Gopal Vittal at Airtel: A period of multiple challenges, in graphs

Even though Sunil Mittal-promoted Airtel was the market leader in March 2013, there was a sense of siege. Airtel had been losing market share for three years in a growing market. It was challenged in March 2010 with a $9 billion purchase of Zain’s African operations. Three months later, India had paid a lot to buy spectrum for one technology, only to discover that Mukesh Ambani’s Reliance had cheaper, full-fledged access to telecom through a different technology.

The participation of Jio, with deep pockets and an all-in approach, had enormous consequences. The number of operators was reduced to six in March 2020. Airtel’s monthly average revenue per user (Arpu) fell from ₹193 in March 2013 to ₹114 in March 2017, six months after Jio’s launch. Eventually, Jio and Airtel called a truce and Airtel’s Arpu started improving. Just like stock performance.

Nice balance

Although Airtel stock has not outperformed the broader market until 2024, the basis for this was the painstaking work it has done at three levels over a decade. Firstly, to continue to acquire subscribers and continue to grow. Secondly, to continue investing in the telecom sector, where the prism quickly changed from voice services to data services. This meant taking on debt. Third, run the business profitably so that free cash flows can pay off the additional debt.

Airtel has managed the deft balance between current operations and future expansion. In the eleven-year period to 2023-2024, Airtel’s consolidated revenues – of which India accounted for 60-65% – grew at an average rate of 7.4%. But corporate profits rose faster, at 12.2%, implying the company was able to sweat its assets more. This gave the country the buffer to expand its debt by an average of 11.5% during this period.

3G to 4G to 5G

Airtel needed to keep pace with technological advancements and offer faster data services. In the 2010 auctions, Reliance entered stealthily through the purchase of HFCL, immediately after the latter acquired the entire wireless broadband access (BWA) spectrum in India. At those auctions, operators mainly purchased 3G spectrum. In the following years, the technology switched to later generation 4G and 5G services.

To keep pace with technological advancements, acquire additional customers, manage the explosion in data consumption and prevent Jio from losing customers, especially in the postpaid segment, we had to continuously invest in the business. Between 2012-13 and 2023-24, capital employed by Airtel increased at an average pace of around 9%, from ₹1.08 trillion ₹2.86 trillion in 2023-2024. Airtel’s net debt increased from approx ₹58,000 crore ₹2.04 trillion. But the ability to pay off those debts, after a dip, has improved over the past three years.

Expiration dates

Airtel’s next big challenge lies in the form of revenue sharing contributions that the company has to pay to the government by 2031. In 2019, the Supreme Court asked a group of legacy operators, namely Airtel and Vodafone Idea, to clarify ₹1.47 trillion in disputed contributions. The operators’ curative petition challenged the calculation rejected by the court in September.

The telecom department has estimated Airtel’s dues at ₹43,980 crore. The good thing is that the core business is running well. The “kind of chaos in the industry,” as Vittal once referred to the period of retrenchment and industry momentum that coincided with the launch of Jio, is largely a thing of the past. One measure of this is the steady and consistent improvement in Airtel’s ARPUs. It was a difficult period, and the quiet Vittal was at the heart of it.

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