BHARTIHEXA - Bharti Hexacom Limited Share Price

In the earnings call on May 14, 2025, Bharti Hexacom's management provided an optimistic outlook for the company, underscored by a robust financial performance over the past year. Consolidated revenues reached approximately Rs.173,000 Crores, with a notable EBITDA growth of 21.2%, leading to an EBITDA margin improvement of approximately 2.3%. For Q4, consolidated revenues were reported at Rs.47,876 Crores, impacted by a decline in the B2B segment, while India revenues, excluding Indus Towers, were Rs.33,100 Crores. The EBITDA margin for Q4 stood at 50.7%, improving by 1.4%.

Management highlighted several key forward-looking points and strategies:

1. Capital Expenditure (Capex): Capex for FY2025 was reported at Rs.30,270 Crores. Management forecasts that FY2026 capex will be lower than in FY2025, indicating reduced spending as previous extensive rural expansions are nearing completion.

2. Debt Management: The company successfully prepaid Rs.5,985 Crores of high-cost DoT spectrum debt and reduced net debt to EBITDAaL to 1.5. Further deleveraging is a focus area, with plans to maintain fiscal prudence.

3. Customer and Revenue Growth: A sharp focus on customer retention through premiumization strategies is expected to enhance ARPU, which was Rs.245 in Q4. Management noted the critical need for a structured tariff architecture to improve the financial health of the industry.

4. 5G Expansion: The company added about 25,000 new 5G sites during FY2025. They reported 135 million 5G customers and emphasized capturing a more significant share of the 5G device market.

5. Digital and B2B Investments: Significant investments are planned for cloud services, cybersecurity, and broadening their digital portfolio, with expectations of B2B growth to contribute increasingly to revenues.

6. International Growth: Africa now represents 24% of total revenues, with a reported revenue growth of 6.3% sequentially in Q4 and a solid balance sheet with a net debt to EBITDAaL of 0.9.

These strategic initiatives reflect management's commitment to driving growth and delivering shareholder value, set against a backdrop of careful cash management and investment in future capabilities.

1. Question: "Would you intend to further increase stake in Airtel Africa or Indus Towers and any minimum net debt to EBITDA threshold which you like to maintain and beyond which surplus capital would be used to pay a dividend?"
   Answer: I want to clarify that we will look for opportunities to increase our stake in Airtel Africa due to its robust growth. As for Indus Towers, we have no plans for buybacks currently. Regarding debt, we continue to reduce our high-cost spectrum debt to lessen our interest burden.

2. Question: "Any kind of minimum net debt to EBITDA threshold or over there also you have complete flexibility?"
   Answer: We are committed to deleveraging and managing to a comfortable net debt to EBITDA ratio. By paying off high-cost debts, we're aiming for a sustainable position while also preparing for dividend distributions.

3. Question: "Any sense on if there could be some formalization of dividend policy in terms of some percentage of net income band or percentage, let us say FCF?"
   Answer: For now, we focus on increasing dividends as we've demonstrated, but no formal policy on percentages is in place yet. We will continue to use our free cash wisely between dividends, deleveraging, and growth investments.

4. Question: "Could you give us some sense of what kind of traction you are seeing in FWA in terms of subscriber ads?"
   Answer: Currently, FWA contributes significantly to our customer additions, accounting for about 40-45% of total net adds. Our goal is to ramp this up, especially as we penetrate areas with inadequate wired infrastructure.

5. Question: "Where are we on the transition to 5G SA?"
   Answer: We're watching the network utilization closely before transitioning to 5G SA. Our primary goal is to ensure a seamless experience; when we can offload 4G traffic to 5G efficiently, we'll consider SA deployment.

6. Question: "Is the mobile capex moving up in this quarter due to seasonality or something more?"
   Answer: I believe there were likely seasonal factors at play. Looking at annual trends, we expect overall capex to decrease in FY2026, reflecting the strategic shift in our investment focus.

7. Question: "Could you shed light on your B2B revenue growth, especially on global OTT?"
   Answer: Our B2B business is evolving, with core connectivity and digital services growing robustly. However, commoditized segments like messaging are under pressure, pushing us to evolve and shed low-margin operations.

8. Question: "What are your thoughts on the future of DTH?"
   Answer: While DTH faces challenges due to technological shifts, it still holds relevance for households without broadband access. We expect broadband growth, but there will be a sizable market for DTH particularly in underconnected regions.

9. Question: "What are your thoughts on tariff architecture changes?"
   Answer: A restructured tariff architecture could enable better upgrades. We propose lowering data allowances on lower-tier plans while encouraging upgrades to more premium segments to enhance profitability.

10. Question: "Can investments in the data center business grow significantly?"
    Answer: Yes, we view our investment in data centers as crucial, aiming to double our capacity in three years and capture a larger market share, especially as demand for cloud services increases.