In March 2013, even though Airtel, promoted by Sunil Mittal, was the market leader, a feeling of siege prevailed. Airtel had been losing share in a market that had been growing for three years. In March 2010, it was challenged by the purchase of Zain’s African activities for $9 billion. Three months later, in India, it had paid a lot to buy spectrum for a certain technology, only to learn that Mukesh Ambani’s Reliance would make a cheaper, full-fledged one, entering telecoms via another technology .

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

Nice balance

Even though it is only in 2024 that Airtel stock has outperformed the broader market, this is based on the painstaking work done over a decade on three levels. First, continue to acquire subscribers and continue to grow. Second, continue to invest in the telecommunications sector, where the lens is rapidly changing from voice to data services. This meant going into debt. Third, run the business profitably so that free cash flow can service the additional debt.

Airtel has managed to skillfully balance its current operations and future expansion. Over the 11-year period to 2023-24, Airtel’s consolidated revenues, of which India accounted for 60-65%, grew at an average rate of 7.4%. But its operating profit grew faster, at 12.2%, meaning it was able to sweat more of its assets. This gave it the room to increase its debt at an average rate of 11.5% during this period.

3G to 4G to 5G

Airtel needed to keep pace with technological advancements and offer faster data services. The 2010 auction saw the stealth entry of Reliance through the purchase of HFCL immediately after the latter acquired broadband wireless access (BWA) spectrum across India. During these auctions, operators mainly purchased 3G spectrum. In the years since, technology has migrated to the latest generation 4G and 5G services.

Keeping up with technological advancements, acquiring additional customers, managing the explosion in data consumption and preventing Jio from weaning off its customers, especially in the postpaid segment, meant constantly investing in the business. Between 2012-13 and 2023-24, capital employed by Airtel grew at an average rate of around 9%, from ₹1.08 billion to ₹2.86 trillion in 2023-24. Airtel’s net debt increased from approximately ₹58,000 billion to ₹2.04 trillion. But its capacity to service this debt, after having declined, has improved over the last three years.

Due dates

Airtel’s next big challenge lies in what form of revenue-sharing dues it will have to pay to the government by 2031. In 2019, the Supreme Court asked a group of older operators, including Airtel and Vodafone Idea, to clarify their accounts. ₹1.47 billion in contested contributions. The curative petition from the operators contesting the calculation was rejected by the court in September.

The telecom department has estimated Airtel’s dues at ₹43,980 billion. What is positive is that its core business continues. The “industrial chaos of sorts”, as Vittal once put it during the period of reduction and surge in the sector coinciding with the launch of Jio, is mostly a thing of the past. One measure of this is Airtel’s steady and consistent improvement in ARPU. was a difficult time, and the discreet Vittal was at the heart of it.

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