do you think about incremental operating leverage for the business, for the mobile business? Consensus has, let's say, a 400 basis points margin expansion at INR 300. Is that appropriate? Is there upside, downside to those numbers? Well, you know we are I mean, the way we think of our business is we think of the return on capital for our business is still hovering around 9% at the India level. And that is really abysmally low. As a consequence, because we are a fixed-cost business, we are a capital-heavy business. When you see a tariff repair that happens, a large part of that really does flow through into the bottom line. So to that extent, there is very high operating leverage for incremental revenue. In fact, you will notice that even in the last 2-3 years, as we have grown the top line through many, many interventions around RPU, we have got operating leverage even from this. Of course, the benefit of a repair in the tariff obviously gives you a lot more operating leverage, where the return ratio overall on return on capital improves modestly. It's not good enough, but it certainly improves from where it is. And once you get to 300, at least there'll be reasonable returns in the industry. And the second question, Gopal, was on deleveraging and dividends. You spoke about this path previously, but if you could maybe articulate what is the net debt target which you're looking at before we can expect any meaningful dividends? Well, at the India level, maybe Soumen, you want to take this? Yeah. So there is no specific number per se, but we currently have certain debts where the coupon is much higher than the market rate at which one can borrow. So I think the first objective would be to retire that debt. If you remember, we had given an INR 8 dividend for the fiscal end of 2024, which was more than the flow-through dividend. So I think a healthy mix of these two will continue. But the first focus would be on paring down the debt, which is at a coupon which is higher than market average today. I think if I can also quickly add to what Soumen mentioned, Aditya, the free cash flow pool is not just in Airtel India, which is growing, which Gopal earlier also talked about. Even Indus has gotten back to regular situations in respect to the counterparty payments. You would have seen the results. Their pattern is back to what it could be, probably close to $1 billion every year. Airtel Africa is dividending. Now, Bharti Hexacom is listed, so we expect any dividend to come from that. All those flow pools are also increasing. So even the earlier pass-through, there is expansion of this pool that is happening. And as Soumen mentioned, I think it's the right time as we build more stability and certainty of the free cash flow and Capex into play that the dividend can increase and so can the leverage go down. Thank you so much. The next question comes from Mr. Sanjesh Jain. Mr. Jain, you may please unmute your side, introduce yourself, and ask a question now. Yeah, good afternoon. Thanks for taking my questions. Gopal, I got a few of them. First, on the tariff hike and the consumer behavior, one of your peers on their call said that they have observed some change in the consumer behavior. Have you witnessed any change in the consumer behavior? Are there any downgrades or a delay in the recharges that we have seen, which could, in the near term, have a lower pass-through? And And SIM consolidation, which was pronounced in the first tariff hike, more benign in the second, how we see in this tariff hike? Sanjesh, you had any more questions, or this was the only one? Yeah, I got a few more, but they are not related to this. Okay. So let me take this first. I think it's a little premature for us to say there's any fundamental change. But from what we've seen in the early weeks, by and large, we have seen some SIM consolidation at the lower end of the market, particularly around our 2G user base. But the SIM consolidation that we've seen is modest. And I think only time will tell as to how that will play out. As of now, we believe it's more or less in line with our action standards. Fundamentally, as far as data is concerned, we haven't seen too much of downtrading yet. Yes, there is some reappraisal that happens during this period whenever tariffs go up. And there is some delay of recharges, all of that. My hope is that this will all unwind as we go through the quarter. Let's see how that plays out, which I was saying it's a little early for me to comment on this. I think by the time we get to the end of this quarter two, we'll have a very good read because some of the flow-through will happen in quarter two, but some more will come in quarter three because of the nature of the recharge cycles and the validity of different packs that people consume. Fair enough. Fair enough. Thanks. The second question is on the, again, continuing with the restructuring part of it. Any reason we chose to increase one percent stake in Indus Towers by not participating in the buyback because that will cost us INR 465 a share, which is significantly expensive than our earlier purchases? So why suddenly such an expensive buying out of 100 basis points? And again, the flow-through of the dividend also has an impact because of that as well. Yeah, I understand. Harjeet, do you want to take that question? Sure, sure. Sanjesh, hi. So just look, Indus runs by its own in terms of a listed company. Of course, we are significant shareholders. And I think the thought process, as we understand now that the board meeting has happened, was more driven towards getting the last few months and quarters of stability on the VIL flows for payments, their current status, some bit of past backlog clearing. So they had the choice to do a dividend or the buyback. And their choice to use buyback was, as I understand, and I'm probably filling it on behalf of what they have already said in the market, was really to focus on their capital ratios because buyback has a capital denominator impact. Number two, they retain the full dividend ability as reserved incrementally because as things improve, their dividend ability reserves, which is close to INR 18,000 crore, is continuing to be intact. And number three was a short-term tax efficiency that is available for the instrument. So I think basis that we have taken is their call. And we are simply in a nice position, really not wanting to participate. We just acquired, in fact. Arguably, you could see this as a contra trade because we increased 1% earlier. So we are simply, in a way, deemed to have invested this in the incremental stake that will generate once the buyback finishes. And hence, our board decided not to participate given that we recently actually only increased. No, my only point is that this was available at INR 350 a few months back or probably a few weeks back. Suddenly buying at 465 appears to be an expensive acquisition, but I got your point. Yeah. Yeah. The next question, again, as Harjeet and Gopal, you all mentioned. So the merger of data center and Indus doesn't seem like an immediate plan for that entity. Is that understanding right? Well, I don't want us to even go down that path right now, Sanjesh. Still, we are clear on what we want to do. As of now, Nxtra is an independent sort of company within the portfolio, I mean, as a subsidiary of ours. At some stage, we've always mentioned that data centers will be something we will look to dilute. And this is an asset that we could look at once we believe the timing is right. What is the destination of that dilution is a question that we'll come to at that stage. So right now, it's too premature to even go down that path. Fair enough. Fair Fair enough. Gopal, last question on the enterprise side of the business. The business appears to have gone significantly soft, not only for us. Our peers have also reported the number. What's happening on the enterprise business? Why there is a sudden slowdown? Last year, we grew very smartly, 15%-16%, and now we are low single digit. It looks very contrasting. Yeah, no, that's a good point, Sanjesh. And I agree with you that the business has certainly softened. We've seen a significant softening in the global side of the portfolio, as I mentioned. Many of the OTT companies deferred their spends. We saw this exact opposite trend in the domestic side last year. The domestics were pitching in strongly. There's been some rationalization on the core connectivity. We believe that will come back based on what we see as the order book. My own sense is that this is really what calls for greater urgency in our own portfolio to really drive a lot more adjacencies. Because remember, the connectivity side of the business, as an industry, is growing only at about 4%, 5%. So underlying connectivity will always be soft. And there is only so much that you can do to actually gain share and so on. The second part of the business is really on the global side, where we are dependent on some of the large players looking at spends. So this is what calls for greater urgency to re-engineer our own portfolio, where we continue to focus on connectivity, which is our bread and butter, but in addition, really accelerate our adjacencies. If you ask me personally where I spend maybe 50%, 60% of my time, it's really towards that part of the portfolio so that we can re-engineer the B2B side towards adjacencies. We've made substantial investments in some of the capabilities on CPaaS, which is seeing good traction. Of course, it comes at a slightly lower margin than the core connectivity business. Then the EBIT margin is actually very healthy because the capital requirements there are very scarce. Second area of focus for us is really cloud, where till now, we've been more partnering with just public cloud players to actually resell cloud along with a small managed services component. I think here we are putting in significant investments in managed services capabilities in Pune. The second place we have also decided to put in a substantial investment is on our own cloud offer. I don't know whether you're aware that as Airtel, we are the largest cloud player for our own private cloud. All our applications, whether it's our retail applications, our call center applications, our portals, or our service portals for all our channels, all of it runs on our own cloud. We believe there's an opportunity here to play a game where we are also managing workload movement to the public cloud, but at the same time, optimizing spends for players that may want to do it in a cheaper way using the private cloud. The third area of cloud is really where we are partnering with one of the large tech companies to go after the banking workloads, particularly given the sovereignty requirements that many of the banks and financial institutions have as far as cloud is concerned. CPaaS, cloud, are the two big areas. The third area of focus really is on security. We've had one big strategic partnership with a large global player on security. You will see that announcement come up in terms of the product portfolio that we launched in the coming quarter. So all of these areas are getting a lot of attention. And I feel that if you think of the market outside of the core connectivity that's growing rapidly, we really need to do a significantly faster and more effective job in converting that opportunity into real revenue for our portfolio. That's fair. Any comment on the competitive intensity in the enterprise business you want to comment? Because one of the players is now working too much a lot for it. Yeah, Sanjesh, that I think remains. I think we've seen, especially when there are reverse auctions in the form of government tenders and for public sector units, which is as per which they do normally, we do see some competitive pressure. But I would not say this is anything that is disproportionately different from what we've seen over the last three years. I think this is business as usual. Fair enough. Thanks, thanks, Gopal, for patiently answering all those. The next question comes from Mr. Kirtan Mehta. Mr. Mehta, you may please unmute your side, introduce yourself, and ask your question now. Good afternoon, sir. And thanks for giving this opportunity. I wanted to understand in terms of the home segment, what would be our targets? Sort of what is the vision for the home segment over the next three years or so? And could you also elaborate the way you elaborated the pros and cons of standalone versus non-standalone architecture in case of the homes? How do you see the sort of the absence of sub-gigahertz? Could it have any impact? And what would be our USPs when we target the home segment? That was one part of the question. So I think the home segment will continue to see strong growth because there are still over 20-25 million high-value homes that still don't have broadband. And we do know that every time a smart TV is bought, it's a moment of reappraisal for that home to consider broadband. So to that extent, we do believe that this will continue to grow. The pricing on broadband is quite low in India relative to any other market in the world. In fact, it's very low. As a consequence, maybe that market could be slightly larger than 60 million or 65 million. We will see how that plays out. I think the bulk of the market is really focused on the top 1,000 cities. We see that. We don't see as much of a market playing out beyond the 1,000 cities. I would say maybe 90%-95% of it is there. The focus on homes for us is really fiber as the first port of call because the experience that you're able to deliver on fiber, given a dedicated network both on the down as well as the uplink, is always going to be better than any wireless technology. Today, the 3.5 gigahertz has a lot of unutilized spectrum. So we will get a great experience at this stage. But over time, that will congest, as happens in many other markets, most notably, if you look at the U.S., the same situation that's playing out there. As a consequence, I think our movement will be to grab the market wherever we can to fixed wireless access, but then to move them to fiber as soon as we can move them to fiber. We do not believe that there is any need for sub-gigahertz spectrum. We've also talked about this at length. We have enough sub-gigahertz spectrum between a combination of 900 band and 850 band for coverage. Remember, the sub-gigahertz band only gives you coverage at the edge. It does not have much spectrum itself. The bands don't have much spectrum. As a consequence, you don't get capacity coming in from sub-gigahertz. It's only for coverage. With technologies like carrier aggregation that are available, we can extend the downlink even of the mid-band. And therefore, we are pretty satisfied that the combination of standalone for fixed wireless access using our mid-band holdings and whatever coverage we have that we need with sub-gigahertz on the mobility side is more than adequate for our needs. Thank you for a very elaborate answer. Probably, if I may add another question, we have been talking about sort of a need for INR 300 RPU to have an adequate return. Is there a possibility that a significant portion of that can be covered by the Airtel Black type of offering where bundled offering goes to the consumer and that allows us to bridge the gap, limiting the need for increase in the connectivity tariff? Well, I wouldn't say that because if you look at our disclosure, our disclosure gives you segmental reporting by business. We disclose the ARPU by business. And so when we talk about mobility ARPU, we talk only about mobility ARPU, which may not be the case with everybody in the country. And therefore, Airtel Black will show up in broadband or will show up in DTH and not really in mobility. Of course, postpaid will show up in mobility. And so when you think about Airtel Black, which is largely a home play, I think it will have very little to do with the ARPU for the mobile segment. What it does give you is a presence in the home, which is a high-value home. And we can leverage our existing relationship that we have with mobility in that home to actually shift them into a converged home. That's a different story, but that is not an RPU story. That's an ARPA story, which is an average revenue per account. Thanks for clarifying this. That's all from my side. The next question comes from Mr. Kunal Vora. Mr. Vora, you may please unmute your side, introduce yourself, and ask your question now. Yeah, and thanks for the opportunity. I wanted to understand your thoughts on 5G monetization. Minimum threshold to use 5G has now increased. So what kind of dropout would you expect from the current 90 million 5G users who were used to paying INR 239, but now they might need to pay closer to INR 350 or even, I don't know, like INR 419? So I wanted to understand thoughts on 5G subscriber ways going forward. Kunal, we have not seen in the early days of the tariff repair, we have not seen any cool-off on 5G. In fact, remember, devices are also coming into India. 80% of the devices now are 5G-enabled. So we continue to see growth in this segment. And we also have a lot of sophisticated data science tools to try and get people onto the right plans, given the change in pricing that's happened in the last few weeks. But at this stage, we don't see any challenge on that front. The broader answer to your question on 5G monetization or the broader problem that you're referring to, which is 5G monetization, is a relevant problem because globally, you really do not see any major use cases that help in 5G monetization other than fixed wireless access. So fixed wireless access is a modest use case in the overall scheme of things because on the mobility side, you put in a lot of CapEx for radio. But fixed wireless access is a small part of the overall revenue that is generated. As you know, home segment tends to be small in most markets other than very developed markets where homes have been penetrated deeply by incumbent legacy government players that have then privatized. But Gopal, would you say that 5G monetization has now been started? Because if you want to use 5G now, there is minimum INR 50, INR 70 extra which you need to pay compared to what you are paying. While there is a normal tariff, which is maybe 20%, 25%, but for 5G customers, the tariff is more like 40%. So that's the reason I was asking whether you're seeing more dropouts because it's a significant INR 100+ increase in the case of 5G customers. Well, that's modest for us because in the past, also, many of these customers were sitting on plans at INR 299 and so on and so forth. But you're right. There is a modest monetization in that respect. There's an opportunity to monetize, and that's something that we'll need to look at over the course of the next few quarters. But just to conclude this discussion, you don't think there'll be much of a dropout from the 90 million, which you're currently seeing? I mean, do you think that 5G customers will be? I'm not suggesting that all 90 million were on 5G packs. What I'm suggesting is that there are 90 million customers who latch onto 5G radios on our device, on our network. And to get them onto the right plan is really the effort. Understood. Second is, what's the incremental Capex which you'll need to incur to offer standalone network? And will you offer FWA on a nationwide basis? And how big do you think the market is? The incremental Capex to run SA is very, very modest because all our, as I mentioned earlier, our radio network, our core network, everything is ready for SA. So the incremental Capex is very modest. It's really some software that will need to be put in there. And yes, when we launch fixed wireless access on standalone by August or September, we will be national with it. Okay. And lastly, India mobile Capex fifth quarter was lower, INR 48 billion versus last year's same quarter, INR 78 billion. Was there any one-off factor like the heat wave or any of that? Or should we extrapolate this or the Capex will increase compared to what we've seen in? We've always mentioned that Capex this year will be lower than last year and that it will moderate. I would not react too much to a particular quarter. Sometimes it goes up, sometimes it goes down. But certainly, the Capex that we will incur in this coming year, which is this year, which is the year that we are in, FY24-25, will be lower than FY23-24. Okay. Thanks. That's it from me. The next question comes from Mr. Vivekanand Subbaraman. Mr. Subbaraman, you may please unmute your side, introduce yourself, and ask your question now. Thank you for the follow-up. Just a couple of questions extending what Kunal just asked on the 5G customer base, right? So just to clarify, you said that 90 million customers have latched on to 5G at some point of time during the quarter. Is that the right assessment? Or during the month? In the month. Oh, okay. In a month. okay. In a month. okay. In a month. Yeah. Right. Understood. Okay. That's why. Secondly, are there any targets that you have on FWA? I know you said this in answer to a previous participant on the 20-25 million users who are not yet connected by broadband. Is it feasible to even connect them via broadband, or you are looking only to connect them through FWA? No, no, it is feasible, but it will take time. We roll out 1.5 million home passes every quarter. So there is a staggering pace of rollout of fiber home passes. But the time taken to do that can be accelerated dramatically if you actually have a fixed wireless access option. So that's the only point. Because remember, in broadband, once you get into the home, unless you make a mistake or unless your experience is poor, the churn tends to be low. Okay. Lastly, I missed the number you said on the digital revenue, the annualized revenue number. I think you mentioned it in the beginning, but I missed it. I didn't mention it. But it's in that ballpark of about INR 2,300-INR 2,400 crores. Okay. Thank you, Tanvi. Yeah. Thank you. Thank you to all the participants. I would like to remind all the participants to stay connected on the call for the next session on Bharti Hexacom. With that, I would now like to invite Gopal for his closing remarks on Bharti Airtel. Thank you very much for this call, and thank you for all the questions. I look forward to talking to you again next quarter. Thank you, Gopal. With this, I would now like to hand over to Mr. Soumen Ray for his opening remarks on Bharti Hexacom. Good afternoon, everyone. Welcome to the Bharti Hexacom Q1 FY25 earnings call. I will start with the key developments of this quarter. There are two. The first was spectrum auction. We purchased about 15 MHz of spectrum in the sub-gigahertz and in the mid-band range. The total cost to us was about INR 1,000. The second, of course, is tariff repair, which, along with the industry, in the first week of July, Bharti Hexacom also took up the tariff in the prepaid segment. Moving on to financial and operating performance, we delivered a revenue of INR 1,911, growing sequentially by 2.3%. Revenue growth was broad-based. Smartphone customers' addition was a strong 700,000 plus 703,000 as compared to 641,000 in the preceding quarter, Q4 of last year. RPU for the quarter also saw an increase. It was at 205 versus 204, with the number of days being the same. Data usage per customer improved to 25.7 GB, the highest in the last four quarters. EBITDA stood at INR 912 with an EBITDA margin of close to 48%. The reported net income was INR 511 for the quarter. And operating free cash flow, which is EBITDA minus capex, was at INR 594. Happy to report that we have repaid about INR 900 of our debt. So there was a paper which was INR 2,000. INR 900 has been repaid, and INR 1,100 has been refinanced. And we ended the quarter with a net debt to EBITDA improving to 2.07. With that, I'd like to open the floor for questions. Over to you, Vidhi. Thank you, Soumen. We will now begin the Q&A interactive session. Due to time constraints, we would please request if you could limit the number of questions to two per participants to enable more participation. Interested participants may click on the raise hand option on your Zoom application to join the Q&A queue. The first question comes from Mr. Sanjesh Jain. Mr. Jain, you may please unmute your side, introduce yourself, and ask your question now. Hi, Soumen. Good afternoon. Thanks for taking my questions. First, on the cost side, the cost increase sequentially appears to be higher both on the SG&A side and the other cost side as well. Can you help us understand what led to a sudden, sharp improvement in the cost line item? Well, in SG&A, there was a bit of one-off in the previous quarter, which has been a catch-up mostly. Also, with the broadband rollout, there was some one-time advertisement expenditure. These are the two primary reasons why SG&A is a little elevated. The normal level would be somewhere between last quarter and this quarter, somewhere in between. People cost also has gone up a bit. And that is more because of, one, increment which has come in, and two, there are some actuarial valuation impact which has come in. And of course, on the OpEx, the reason is because, as you know, we have capitalized our 5G spectrum and the investments. So this quarter saw the full impact of OpEx as well as depreciation amount and interest of the 5G spectrum and associated fixed costs of the radios and the variable cost of the OpEx per site. So, Soumen, we have largely now capitalized all the spectrum, leaving the one which we have just purchased. Everything is amortized now? As far as BHL is concerned, everything is capitalized. You have seen in Bharti Hexacom the full impact in this quarter P&L. Okay. So from next quarter onwards, it should stabilize in terms of the growth, right? Yes, it should. Okay. My second question is on the working capital. There is a significant release of working capital to the tune of ₹445 crores to be precise in this quarter. What led to that sudden release in the working capital? And is this current working capital a sustainable number to look at? Well, I think what led to this release is multiple levers being pushed, some collections being fast-tracked, and all of that. You can consider the current level to be reasonably a steady level of working capital. But I'm not saying the exact numbers, but directionally, this is how it should be. One of the reasons why this got released is there were some LF reversals which happened because of the Supreme Court case. Okay. Okay. So that INR 300 crore was sitting in the working capital, and that got reversed. But that should not flow through the cash flow, right? Because INR 445 crore is what I'm saying. When you say working capital, I was telling you, so you will see some reduction in current assets and current liabilities. In current assets, there was a large borrowing which was sitting, which was due within one year, which, as you know, INR 800 crores has been actually paid off. And the balance has been rolled over to be paid in future quarters as the company sees good cash accrual. But that's a very larger number. Your difference is about INR 400 crores. So it's explaining. So the current assets have come down by INR 800-INR 900 crores. But there is a corresponding reduction in current liability to the extent of reversal of the LF interest. Got it. And towards the capex, Soumen, this quarter was 16.6% of the revenue, just INR 370 crores. This should not be a representative capex for the full year, right? See, quarterly, we would not like to say whether it is representative or not. But like it happened in our parent at a full year level, we should finally end with a capex which is lower than last year. Okay. That applies to the Hexacom as well? To BHL. Yes. Got it. That's it from my side. Thanks, Soumen, for answering all the questions. And best of luck for the coming quarters. Thanks. Thanks. The next question comes from Mr. Vivekanand Subbaraman. Mr. Subbaraman, you may please unmute your side, introduce yourself, and ask your question now. Hi, Soumen. As far as the costs are concerned, thanks for the explanation there. So just one additional question in the same breath. When I look at the net revenue and divide it by gross revenue, I'm getting 79.2% this quarter versus and this has been steadily declining from around 80.6% one year in the one year prior, same quarter. So there has been some increase in access charges as a percentage of revenue. Could you help us understand what are the factors responsible for that, and where should this stabilize? So, Vivekanand, thanks. Bharti Hexacom Limited is the only player currently who does not have a Pan India presence, and hence we have access charges. You should look at access charges on an annualized basis because there are multiple seasonalities because of which outroamers, inroamers, numbers change. Typically, for Bharti Hexacom, there would be some reduction in access charges, net access charges during Q3, Q4, and possibly Q1. We've just got listed. This is the second quarter. This is effectively the first quarter after listing. My request is you consider it in that range, look for a year. I think you will get an annualized trend as to how it flows. Okay. And there were no other factors apart from inroaming? No, there is no other factor. No, no, no. There is no other factor. It is just that, as I said, in our normal in the industry, this does not apply. Whereas because we are only a two-circle player, we have this exposure which will normalize when you take a longer period average. You're seeing two quarters, and hence it is looking a little yo-yo. Okay. My second question is, as far as Airtel overall is concerned, Gopal outlined the home market opportunity of top 60 million homes, 20-25 million of whom are unconnected. What would the corresponding numbers be for Hexacom? What's the opportunity set that you foresee in these markets? Well, Vivekanand, I would not have the numbers offhand with me to give you. But suffice to say, it should be lower than equal subset because the two circles we are talking of is relatively lower in terms of discretionary income and development. So I would say if it is 60 million, this number could be anywhere between 1-1.5 million in these two circles. Understood. Okay. Great. Thank you very much. The next question comes from Mr. Kirtan Mehta. Mr. Mehta, you may please unmute your side, introduce yourself, and ask your question now. Thank you for this opportunity. Just extending Vivekanand's question into the homes. So would we be more open to sort of explore the FWA route to tap the home segment within our two circles where probably the network providing network connectivity to the upper household would be difficult? So would we be aiming to focus more on FWA route to capture them? Thanks, Kirtan, for the question. I think let me put it this way. The way we are approaching it is we are saying Wi-Fi. When we lit up both wired connection as well as FWA, the feasibility goes up significantly. The pricing is same. The customer is actually agnostic because this is a residential customer. The kind of usage that they have is serviced adequately by a 40-60 Mbps connection. They don't need any more. So if it is FWA which has to take the lead, FWA will take the lead. We are not working towards saying that FWA will be my lead in acquiring home customers in these two circles. Our pitch is it is Airtel's Wi-Fi. If you want it, let us know. We will give it. Whether it is wired or FWA depends on whether the area has been wired or not. But for a customer facing, it's just Airtel Wi-Fi. But yes, as you rightly said, there is a probability that FWA will do a little better in these places, primarily because laying fiber across is a little challenging. Just one more follow-up here. So in terms of we mentioned around 1,300 cities where home passes would be available. So how many of those cities would be within our two circles? We will be closer to about 100. Sure. Just one last question from my side. We have mentioned about net income before exceptionals was INR 2.6 billion was around 24% YOY. Could you just remind us through what were the factors during the previous Q1, which is sort of showing this apparent decline? Pardon? Underlying net income excluding exceptionals at INR 2.6 billion is 24% down YOY. So this is an apparent decline because I believe of the previous Q1. Would you be able to remind us what were the reasons during previous Q1? So I think it is primarily network cost. The 5G cost has come in. We have rolled out a lot many more new sites. So if you go to I'll tell you what to look at. If you go to page 16 on schedule 8.1, you will see a very, very sharp increase in network operating cost from about INR 348 crores to INR 467 crores. Right. Thank you. I think that's it from my side. Thanks for these answers. Thank you to all the participants. I would now like to hand over to Mr. Soumen Ray for his closing remarks. Thanks a lot for showing interest in attending this call. Like other telecom operators, we are very excited with this tariff increase, and we hope in the next two quarters we get a good flow-through of this and thereon take it on from there. The focus on broadband continues. Broadband as a share of our business has inched up marginally. It was more like 3% of our total business. It has moved to 4%. Hopefully, with aggressive focus on broadband coupled with driven by FWA, we can further enhance the diversity of the portfolio between these two businesses. Thank you. Thank you, everyone, for joining us today. Recording of this webinar will be available on the websites of the companies for your reference. Have a great day ahead.