BHARTIHEXA - Bharti Hexacom Limited Share Price

Outlook and Major Points from Management:

Outlook:
Management anticipates continued growth through strategic initiatives, including transferring 16,100 towers to Indus Towers for operational efficiency and value creation. Focus areas include ESG (solarization, AI-driven energy savings), financial prudence, and expanding broadband/FWA, B2B digital services, and mobile monetization. Capex is expected to moderate, with emphasis on balance sheet strength and shareholder returns. Further tariff repair is deemed essential for industry sustainability.

Key Points:

1. Operational Efficiency: Transferring towers to Indus to optimize management focus and scale.
2. ESG Initiatives: Solarized 28,000 sites in six quarters; AI reduces energy costs by adjusting network traffic.
3. Financial Health: EBITDAaL margin at 49.3%; net debt/EBITDAaL improved to 1.8 (vs. 2.5 YoY). Prepaid Rs.35,500Cr high-cost spectrum debt.
4. Mobile Growth: ARPU rose to Rs.245 (QoQ +5.2%) driven by smartphone upgrades (6.5Mn adds), postpaid (0.6Mn adds), and data monetization. 5G base at 120Mn.
5. Broadband Expansion: Added 674K customers; fiber home pass reached 35Mn. FWA live in 2000+ cities, testing IPTV for easier onboarding.
6. B2B Retooling: Exiting low-margin global voice/messaging to prioritize digital adjacencies (Cloud, IoT, Cybersecurity). Cloud solutions launch imminent.
7. Digital Services: Airtel Finance disbursed Rs.4,600Cr; Payments Bank hit Rs.3,300Cr deposits. Bajaj Finance partnership to expand offerings.
8. Capex & FCF: Capex to decline YoY, prioritizing transport, homes, and B2B. Operating FCF (EBITDAaL - capex) at Rs.9,440Cr.
9. Dividend & Growth: Free cash flow to support deleveraging, dividends, and selective M&A (e.g., data centers).

Focus Areas: Tariff hikes, rural mobile penetration, and scaling digital/cloud services remain critical.

Question 1: "My first question is on the capex... Now going forward, which parts of your business do you expect to continue to see elevated capex? ... Is there a theoretical upper limit beyond which you do not need to expand mobile broadband sites?"
Answer: Capex is moderating, with radio investments decelerating significantly. Focus areas include transport infrastructure (fiber), homes (FWA/fiber rollout), and B2B. Mobile site expansion will slow as network rollout nears completion, except in underpenetrated circles.

Question 2: "With free cash flow improving, how will it be utilized? Will dividend payouts increase, or is M&A/deleveraging prioritized? Why is Bharti's home broadband growth slower than peers?"
Answer: Free cash flow will support deleveraging, higher dividends, and selective M&A. Home broadband growth is accelerating through FWA expansion, mass retail channel activation, and IPTV testing. Supply/value delivery are competitive, but channel access (e.g., retail distribution) is being ramped up.

Question 3: "How much ARPU growth can occur organically (excluding tariffs)? What is FWA's network coverage using 5G SA, and what are its ARPU/data usage trends?"
Answer: ARPU growth drivers (smartphone upgrades, data monetization) remain intact. FWA uses NSA currently, but SA is ready for deployment. FWA ARPU and usage mirror fiber plans (40"“100 Mbps), with no material margin difference.

Question 4: "Why are incremental mobile EBITDA margins (~90%) exceptionally high? Is this sustainable?"
Answer: High margins reflect tariff hikes flowing directly to EBITDA due to fixed-cost business structure. This is not the "new normal"; margins will align with operating leverage trends absent tariff adjustments.

Question 5: "What is the rationale for transferring 3,400 towers to Indus, and how will this impact Hexacom's P&L and capex?"
Answer: The transfer optimizes operational efficiency and long-term value creation via Indus's expertise. P&L impact is negligible (EBITDA dilution offset by interest savings). Capex may rise marginally due to FWA CPE costs, but net debt/EBITDAaL remains healthy (~1.03).

Question 6: "Why did B2B EBITDA decline despite exiting low-margin global voice?"
Answer: B2B margin pressure stems from higher low-margin hardware sales in converged solutions (e.g., security licenses). Exiting low-margin voice will improve margins over time, but growth in adjacencies (Cloud, IoT) has lower margins than connectivity.

Question 7: "How does Airtel Finance's partnership with Bajaj Finance work, and where is it reported?"
Answer: The partnership leverages Airtel's distribution/Bajaj's underwriting to offer financial products via Airtel's app/stores. Revenue is consolidated under Airtel (not Payments Bank).

Question 8: "What explains Hexacom's exceptional charge of Rs.1.4 billion?"
Answer: The charge relates to regulatory provision adjustments and prior period liability reversals. It is non-cash, one-time, and reduces contingent liabilities.

Question 9: "What is Hexacom's FWA/fiber home pass coverage and TAM?"
Answer: Hexacom covers ~200 cities with 2 million fiber home passes. FWA expands TAM to 3"“4 million in its geographies, with plans to accelerate rollout.

Question 10: "How will 5G monetization evolve given current 2GB plan adoption?"
Answer: 5G drives upgrades to unlimited-data plans (≥2GB). Future monetization hinges on pushing higher-tier plans and contextual data pack sales as usage grows.