Bharti Airtel Ltd’s consolidated Ebitda for the December quarter (Q3FY26) grew by 4.1% sequentially to ₹30,783 crore. India’s mobile services Ebitda crawled up by 2.2% quarter-on-quarter (q-o-q), but the metric for the Africa mobile business rose at a faster rate of 6.8% in constant currency.
Africa’s user base growth was higher at 3.2% versus India’s 1.2%. Data customer base rose 4.7% in Africa and can accelerate further as this customer base forms 45.6% of the total (79.8% in India). As the share of data customer bases grows, the Africa Arpu (average revenue per user) can get a further boost, given higher data Arpu at $2.70 versus $1.10 for voice. Even in terms of data usage per customer, Africa is at just one-third of India’s 30 GB per month, indicating potential to move up. Still, currency devaluation poses a significant risk to to the African telecom business of Bharti.
India’s mobile Arpu growth was soft at just 1.1% q-o-q to ₹259. The management shared that it’s difficult to implement differential pricing for 5G over 4G, as it could create confusion in the market, with customers not knowing the distinction between 5G and 4G data usage. There are traditional Arpu drivers, such as premiumization including migration from prepaid to postpaid that enables international roaming, but this did not have a meaningful impact last quarter.
New Arpu drivers could be tied to artificial intelligence (AI) providers. Bharti is providing Perplexity AI, just as Jio is providing Google’s Gemini. In such arrangements, Bharti and Jio have scope to earn revenue share from AI providers as and when users are willing to pay for AI. However, it could be a long haul before mobile users in India embrace paid AI plans at a significant scale, lifting Arpu.
Key Takeaways
- Bharti’s net-debt-to-Ebitda of 1.2x is conservative, sparking calls for more aggressive capital deployment.
- With higher data customer growth and vast Arpu upside potential, Africa is currently outperforming India in volume and Ebitda growth.
- Management is avoiding premium 5G pricing to prevent consumer confusion, leading to a stagnation in domestic Arpu.
- While partnerships with Perplexity AI offer a new revenue-share model, it is viewed as a long-term play rather than a near-term Arpu catalyst.
- The upcoming Reliance Jio IPO threatens Bharti’s ‘scarcity premium,’ making its 10x EV/Ebitda valuation a key metric for investors.
Leverage debate
Besides mobile, Bharti’s next area of focus is data centres, where it aspires to increase the market share from 12% to 25% over the next three to four years. In the earnings call, management was asked about their leverage, net-debt-to-Ebitda is just about 1.2x after factoring in nearly ₹16,000 crore to be collected from the final call on the rights issue till March. So, it’s possible for them to borrow more, stretching their net-debt-to-Ebitda to at least 2x to pursue inorganic growth opportunities in data centres. A net-debt-to-Ebitda of 2x is not considered high for a telecom company, given the stable nature of the business.
The management stated that they are not thinking along those lines, for now. If that’s the case, analysts were keen to understand whether Bharti could consider a sizable increase in dividend payouts, given the ₹50,000 crore in annual free cash flow (Ebitda minus capex) generated from India’s mobile services business alone. The management did not confirm this. It appears that either an aggressive growth strategy using higher leverage or an increase in dividend payout would please investors.
Reliance Jio’s upcoming listing will offer investors an opportunity to participate in another pure-play, profitable telecom company. Post Jio’s listing, it will be interesting to see whether Bharti Airtel’s scarcity premium as a sole telecom stock diminishes. Bharti’s stock’s current valuation at EV/Ebitda of 10x, as per Bloomberg consensus estimates for FY28, is not expensive given the near-duopoly status of the telecom industry in India.
