Tariff correction only way to improve RoCE: Bharti’s Vittal

‘In India, EBITDA margins improved to 51.8%, benefited by continued cost control and the SUC benefits’

5G spectrum acquisition optically increased our debt levels while our deleveraging continued on the back of tight fiscal prudence and strong operating leverage, says Mr. Vittal. | Photo Credit: KAMAL NARANG

Tariff correction alone can improve Bharti Airtel’s South Asia and India’s ‘very low’ 8.4% return on capital employed (RoCE), CEO Gopal Vittal said on Tuesday.

On leveraging the ‘power of 5G,’ he said there was a serious short-term opportunity to grow the operator’s market share. “Given “the financially pressed situation that one of the players in the industry is going through, we feel that the moment is ripe for [Bharti] Airtel pulling ahead and being the decisively most aspirational brand in India.”

Speaking at a post earnings analysts call, Mr. Vittal said, “...our South Asia and India ROCE is at 8.4%. For a business that takes risk and puts in substantial capex in order to drive digital adoption in India, we believe this level of ROCE is very low. The only way to help remedy this situation is a tariff correction.”

The telecom operator had on Monday posted a net profit of ₹2,145.2 crore for the second quarter, up 89% from the year-earlier period. Revenues rose almost 22% to ₹34,527 crore.

“In India, our EBITDA margins improved to 51.8%, benefited by continued cost control and the SUC benefits which were part of the seminal telecom reforms of last year. 5G spectrum acquisition optically increased our debt levels while our deleveraging continued on the back of tight fiscal prudence and strong operating leverage,” Mr. Vittal added.

Pointing out that the company has commenced 5G plus introduction in key cities, Mr. Vittal said by March 2024, Bharti Airtel expects to cover all towns in urban India as also key rural areas.

“As the network starts getting built out, we will see a significant part of our existing data traffic on 4G move to Airtel 5G plus. This is important since it will allow us to gradually move more and more spectrum to 5G at the flick of a button,” he said.

Mr. Vittal added that the use cases for 5G are still nascent outside of high-speed broadband, and the company is working across a large number of companies including start-ups to test out use cases spanning from experiential education using virtual reality to connected ambulances to productivity enhancements in manufacturing and agriculture to logistics and entertainment.

“...while many of these use cases could come into India over the next few years, we believe that there is a serious short-term opportunity to grow share and disproportionately win quality customers leveraging the power of 5G. Given the financially pressed situation that one of the players in the Industry is going through, we feel that the moment is ripe for Airtel pulling ahead and being the decisively most aspirational brand in India,” he said.