Internet is now an essential part of everyone’s life. Because of the pandemic, so many changes arrived and one of them is, more usage of the internet. From online classes and meetings to working from home, it all was possible just because of the Internet. And now, we can’t imagine our life without the Internet. This change brought an enormous change for Telecom Industry. In this article, we are going to talk about BHARTI AIRTEL: the Next Telecom boss of India.
The most common questions about Airtel from the investors are, How does Airtel earn? What is the company’s business model? What does the future hold for Airtel? After such massive AGR, will the company survive? So before moving forward, let us learn about AGR. As one cannot talk about the Telecom Industry without knowing about AGR.
Table of Contents
What is AGR?
AGR stands for Adjusted Gross Revenue is a fee-sharing mechanism between the government and the telecom companies. The government of India implemented it in the year 1999. As the government shifted from “Fixed License Fee” to “Revenue Sharing fee” model. And according to this new model, companies have to share a percentage of their revenue with the government.
Companies were against it, but there was no other choice for telecoms. So, the government decided that telecoms have to pay the due AGR to the government. And the Supreme Court has provided 10 years to the companies to pay off the remaining AGR. AGR dues for Airtel, Vi, and Tata Tele are Rs 43,980 crore, Rs 58,254 crore, and Rs 16,798 crores, respectively.
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What’s in it for Airtel then?
Airtel is the first company that paid off Rs 18,000 Cr from the total due amount. The most important thing is, a part of the remaining amount is already provisioned by the company. Airtel handled the matter of AGR smoothly, while for other companies it’s still a matter of trouble. And by this achievement, we can say that Airtel would be the next telecom boss of India.
You know, Airtel is not just a Mobile service provider but is more than that. Now, let’s move to the Business Model of Airtel.
Business Model of Airtel
You might have used many Airtel services. Airtel has diversified its business. Well, all these businesses are linked to one another and act as an extension of their telecommunication business. Let’s see all the services that the company provides:
1. Airtel Business
This segment of the company includes many services, such as voice, data, security, IoT, enterprise mobility, digital media, etc. Airtel is one of India’s leading providers of ICT services for both small and medium scale businesses. This segment is basically for the corporates. And Airtel is the best enterprise mobile and data services, provider.
2. Mobile services
We all know, in India, two companies take the major market share: Airtel and Jio.
The pandemic hit all the industries so badly, but this isn’t the same if we talk about the telecom industry. Indirectly, it brought a tremendous opportunity for the telecom industries. Work from home, online classes, online meetings, and everything that was done virtually. I mean all that was not possible without the internet.
From the insights of the company, we saw the telecom sector grow magnificently, in terms of 4G subscribers, voice traffic, data traffic, and the most important- revenue. Although the company grew in all the sectors above, its ARPU still requires attention.
ARPU stands for Average Revenue Per User. It is like fuel for the companies. Airtel did a great job and has made an excellent reputation in this sector. Recently, the company has increased its plans, which is helpful for the company in increasing its ARPU.
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3. Tower infrastructure
You might have assumed that the company contributes to mobile services only, but it isn’t true. Airtel’s Bharti Infratel is India’s leading provider of tower and related infrastructure. Bharti infratel was incorporated in 2006 as a subsidiary of Bharti Airtel. The company manages telecom towers and communication structures for their own as well as for various other mobile operators.
Recently, the company merged with Indus towers to form Indus power limited. And the company has become one of the largest telecom tower companies in the world. The company has over 180,997 towers, 325,355 co-locations, and a nationwide presence covering all 23 telecom circles.
4. Home services
Under this segment, the company provides telephone and broadband services to their customers. Because of the increasing demand for high-speed internet for various purposes like education, gaming, work from home, this segment is getting huge traffic. The company is taking measures to increase the internet speed they provide to their customers.
5. Digital TV services
Airtel DTH has over 16.6 million subscribers and is one of the leading DTH services in India. Airtel XStream provided a world-class seamless experience on the biggest screen in the house. DTH services played an important role in the vision’s fulfillment of connectivity and quality content delivery.
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6. Airtel payments bank
In 2015, Airtel applied for a Payments Bank license with Kotak to gain a 19.9% stake in Airtel M-commerce Services Limited. And the company has increased its revenue from this segment consistently.
Revenue Mix
By examining the revenue mix of the company, we concluded that the major part of the company’s revenue comes from the mobile services segment. Airtel business contributes 14% while tower infrastructure segment contributes 7%. Digital services and home services contribute little, but in the future, we expect them to increase.
Financials of Bharti Airtel
We observed the balance sheet, profit-and-loss account, and ratios of the company.
Balance sheet
In the balance sheet, a consistent increase in the reserves of the company is seen. Because of the AGR, reserves are required. There’s also an increase in the company’s total investment.
One concern for the investors might be the rise in the borrowings of the company. Around 20% of borrowings are raised by the company from March 2020 to March 2021.
Profit and loss account
After checking the company’s profit-and-loss account, we concluded some points.
- There is an increase in the Net sales of the company from March 2019-to 2020.
- Total expenditure is decreased.
- There is an increase in the Operating profit by almost 50%
Exceptional items are noticeable because of the AGR issue. Well, we expect them to be reduced in the future.
Ratios
The ratios of the company might not be encouraging. It may be due to the AGR issue, but we can expect that things will improve in the future.
Why do I think Airtel can become the next telecom boss?
We learned about the business model and financial condition of the company. Although it was very difficult for the telecom companies to tackle the AGR issue, despite so many difficulties, Airtel did it well. The business model of the company is also very strong. So, we expect that the company will soon sail out of the issues and come out stronger than before.
Do you think Airtel can become the next telecom boss of India? Tell us about your views in the comments section.
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