Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 6 - Vivekanand Subbaraman – Ambit Capital Thank you just one follow up, it has been three years since you last gave a guidance on the data center investments, you had said I think at the end of 2021 that you will invest around Rs.5,000 Crores over a three year period any further guidance? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited Vivek, we are broadly in line with that kind of investment so we are broadly in line with those numbers over a three year period. Vivekanand Subbaraman – Ambit Capital Right. No I am just looking ahead and trying to understand the magnitude of opportunity and investment envisage over the next three years. Thank you. Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited I think that the demand for data centers continues to be strong both from global customers as well as domestic, so we will continue to invest in data centers and so the guidance would be more or less around the same level over the next few years. Vivekanand Subbaraman – Ambit Capital Understood. Thank you so much and all the best. Vaidehi Sharma – Moderator The next question comes from Mr. Aditya Suresh. Mr. Suresh you may pleas e unmute your side, introduce yourself and ask your question now. Aditya Suresh – Macquarie Thank you Gopal and congratulations on a fantastic progress which Bharti has seen in the past couple of years. A specific question Gopal was on incremental operating leverage. As you kind of spoke about the trajectory towards Rs.300 of ARPU how do you think about incremental operating leverage for the mobile business? consensus has let us say a 400 to 500 basis points margin expansion at Rs.300 is that appropriate, is the upside or downside those numbers? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited The way we think of our businesses, 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 two to three years as we have grown the topline, through many, many interventions around ARPU 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 the overall return on capital improves modestly. It is not good enough but it certainly improves from where it is and once you get to 300 at least there will be reasonable returns in the industry. Aditya Suresh – Macquarie The second question Gopal was on deleveraging and dividends. You have spoken about this path previously but if you could maybe articulate what is the net-net target you are looking at before we can expect any meaningful dividends? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited Well at the India level, may be, Soumen you want to take this.

Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 7 - Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited Yes 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 a Rs.8 dividend for the fiscal ended 2024, which were 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 the coupon which is higher than market average today. Harjeet Kohli – Joint Managing Director - Bharti Enterprises 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 talked about even Indus has gotten back to regular situations in respect to the counter party payments you would have seen their results their PAT is back to what it could be probably close to a billion dollars 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 is 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. Aditya Suresh – Macquarie Thank you so much. Vaidehi Sharma – Moderator The next question comes from Mr. Sanjesh Jain. Mr. Jain you may please unmute your side, introduce yourself and ask question now. Sanjesh Jain – ICICI Securities Good afternoon. Thanks for taking my questions. Gopal I got few of them. First on the tariff 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 SIM consolidation which was pronounced in the first tariff are more benign in the second how we see this tariff hike? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited Sanjesh do you had any more questions or this was the only one. Sanjesh Jain – ICICI Securities Yes I got few more but they are not related to this. Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited So let me take this first. I think it is a little premature for us to say there is any fundamental change but from what we have 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 have seen is modest and I think only time will tell as to how that will play out. As of now we believe it is more or less in line with our action standards. F undamentally as far as data is concerned we have not seen too much of downtrading yet. Y es 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 and let us see how that is which is I was saying it is a little early for me to comment on this. I think by the time we get to the end of this Q2 we will have a very good read because some of the flow through will happen in Q2 but some more will come in Q3 because of the nature of the recharge cy cles and the validity of different packs that people uses. Sanjesh Jain – ICICI Securities Fair enough thanks. The second question is on, again continuing with the restructuring part of it, any reason we chose to increase 1% stake in Infratel by not participating in the buyback because that will cost us Rs.465 a share which is significantly expensive than our earlier purchases so why suddenly such an expensive buying out of 100 basis point and flow through of the dividend also has a impact because of that as well?

Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 8 - Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited Yes I understand. Harjeet you want to take that question. Harjeet Kohli – Joint Managing Director - Bharti Enterprises Sure. Sanjesh just look Indus runs by its own in terms of a listed company. Of course we are significant shareholders and I think there 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 t heir current status some of pas t backlogs clearing so they had the choice to do a dividend or the buyback and their choice to use buyback was as I understand I am probably relaying 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 in denominator impact. Number two they retain the full dividend ability as reserve incrementally, because as things improve their dividend reserves which is close to Rs.18,000 Crores is continuing to be intact and number three was a short-term tax efficiency that is available for the instrument, so I think based on that they have taken 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 contract trade because we increase 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. Sanjesh Jain – ICICI Securities No, my only point is that this was available at Rs.350 few months back or probably few weeks back and suddenly buying at Rs.465 appears to be an expensive acquisition but I got your point. The next question again as Harjeet and Gopal you all mentioned so the merger of data center and Indus does not seems like an immediate plan for that entity is that understanding right? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited Well I do not want us to even go down that path right now San jesh till we are clear w hat we want to do. As of now Nxtra is an independent sort of company within the portfolio. It is a subsidiary of us. At some stage we have 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 will come to at that stage so right now it is too premature to even go down that path. Sanjesh Jain – ICICI Securities 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 number, what is happening on the enterprise business? Why there is a sudden slowdown? Last year we grew very, very smartly 15% to 16% and now we are low single digit? It looks very contrasting? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited Yes, it is a good point Sanjesh and I agree with you that the business has certainly softened. We have seen a significant softening in the global side of the portfolios that I mentioned. Many of the OTT companies deferred their spends. We saw this trend - exact opposite trend in the domestic side last year . T he domestics were pitching in strongly. There has been some rationalization on the cor e connectivity. We believe that it 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 % to 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 was our bread and butter, but in addition really accelerate our adjacencies and if you ask me personally where I spend maybe 50 % to 60% of my time, it is really towards that part of the portfolio so that we can re -engineer the B2B side towards adjacencies. We have 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 but then the EBIT margin is actually very healthy because the capital requirements there are very scarce. The second area of focus for us is really cloud where till now we have 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 do not know whether you are aware that as Airtel we are the largest cloud player for our own private cloud . All our applications whether it is a retail applications or call center applications our portals or our service portals for all our channels all of it run on our own cloud and we believe there is 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 and 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

Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 9 - have as far as cloud is concerned, so CPaaS and cloud are the two big areas. The third area of focus really is on security. We have had one big strategic partnership with a large global player on security. Y ou will see that announcement come up in terms of the product portfolio that we launched in the coming quarters, 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 is growing rapidly we really need to do a significantly faster and more effective job in converting that opportunity into real revenue for our portfolio. Sanjesh Jain – ICICI Securities That is fair. Any comment on the competitive intensity in the enterprise business you want to comment, because one of the players is now talking too much? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited Yes Sanjesh that I think remains. I think we have seen especially when there reverse auctions for government tenders and for public sector units 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 have seen over the last three years. I think this is business as usual. Sanjesh Jain – ICICI Securities Fair enough. Thanks Gopal for patiently answering all those. Vaidehi Sharma – Moderator The next question comes from Mr. Kirtan Mehta. Mr. Mehta you may please unmute your side, introduce yourself and ask y our question now, good afternoon. Kirtan Mehta – BOB Capital Markets Good afternoon Sir and thanks for giving this opportunity. I wanted to understand in terms of the homes segment what would be our targets sort of what is the vision for the home s segment over 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 USP wh en we target the homes segment? that was one part of the question. Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited So I think the homes business or the homes segment will continue to see strong growth because there are still over 20 to 25 million high value homes that still do not have broadband and we do know that every time a smart TV is bought, it is 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. I n fact is very low and as a conse quence maybe that market could be slightly larger than 60 million or 65 million but we will see how that plays out . I think the bulk of the market is really focused on the top 1000 cities. We will see that. We do not see as much of a market playing out beyond 1,000 cities. I would say maybe 90% to 95% of it is there. The focus on homes for us is really fiber as a first protocol because the experience that you are able to deliver on fiber even 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 GHz has a lot of unutilized spectrum and 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 US the same situation that is playing o ut there. As a consequence I think our movement will be to grab the market wherever we can to fix 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 have also talked about this at length. We had 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 do not have much spectrum. As a consequence you do not get capacity coming in from sub-gigahertz. It is only for coverage and 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.

Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 10 - Kirtan Mehta – BOB Capital Markets Thank you for a very elaborate answer. Probably if I may add another question. We have been talking about sort of a need for Rs.300 ARPU to have an adequate return is there a possibility that 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 breathe the gap limiting the need for increase in the connectivity tariff? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited Well I would not 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 is really, 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 homes 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 converg ed home. That is a different story but that is not an ARPU story. That is ARPA story, which is an average revenue per account. Kirtan Mehta – BOB Capital Markets Thanks for clarifying this. That is all from side. Vaidehi Sharma – Moderator The next question comes from Mr. Kunal Vora. Mr. Vora you may please unmute your side, introduce yourself and ask your question now. Kunal Vora – BNP Paribas 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 239 but now they might need to pay closer to 350 or so, or even higher like 419. So wanted to understand thoughts on 5G subscriber base going forward? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited 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 has happened in the last few weeks, but at this stage we do not see any challenge on that front. The broader answer to your question on 5G monetization or the broader problem that you are referring to which is 5G monetization is a relevant problem because globally you really do n ot see any major use cases that is held 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 homes 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. Kunal Vora – BNP Paribas But Gopal would you say that 5G monetization has now been started because like if you want to use 5G now, there is like minimum Rs.50, Rs.70 extra which you need to pay compared to what you are paying while this is a normal tariff price which is may be 20% to 25% but for 5G customer the tariff hike is more like 40% so that is the reason I was asking whether like you are seeing more dropouts because it is a significant Rs.100 plus increase in case of 5G customers? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited Yes, well that is the modest for us because in the past also many of these customers were sitting on plans at Rs.299 and so on and so forth but you are right there is a modest monetization in that respect . There is an opportunity to monetize and that is something that we will need to look at, over the course of the next few quarters.

Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 11 - Kunal Vora – BNP Paribas But just to conclude this discussion you do not think there will be much of a dropout from the 90 million , which you are currently seeing? I mean, do you think that 5G customer base will still grow? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited I am not suggesting that all 90 million were on 5G packs. What I am suggesting is that 90 million customers who latch on to 5G radios on our device on our network and to get them onto the right plan is really the effort. Kunal Vora – BNP Paribas Understood and second is what is the incremental capex which you 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? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited The incremental capex to run SA is very very modest because all are as I ment ioned earlier our radio networ k, our core network everything is ready for SA so the incremental capex is very modest. It is 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. Kunal Vora – BNP Paribas Okay and lastly India mobile capex this quarter was lower Rs.48 billion versus last year same quarter 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 have seen? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited We have 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 and 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 in FY2024-25 will be lower than FY2023-24. Kunal Vora – BNP Paribas Okay thanks. That is it from me. Vaidehi Sharma – Moderator The next question comes from Mr. Vivekanand Subbaraman. Mr. Subbaraman you may please unmute your side, introduce yourself and ask your question now. Vivekanand Subbaraman – Ambit Capital 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? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited In a month.

Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 12 - Vivekanand Subbaraman – Ambit Capital Right understood okay that is one. Secondly are there any targets that you have on FWA? I know you said this has been answered to a previous participant on the 20 to 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? Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited No, it is feasible but it will take time. We will roll out one and a half million home passes every quarter so there is a staggering case 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 is the only point. Because remember in broadband once you get into the homes unless you make a mistake or unless your experience is poor the churn tends to be low. Vivekanand Subbaraman – Ambit Capital 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. Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited I did not mention it but it is in that ballpark about Rs.2300 to 2400 Crores. Vivekanand Subbaraman – Ambit Capital Well thank you and all the best. Vaidehi Sharma – Moderator 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. Gopal Vittal – Managing Director & Chief Executive Officer, Bharti Airtel Limited Thank you very much for this for this call and thank you for all the questions. I look forward to talking to you again, next quarter. Vaidehi Sharma – Moderator Thank you Gopal. With this I would now like to hand over to Mr. Soumen Ray for his opening remarks on Bharti Hexacom. Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited Good afternoon everyone. We lcome to the Bharti Hexacom Q1 FY25 earnings call. I will start with the k ey developments of this quarter. There are two. The first was spectrum auction. We purchased about 15 megahertz of spectrum in the sub-gigahertz and in the mid-band range. The total cost to us was about Rs.1,000 Crores. 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 Rs.1,911 Crores, growing sequentially by 2.3%. Revenue growth w as broad -based. S martphone customers add ition was a strong 700,000 plus, 703,000 as compared to 641 ,000 in the preceding quarter Q4 of last year. ARPU for the quarter also saw an increase it was at 205 versus 204 with the number of days being same. Data usage per customer improved to 25.7 gigahertz the highest in the last four quarters. EBITDA stood at Rs.912 Crores with an EBITDA margin of close to 48%. The reported net income was Rs.511 Crores for the quarter and operating free cash flow which is EBITDA minus capex was at Rs.594 Crores. I am happy to report that we have repaid about Rs.900 Crores of our debt. So there was a paper which was due of Rs.2,000 Crores. Rs.900 Crores has been repaid and Rs.1,100 Crores has been refinanced and we ended the quarter with a net debt to EBITDA improving to 2.07. With that I would like to open the floor for questions . Over to you Vaidehi!

Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 13 - Vaidehi Sharma – Moderator Thank you Soumen. We will now begin the Q&A interactive session . Due to time constraints we would pleas e request if you could limit the number of questions to two per participants to enable more participation . Interested participants may click on 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. Sanjesh Jain – ICICI Securities Hi Soumen, Good afternoon. Thanks for taking my questions . First on the cost side, the cost increased sequentially appears to be higher both on the SG&A side and the other cost as well, can you help us understand what led to sudden sharp improvement in the cost line item? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited Well the SG&A there was a bit of one -off in the previous quarter which has been catch up mostly. A lso with the broadband rollout there was some onetime 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. 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 ra dios and the variable cost of the opex percent. Sanjesh Jain – ICICI Securities So, Soumen we have largely now capitalize all the spectrum, leaving the one which we have just purchased everything is amortized now? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited As far as BHL is concerned everything is capitalized and you have seen in Bharti Hexacom the full impact in this quarter P&L. Sanjesh Jain – ICICI Securities Okay, so from next quarter onwards it should stabilize in terms of the growth right? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited Yes, it should. Sanjesh Jain – ICICI Securities Okay, my second question is on the working capital ? There is a significant release of working capital to the tune of Rs.445 Crores should be precise in this quarter , what led to that sudden release in the working capital and is this current working capital is a sustainable number to look at? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited Well, I think what led to this release is multiple levers being pushed, s ome 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 am not saying at exact numbers but directionally this is how it should be. One of the reasons why this got released is there was some VLF reversals which happened because of the Supreme Court case. Sanjesh Jain – ICICI Securities Okay, so that Rs.300 Crores was sitting in the working capital and that got reversed but that should not flow through the cash flow right because Rs.445 Crores is?

Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 14 - Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited No, so 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 Rs.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 is very larger number. Your difference is about Rs.400 Crores so explaining so the current asset has come down by Rs.800 Crores to Rs.900 Crores but there is a corresponding reduction in current liability to the extent of reversal of the VLF interest. Sanjesh Jain – ICICI Securities Got it and towards the capex Soumen this quarter was 16.6% of the revenue just Rs.370 Crores, this should not be a representative capex for the full year right? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited See, quarterly we would not like to say whether it is representative or not but like it happen in our parent at a full year level we should finally end with a capex which is lower than last year. Sanjesh Jain – ICICI Securities Okay that applies to the Hexacom? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited To BHL yes. Sanjesh Jain – ICICI Securities Got it. That is it from my side. Thanks Soumen for answering all the questions and best of luck for the comings. Vaidehi Sharma – Moderator The next question comes from Mr. Vivekanand Subbaraman. Mr. Subbaraman you may please unmute your side, introduce yourself and ask your question now. Vivekanand Subbaraman – Ambit Capital 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 divided by gross revenue I am getting 79.2% this quarter and this has been steadily declining from around 80.6% 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? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited 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 out-roamers, in-roamers numbers change. Typically for Bharti Hexacom there would be some reduction in access charges net access charges during Q3 and Q4 and possibly unwavering. We have just got listed. This is effectively the Q1 after listing. My request is you consider it in that range and look for a year I think you will get an annualized trend as to how it flows. Vivekanand Subbaraman – Ambit Capital Okay and there were no other factors apart from?

Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 15 - Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited No. There no other factors. It is just that as I said 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 y ou take a longer period average. You are seeing two quarters and hence it is looking a little yo-yo. Vivekanand Subbaraman – Ambit Capital 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 correspondi ng numbers be for Hexacom? What is the opportunity set that you foresee in these markets? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited Well, I would not have the numbers off hand with me to give you but suffice to say it should be a 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 one to one and a half million in these two circles. Vivekanand Subbaraman – Ambit Capital Understood. Great, thank you very much. Vaidehi Sharma – Moderator The next question comes from Mr. Kirtan Mehta. Mr Mehta you may please unmute your side, introduce yourself and ask your question now. Kirtan Mehta – BOB Capital Markets 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 s segment within o ur two circles where probably the providing network connectivity to the upper households would be difficult, so would we be aiming to focus more on FWA route to capture them? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited Thanks Kirtan for the question. I think let me put it this way, the way we are approaching it is we are saying WiFi. When we lit up both wire 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 by adequately by a 40 to 60 mbps connection they do not 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 WiFi if you want it, let us know and 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 is just Airtel WiFi, 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. Kirtan Mehta – BOB Capital Markets Just one more follow-up here, so in terms of we mentioned around 1300 cities where home passes would be available so how many of those cities would be within our 2 circles? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited It will be closer to about 100.

Transcript of Bharti Airtel Limited and Bharti Hexacom Limited Q1 ended June 30, 2024 Earnings Webinar Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Bharti Airtel Limited and Bharti Hexacom Limited. - 16 - Kirtan Mehta – BOB Capital Markets Sure just one last question from my side , we have mentioned about net income before exceptional said 2.6 billion was around 24% Y-o-Y could you just remind us through what were the factors during the previous Q1 which is sort of showing this apparent decline? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited Pardon. Kirtan Mehta – BOB Capital Markets Underlying net income excluding exceptional at 2.6 billion is 24% down Y-o-Y 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? Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited So I think it is primarily network cost you know the 5G cost has come in and we have rolled out a lot many more new sites so if you go to, I will 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 Rs.348 Crores to Rs.467 Crores. Kirtan Mehta – BOB Capital Markets Right thank you. I think that is it from my side. Thanks for these answers. Vaidehi Sharma – Moderator Thank you to all the participants. I would now like to hand over to Mr. Soumen Ray for his closing remarks. Soumen Ray – Chief Financial Officer - India & South Asia - Bharti Airtel Limited and Director, Bharti Hexacom Limited 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 there on 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 a 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. Vaidehi Sharma – Moderator Thank you everyone for joining us today. Recording of this webinar will be available on the websites of the company for your reference. Have a great day ahead.