Good afternoon, ladies and gentlemen. I'm Vaidehi Sharma, the moderator for this webinar. Welcome to the Bharti Airtel Limited and Bharti Hexacom Limited Fourth Quarter ended March 31, 2024, Earnings Webinar.
Present with us today is the senior leadership team of Bharti Airtel and Bharti Hexacom Limited. I must remind you that the overview and discussions today may include certain forward-looking statements that must be viewed in conjunction with the risks that we face. Post the management opening remarks, we will open up for an interactive Q&A session. [Operator Instructions]
With this, I would now like to hand over to Mr. Gopal Vittal for his opening remarks.
Thank you very much. A very warm welcome to this earnings call. With me on the call, I have Soumen, our CFO; Harjeet; Naval; and Akhil Garg.
I want to start by thanking our investors for showing confidence in us through the recently concluded Bharti Hexacom IPO. This speaks well about the brand Airtel, about our execution capabilities, high standards of integrity and corporate governance.
This quarter's earnings call focus will be on a stock take of FY'24. In addition, I'll provide an update on the development of our strategy.
A quick update on ESG. We were recognized globally for our ESG initiatives. We were awarded the most sustainable emerging market telco as per future investment initiatives institutes, top 250 emerging market ESG ranking. We were also included in the S&P Global Sustainability Yearbook in 2024 in recognition of our sustainability efforts for the third year in a row.
Finally, we were awarded ISO certification for over 27,000 sites across our operations, including our network MSEs by DNV, which is one of the leading global providers of accredited management systems certification. We continue the momentum on our ESG initiatives. We are an industry-first in India, we partnered with IDEMIA Secure Transactions to switch from virgin plastic to recycled PVC SIM cards. The initiative will limit generation of over 165 tonnes of virgin plastic, leading to a reduction in CO2 equivalent of 690 tonnes in a year. On diversity, we made significant progress in FY'24. The share of women in our workforce moved up by over 40% in just 1 year and all our stores are now gender balanced.
Let me turn to our financial performance with a quick round-up on the full year '24. Overall, we delivered another solid year. The consolidated revenue came in at just under INR 150,000 crores and was impacted by currency devaluation in Africa.
India performance was steady despite the continued absence of tariff repair. EBITDA margins were at 53.8%, a 1.6% expansion despite 5G costs. We delivered strong operating free cash flow. This is EBITDA minus CapEx of over INR 25,650 crores for India despite the higher CapEx loading in the year. We paid INR 16,350 crores of debt. India net debt-to-EBITDA is now at a comfortable level of 2.86. We expect further debt reduction going forward.
Performance continues to be based on solid execution and we saw sustained growth across all businesses. We hit a lifetime high in revenue market share across all our businesses. On mobility, every single one of our circles gain share. We also saw green shoots emerging on DTH. I do want to underscore that we have a simple and very clear strategy, winning with quality customers, delivering a great experience for them, putting digital at the core of all we do and stripping out waste.
We expanded our network rapidly. We rolled out 5G at tremendous speed. It's now available across the country. We rolled out about 43,100 sites -- network sites and 55,982 kilometers of fiber. Our bet on NSA, which is a non-standalone technology, paid off. It just not only saved us CapEx, it also delivered superior experience as evidenced by the recognition from the likes of Opensignal, which is an independent standard to assess the experience of networks.
Moving to the quarter 4 performance in specific, we delivered a strong end to the year. We had strong revenues and operating margins. Consolidated revenue of just under INR 37,600 crores, which was impacted by the Naira devaluation. India delivered a steady growth of 2.5% sequentially with INR 28,513 crores of revenue. Adjusting for the impact of the Beetel acquisition, revenue growth was 1.7%.
EBITDA margins came in at 53.6%. Again, if I adjust for Beetel, EBITDA margins were 54.1%. We had a strong operating free cash flow, about INR 6,800 crores, which is EBITDA minus CapEx, yet our ROCE for India is 9.5%, which is extremely low for a business that is so essential to the digital spine of this country. Clearly, tariff repair is needed to set this right.
A quick update on each of our segments, and let me start with the mobility segment. We ended the year on a strong note with 6.7 million REC net adds and 7.8 million smartphone net adds in the quarter. This was also supported by our structural efforts to fix the network experience. We saw mobile churn reducing from 2.9% in quarter 3 to 2.4% in quarter 4. Postpaid net adds were steady at 0.8 million.
ARPU came in at INR 209 and was impacted by 1 day less in the quarter. This implied that we added INR 16 to ARPU in FY'24, the highest in the industry. This consistent improvement is led by 3 key drivers, and I've spoken about this earlier: feature phone to smartphone upgradation, prepaid to postpaid upgradation, and driving higher share of wallet through data monetization as well as growth in the penetration of international roaming.
As an industry first, Airtel now offers one single roaming pack at one price point to travel anywhere in the world as well as includes in-flight connectivity. Airtel 5G Plus is now available across urban areas and select rural relators. We continue to expand our coverage despite no monetization at site. 5G shipments continue to grow steadily, and we continue to gain our fair share, which is reflecting in our growing 5G base, as of March, this was close to 72 million.
On broadband, we grew our customer additions by 1.6 million. However, there were some moderation in net additions to 3.6 lakhs in the quarter. Broadband is an area where we need to do more work, particularly given the size of the opportunity. In line with our strategy, we continue to expand in the right areas. We expanded our presence to 23 more cities and added 2.2 million fiber home passes in the quarter.
Second, our focus on convergence continued with simplification of our convergence propositions by bringing in over 22 OTT platforms into the XStream app. 43% of all broadband customer additions are now on our converged plans. The third part of our strategy is fixed wireless access. We are live in 25 cities and currently streamlining the customer journeys. We will be at scale in the coming 8 weeks. As stated earlier, this will only complement FTTH, which is fiber to the home with focus on weak fiber areas.
Let me turn to DTH. Our strategy of focusing on key markets of the South, of Maharashtra and of Bengal, combined with our pivot to convergence is yielding positive green shoots. Quarter 4 is typically a soft quarter. However, despite the adverse impact of seasonality, we grew our customer base by 9,000 in the quarter. On an annual basis, after 2 years of decline, we grew our customer base by over 200,000 net adds. The only operator in the industry to go customers -- to grow customers during this year. We also rolled out a moderate price hike in the quarter, which was due to broadcasters raising prices. It was also contributed towards revenue growth.
On Airtel Business, revenue growth in quarter 4 was 0.6% sequentially. On an annual basis, we sustained a double-digit growth despite headwinds in our global business. While the global segment continues to be soft and there are some conversations that are going on in terms of orders, the domestic business is on a strong footing and continues to grow at 18% to 20%.
Payments Bank is the other one I want to comment on briefly. Monthly transacting users under 67 million. The annualized revenue run rate is now over INR 2,100 crores. Deposits remained robust at around INR 2,800 crores, growing nearly 50% year-on-year. We also had the highest-ever quarter-on-quarter growth of 22% on savings bank account balances.
A quick update on our digital businesses. We are now delivering an annualized run rate of just under INR 1,900 crores. Our focus remains on CPaaS, on financial services, on IoT, on security and cloud. These showed tremendous acceleration. We saw 50% revenue growth in the last fiscal. Airtel Finance is scaling up well and served 4 lakh customers across loan and card products in FY'24. We disbursed loans worth INR 2,000 crores.
A quick update on all the 5 pillars of our strategy. The first pillar is really to shape the portfolio, so as to give us resilience. This continues to be one of our strategic drivers. Africa now accounts for 25% of revenues, India Mobile at 59%, and India Nonmobile at 17%. Over the medium term, we see strong growth tailwinds in nonmobile parts of our portfolio, homes, B2B and digital. Africa continues to perform well on an underlying basis with 3% sequential revenue growth in constant currency terms.
Second pillar of our strategy is to really win with quality customers. As I talk about this, let me give you some texture across all parts of the market, our homes business, postpaid, rural and B2B. On Homes, the top 60 million homes in the country contribute 35% of industry revenues. And of these, broadband penetration is only 40 million, but growing. Each of these 60 million households have some relationship with Airtel. To capture this opportunity, our strategy continues to be expanding our fiber presence, driving penetration of our converged offers, to build in stickiness by leveraging our digital targeting capabilities; and lastly, to leverage FWA, which is fixed wireless access, as a complement of fiber.
The other critical focus area for us on homes is delivering a superlative experience. We're undertaking a structural program to rehaul our network infrastructure right from the fiber access terminal outside the home to architecture-level fixes on our network. In addition, we are now refining our ways of working so that we dramatically improve the craftsmanship of the work that our engineers delivered in the home.
The fact that we have digital tools to monitor our SOPs and take live pictures to authenticate them using artificial intelligence makes this scalable. On postpaid, our family plans continue to drive acceleration. We now have over 18 million credit-scored customers who, we believe, could move to postpaid. Supported by our deep digital analytics, our omnichannel journeys, and our small-format stores, this segment is poised for growth.
In rural, the last 6 quarters have seen a massive rollout of more than 33,000 sites. This deployment has met all our action standards both in terms of absolute yield and the site as well as our competitive performance. As I mentioned on the last call, there are many geographies where our market share is weak. This is primarily because we have lesser coverage here. We have commenced another round of expansion here to plug this gap. We expect to roll out over 25,000 sites lower than last year in the next couple of quarters.
We are bringing to bear all our digital tools and data science for precise deployment as well as deploying the execution best practices from our rollout last year to turbocharge growth from this deployment. For B2B, the market is large and adjacencies are driving a bulk of the growth. As I mentioned before, the top 500 accounts comprise 70% of this market.
The emerging business segment, commonly called SME, has also started to grow after a couple of years of slowdown. There are 3 structural actions we are taking to capitalize on the opportunity: First, revitalizing account management to raise our sales team's capabilities to sell solutions. As part of this, we have taken all our account managers through what we call a masterclass. In addition, we have focused more attention on verticals of industries and created virtual vertical communities so that we can learn from what some of the team are doing well.
Second, we are fixing our network infrastructure with the aim to achieve best-in-class global standards of performance. Significant investments are being directed into this area. Lastly, we're investing in building digital products coupled with managed services. Our managed service facility in Pune is up and running. We are now looking to strike deep strategic alliances with a few top companies so we can package solutions along with our own. Day before yesterday, we announced a strategic alliance with Google to gain a significant share of the Indian cloud market, which is expected to reach $18 billion by 2027.
The third pillar of our strategy is the obsession to deliver a brilliant customer experience. There are 2 parts of experience which we focus on: First, the digital experience. Here, we've now developed 4 platforms for our B2C business, which is buy, build, pay and serve. These are common journeys across all our businesses. These platforms power all our journeys as well as speed force management in an omnichannel way. Second is the network experience. Here, we've taken structural corrections as well as leveraged our digital tools and analytics to bring down mobile churn by a step margin.
On fiber, there's a massive drive that they're undertaking to fix the structural issues, which plague our network, be it network infrastructure or the quality of workmanship. I also believe that experience starts with our people. We think of Airtel as having only 2 types of people; those who serve customers and those who serve those who serve customers. It is with this in mind that we had every one of our 20,000 people get out into the market and spend a whole day with our frontline people in March. We don't this focus is a one-off, but an ongoing ritual in the company. In fact, this exercise gave us a number of very strong ideas relating from digitization, network infrastructure upgradation amongst others, which are being put to action now.
The fourth pillar of our strategy is to use our underlying digital capabilities to incubate new digital businesses. As I mentioned before, we see Airtel in 3 parts: digital infrastructure, both the network as well as data, which I'll talk about in a moment; digital experience; and digital services. Our portfolio of digital services, which is Airtel IQ, IoT, cloud, SD-WAN and Airtel Finance, are all getting substantial focus on investment.
One of the areas I wanted to give more texture on today is our secret sauce, which is data. Every telco worth its salt has a data infrastructure. We have taken this further and build what we call a converged data engine, which sits on top of this infrastructure and powers it. It is now extending into all our categories and geographies. The convert data engine specifically solves the following problems: firstly, it has an existing data model, which is based on deep telco understanding and is also TM Forum compliant. Telcos can simply use the data model as a starting point to make modifications based on their business context. This can be done in weeks as opposed to several quarters if they were to do it on their own. Second, the CDE, which is a converged data engine, enables ingestion of all the data signals as aggregates across all the database of a telco.
Our injection core allows us to be an automated process while ensuring data quality and governance. Third, the engine comes with an in-built intelligence based on the data signals to throw up the next best action across sales and service for a customer and is agnostic of the channel. Finally, it comes with an in-bid CLM, which is a customer life cycle management tool, that has patch out integration capability across all push channels, whether it's WhatsApp, messaging, call, e-mail as well as pull channels, app or integration with other OTT platforms. The CLM also comes with the capability of generating feedback and optimize campaigns based on A/B testing. The strength of the engine is that it comes prepackaged as a full-stack solution. The best value from it is a seamless functioning across all parts of the telco. We're now rolling this into Africa and are also in conversations with other telcos in the world.
The fifth and last pillar of our strategy is war on waste. This is really central to how we operate. FY'24 saw us optimizing upwards of INR 2,500 crores of network costs. Network costs per site declined in absolute terms for the second time in the history of the company despite massive mobile expansion of sites, 5G expansion and increase cost of power. This was enabled through on-ground execution rigor. We identified 60,000 high-cost sites, looked into cost structure of every single site and put together a plan to optimize cost at the site. The exercise required the levels of digital tools, data science and physical work to bring costs down.
We continue to drive a focused war on waste program and believe there is still headroom available on stripping out waste. To sum up, overall, it was another good year with growth across the portfolio. We have a lifetime high in terms of market shares across all our businesses. The momentum on postpaid, B2B and homes, particularly, is an area where more work is required, and we're focused on that.
Our prudent capital allocation approach, coupled with strong execution has been yielding the results with marginal improvement in return ratios even in the absence of tariff repair. Our investments are channelized to future-proof Airtel with a focus of the outline strategy, shaping a resilient portfolio, winning quality customers, obsessing with delivering a brilliant experience, all enabled by digital at the core and fueled by our war on waste agenda.
With this, let me hand over back to the moderator for the Q&A.
Thank you, Gopal. Soumen, over to you for your opening remarks on Bharti Hexacom performance.
Good afternoon, everyone. Welcome to this part of the Bharti Hexacom earnings webinar. In its maiden quarter after listing, Bharti Hexacom delivered a great performance. with about INR 1,868 crores of total revenues, an increase of more than 3.5% sequentially, primarily driven by mobility, which grew by upwards of 4% quarter-on-quarter. It was driven both by strong customer addition, data customer addition as well as improvement in ARPU.
Operating performance was healthy with an EBITDA about INR 914 crores. EBITDA margins were at 48.9% and improved close to by 1 percentage point quarter-on-quarter. Net income was at about INR 223 crores for the quarter. Operating free cash flow, which is our EBITDA minus CapEx, for the full year was at about INR 1,467 crores. Last year was the year of elevated CapEx, which is reflected in our network additions of about 4,000 towers. Happy to report we have repaid about INR 1,500 crores of debt in Q4 and ended the year with a net debt-to-EBITDA of about 2.14.
With this, I would request the moderator to open up for Q&A.
[Operator Instructions] With this, the first question comes from Mr. Manish Adukia.
This is Manish Adukia from Goldman Sachs. Firstly, just your outlook on competition in the industry structure. You've been seeing very strong subscriber additions, including 4G adds and your revenue market share, like you said, has been at lifetime high. Now in your view, do you think this trajectory may slow down with the recent CapEx plans of Vodafone Idea? Or asked differently, will Bharti have to push a little bit harder than earlier to continue being on the same market share trajectory? So just your thoughts there would be helpful.
And the second, Gopal, on returns on 5G investments and now CapEx has been elevated. You called out that you will have a new rollout plan of 25,000 sites in the next few quarters. So from an absolute CapEx standpoint, should we think about that not declining meaningfully in fiscal '25 or staying at the same levels? And I think you also said that there's maybe no visible monetization in sight for 5G in your opening remarks. So if you can just think about -- talk about how you think about medium-term monetization from 5G, that will be helpful. I'll stop there, and I have a follow-up after.
I think let me take the second part of your question first. I think the return on 5G is, I would say, we don't quite see it like that. I agree with you that there's limited monetization of 5G. But the way we see it is the overall return of the business. So today, all of the capacity investments are going behind 5G. We've stopped investing on any capacity investments on 4G. And therefore, I think the return that the industry really needs is predicated on tariff repair. And this is really the heart of the problem that we have today, our pricing and tariffs are at an absurdly low level relative to any other part of the world. So tariff repair is sorely needed for return ratios to improve. Frankly, doesn't come from -- it doesn't matter which technology comes from. The fact, however, is that 5G is a more future-proof technology. So to that extent, it's just about advancing CapEx that would anyway have happened.
As far as the overall CapEx is concerned, we've always mentioned that FY'24 will be an elevated and peak level of CapEx, and I expect to see clear moderation going into FY'25. As far as the industry structure is concerned, I'm glad to see that Vi has raised money and I really wish them well. I think India will be well served if it has 3 operators -- 3 private operators working there. Whether we need to push harder? We are pushing hard every day. So this is an ongoing effort. It's always been a brutally competitive marketplace ever since I've been around and ever since the company has been around. So ups and downs keep happening. It's a volatile market sometimes. But you just need to be at the top of your game in terms of execution for you to continue to deliver sustainable performance.
Follow-up to your tariff repair comment, right? And you called out, let's say, today you are closer to 10% return on capital. And for that to, let's say, meaningfully improve, there probably needs to be multiple large tariff hikes, right? So like how do you think about the path to that? I mean do you think you would prefer to do multiple smaller tariff hikes for a period of time or let's say, 1 or 2 large tariff hikes? And what really needs to happen for that eventually to really play out in the next, let's say, 6, 12, 18 months?
I think that we've done what we could. We have moved up the entry-level tariffs of future homes. We have tried to sort of drive all the levers of ARPU upgradation across the multiple levers that we have using, the lots of digital analytics. But at the end of the day, it is a competitive market. And repair will need to happen across the industries. It's just us doing it. We could do it, we could lead it, we could start it, but the fact is that if there is no -- if competition doesn't follow, then it will hurt us, and that's a challenge. So we just have to wait and see when the time is right. My own sense is that you will need substantial repair in industry. We're already at just over INR 200 ARPU. I think the right level of ARPU even at INR 300 would still be one of the lowest in the world. So there is substantial repair to be had in the industry. Now how that happens? I think I can't sort of guess, but we'll see how it plays out.
I'm going to try this one more time. So in terms of ARPU, do you think closer to INR 250 -- I think in one of the interviews, I think, Mr. Mittal had mentioned, closer to INR 250 by next year. Is that possible? Or do you think still too many moving parts to really say something concrete?
I wouldn't comment on a specific milestone. I think all I'll say is that repair is solely needed in the industry. I think all the players need it. So it's not just one way or the other.
The next question comes from Mr. Kunal Vora.
Yes. First question, I wanted to get your sense on like how are you looking at the industry customer additions going forward over the next couple of years. And how do you see the distribution of that amongst the 3 players? And also, in terms of tariff hikes, I understand like already discussion has happened but like say, how much tariff hike do you think the customers can absorb considering that mass consumption overall is not really doing well? Do you think that going from INR 200 to INR 300, the customer can absorb that without seeing customer losses?
I think as far as the customer addition is concerned, I think we've seen a growth in smartphone shipments this year relative to last year. And I had mentioned a few quarters ago, when the chipset shortages hit us and when chipset prices went up smartly -- went up sharply, that led to increase in smartphone prices. The entry-level smartphone prices at the time is to be about INR 5,000 to INR 5,500. That's suddenly shot up to INR 8,000 to INR 9,000. And we had conversations at that point as to the slowdown in upgradation. And I mentioned that it takes any consumer market when there's a price shock, people take time to absorb the shock as somebody who wants to upgrade feature phone -- from a feature or a smartphone, comes into the outlet, suddenly finds that price has gone up, goes back. But then the next time they come around, they determined to actually buy because now they're used to a new reality. So I think that's what we've seen in the increase in smartphone shipments relative to last year. That has obviously benefited us somewhat on smartphone additions.
The overall REC additions that we've seen, the revenue-earning customer addition that we've seen is a function of the large-scale rollout that we have done. I mentioned that in many places that we are going, where we are expanding our shares, are very low or almost non-existent. So to that extent, there has been some pickup on customer additions as far as that's concerned. On tariff, repair, how much can be absorbed? I would say we've seen several rounds of -- actually 2 rounds on tariff repair in the last couple of years, and that has led to some SIM consolidation every time there is some increase, there is some SIM consolidation that happens. I would say, at best, it's modest. The upside benefit of the repair is much, much greater than some SIM consolidation at the lower end. And the fact is that the digital and mobility today has become so essential to people's lives that people will adjust their spends to deal with any increase. The quantum of increase will need to be determined. Obviously, it will not go in one shot from INR 200 to INR 300, that's not going to happen. But it will have a couple of rounds to actually get there. And so let's see how that plays out.
And just in terms of timing, do you think like annual tariff hike is a possibility? Like in the past, you've done, like, say, 1 tariff hike every 2, 2.5 years now. But do you believe that it can be quicker now?
Well, Kunal, I think this question being asked in different ways. I think -- I mean I can't comment any more than what I've already done.
Okay. Just second last question on home broadband. Like
[Audio Gap]
Sorry, Kunal. I think we lost you.
Kunal, you may please unmute your side, introduce yourself and ask your question now.
Okay. Sorry, I got unmuted -- muted. But, yes, question was on home broadband. I wanted to understand the slowdown in subscriber growth and the continued decline in ARPU. And are there any signs of the market getting saturated? Are the customers coming in lower plans? And your thoughts on air fiber as well.
No, I think the ARPU decline, I wouldn't worry about because the entry-level plans are slightly lower than the customers who have been with us for a long time because they are on slightly higher-priced plans and obviously get a lot more value as well. And so the entry-level plans are a little bit lower than the base-level plans. And that's the reason for the ARPU drag. But broadly, I would say the entry-level plan for us is INR 499, which is really where it starts. And then along with content, it gets to INR 699 a month. Yes, I think that the home broadband business needs to pick up trajectory. I have no concern at all on saturating penetration or anything of that sort. I think the combination of the rollout that we're doing, the ability to execute to extract or to get utilization from the rollout, coupled with the full-fledged launch of fixed wireless access is what we need to do and get right. And this is really where we are focused.
The next question comes from Mr. Piyush Choudhary.
This is from Piyush from HSBC. Two questions. Firstly, can you share your thoughts on incremental capital allocation with rising free cash flow? Like how are you thinking about inorganic opportunities or dividend? Any thoughts around framing our dividend distribution policy? That's the first one. Secondly, can you share your progress on 5G SA deployment and FWA launch? You were saying in the next 8 weeks, this is the space to watch, so any color which you can provide on FWA, how that will complement the FTH?
Yes. So I take both the questions. I think on the capital allocation, clearly, I think one place where capital will continue to be allocated as our transport infrastructure. That is something that will require investments for multiple years because of the growth of data and the fact that it impacts all our businesses, home broadband, B2B as well as mobility. We will continue to invest behind our enterprise business and our data center business. Wireless on the radio side, we'll moderate with the massive rollout that we've done last year, both on 5G as well as coverage. And then, of course, homes will continue to get a step up in terms of overall capital allocated. We are looking at potential bolt-on acquisitions in the B2B area. This is an area where some of our capabilities on adjacencies can get strengthened. I have nothing to report right now, but that's something that we keep looking for opportunities that could strengthen our portfolio.
On the SA deployment, I think we have currently got a pilot going on in one state in the country. We're extending this to another circle as well. There are a lot of trials that are happening to see how this will work out. And like I said, I think the mid-band holdings are really a big thing and very, very priceless part of the overall SA strategy, which is 1800 and 2100 bands. Fixed wireless access, we've launched into 25 cities. We have the outdoor CPE that's been launched in 25 cities. The reason I said that it will take time for it to scale is the supplies of the CPEs from across the world, some of it are flowing in as we speak. The fine-tuning of some of the customer journeys and then, of course, training all our people across the board, all of this takes its time.
So I would imagine in quarter 2, you should see the full-scale impact of fixed wireless access. As of now, we are gearing up to make sure that the velocity of this increases. Like I've said, this will always be a complement to fiber where there is fiber, obviously, we'll put focus on fiber because experience, given the better uplink and downlink and more resilient network that fiber has will always be better than a wireless network. But given the unutilized spectrum on fixed wireless access on 3.5 gigahertz, clearly FWA will be a very good complement where fiber is not reached.
Just on FWA. So can I confirm you're doing this on NSA as well, and this is not our SA deployment? And also on capital...
This will be an SA deployment.
So FWA will be completely SA?
Yes.
So these 25 cities you have already done SA?
Yes, yes. We are moving to SA. We have not fully done SA. Some of those that fine-tuning has also happened as we see speak.
Okay. On dividend?
This is -- obviously, as we generate more cash, a combination of deleveraging and dividend will happen. I think it's too premature for us to comment on any dividend policy.
The next question comes from Sanjesh Jain.
First on the CapEx, where you did mention that there will be a moderation in the CapEx, but at the same length, you said that you still want to roll out 25,000 new sites, fiber, transport, enterprise, home. I see investment growing all across and becoming more broadband, it also tells that this moderation will be more moderate or it will be a slight decline than actually a major decline in the CapEx? Will that be a fair assumption?
Well, I think I'm not -- Sanjesh, thanks for the question. I think -- what I'm saying is that capital will continue to be allocated on those areas. This has been going on for the last few years. So nothing has changed there. I think where the moderation will happen is really on wireless CapEx, which is where -- which accounts by the way for a large part of the CapEx. So to that extent, we do see a moderation going ahead into next year.
Fair enough. Fair enough. But where do you think, Gopal, India will saturate in terms of fresh tower requirement? Because earlier we thought 300,000 would be enough, we are already at 320,000. We are talking of going to 350,000. Where do you think India will saturate in terms of tower requirements?
I think coverage, Sanjesh, will -- especially if you start looking at rural areas, I think that will more or less saturate with this rollout. I think what happens is in many cities, the top 50 to 60 cities, you do see cities growing. So if you look at Delhi NCR, for example, Delhi NCR has grown so much in the last few years. So as some of these new build-outs happen, that's where you need more coverage. But that will be much more modest compared to the rollout that we've done. By the way, even the rollout that we're planning for this coming year or this year is much lower than the rollout that we would have done last year.
Fair enough. Second question, again, is on the subscriber, you did mention the smartphone increase, but Gopal, our 4G addition has not improved. Materially, it has been healthy at 7 million plus, we continue to remain there. The question is more on the net subscriber addition, where you're adding 7 million, Jio is adding 11 million, almost industry has added 2% sequentially. Where are we going in terms of subscriber growth? And what is really driving the subscriber growth?
Well, I think it's a combination of probably multiple SIMs coming in with multiplicity of devices in urban areas, coupled with some growth in the new coverage sites that we've done, which is really the bulk of the growth that we've seen. So I think it's a combination of both.
What is sustainable subscriber growth, Gopal, in your sense, a 2% to 3% annual subscriber growth should be fair enough assumption, for annual?
For the industry?
For the industry, correct.
For the industry, I think you are anyway seeing that sort of growth, right? I mean you're seeing, well, this quarter is a bit of an aberration, but if you go back and look at the last, let's say, 12 quarters, and you see what is the total customer addition, you are seeing that customer addition in the low single digits at the aggregate level.
Got it. Got it. One bookkeeping question, Gopal. On the 5G cost being recognized in the P& L, I see that there is an 80% reduction in the CWIP spectrum, which largely should be the 5G spectrum, which we bought. So would it be fair to assume at the exit month, 80% of the 5G-related cost is now reflecting in our P&L?
Soumen, you want to take that?
Yes. So Sanjesh, I won't get into the percentages, but largely, it is done. A few circles are left, which will be done very soon. But the large part is done.
So in the same breath, it is also fair to assume that our depreciation, amortization and finance costs are largely peaked out.
No. Because when you do amortization, you don't do it for the full quarter. You do it based on which month what gets capitalized. So there will be a bit of moderation also for that.
So probably say, in another 2 quarters when everything is booked then we are all through with all the cost recognition, right?
Yes. Yes.
The next question comes from Mr. Vivekanand Subbaraman.
So two questions here. One is on the tariff side, which is one point that your competitor keeps making is that the industry currently does not charge based on usage and most plans are quasi unlimited. Do you think that the industry will ever be able to move back to usage-based pricing in this phase of tariff repair? And a related question on ARPU is, by when do you think 5G gets monetized? Because currently, you are offering unlimited data for 5G users, and I'm sure that may be weighing on your ARPU. Second question is on any trials or any success that you have had with the usage of millimeter wave for any sort of application, 5G for enterprise or FWA or any network debottlenecking.
On the unlimited plans, I mean, I agree with you. I think I've mentioned this before, I think the architecture of pricing in India is quite broken because people who can afford to pay a lot more are paying a lot less simply because of these unlimited plans, which are like effectively a one-size-fits-all plan. If you look at markets like Indonesia, Thailand or in any of the markets in Asia, you will find small, medium, large, extra-large, and there's a pathway to upgradation. That unfortunately is not the case in India, but this is not something that we can build alone. This needs to be something that we would be happy to follow if this happens.
On 5G, that's another problem. Actually with the free data that's running, obviously, there is some headwind in terms of monetization. But again, it's a competitive market. We have responded to what we have seen happening in the marketplace. And hopefully, at some point, we will see if sanity prevails.
Millimeter wave is still early days because we have so much capacity, so much unutilized capacity on 3.5 gigahertz. This is very, very good spectrum. We've got 800 megahertz of very solid spectrum. And we are beginning to see some early experiments going on in some of the Western markets, particularly in the United States, where millimeter wave is being used for fixed wireless access. Millimeter wave is unlikely to be used from mobile applications. It will be a lot more on fixed wireless access or some industrial use cases. But at this stage, given the abundance of spectrum and the abundance of capacity that you have on 3.5, it's a bit early for us to start doing anything with it. We are doing a lot of trials to figure out what is the propagation, how does it work, et cetera, et cetera, but really nothing to report on a commercial basis.
Just one last follow-up. How important is 5G for your scalability in the medium term, as you highlighted, of your nonmobile growth? Because you did mention about FWA -- sorry, millimeter wave primarily being used for nonmobile applications, including enterprises?
Sorry, what was the question?
So question is -- yes, so you -- in your opening remarks, you said that there are strong tailwinds for nonmobile growth in the medium term. In that context, how important will 5G and millimeter wave be? And is there anything more that you can report in terms of 5G trials that you're doing with enterprises where you can find use for such applications?
That is still niche. I mean a lot of the enterprise applications, we are having private 5G networks on -- for several companies, almost 8 to 9 private networks that are now running but it's still niche in the overall scheme of things. Fixed wireless access also will be relatively niche because remember, the broadband business itself is about 5% of the overall company in India. So of that fixed wireless access will be a small percentage. When I was commenting on the nonmobile business, I was talking more generally because this part of the business, which is about 20-odd percent of our portfolio is a business that can grow much faster given the opportunity in adjacencies on B2B, the growing penetration of home broadband, the need for convert solutions and, of course, digital service. So that's really what I was commenting on.
The next question comes from Mr. Bhavik Mehta.
This is Ankur Rudra from JPMorgan. So first question is, Gopal, if you can give us the 5G customers for the quarter? And at what point do you think the 5G penetration becomes meaningful for promotional pricing to stop? And again, on the same line, do you think there will be a meaningful drop in paying 5G customers if promotional pricing comes to an end? I have a follow-up after this.
Well, we have roughly 72 million 5G customers as of March '24. This is growing currently at the rate 2 million, 2.5 million every month because 70% to 80% of the shipments that are happening on smartphones are now 5G enabled. So to that extent, as people upgrade their devices, they naturally move to 5G. As far as we are concerned, we don't distinguish between 5G and 4G. The only challenge, of course, is that because of free 5G that's running, a user who has access to free 5G data, uses a lot more data, almost double the data that they use related to if they don't get free data. So now if pricing were to -- if this were to be priced in, will they use the full double? I presume not because people calibrate some of the usage, but it will still be meaningfully more than what's currently being used on just 4G. So I think that's the way we see.
Understood. Just a couple of follow-ups on CapEx. You mentioned that you expect wireless CapEx to come down meaningfully. But maybe if you can comment about overall CapEx because this quarter CapEx went a bit against trend versus what we saw the last couple of quarters appears to be mainly from the enterprise side. Is that a one-off? And should we expect the trend we saw in the previous 2 quarters continue for the rest of the year?
Yes, I think on the -- there was a little bit of a one-off on the enterprise side. Soumen will elaborate on that in a moment, and I'll hand it to him. But we expect the overall CapEx moderate. I would not comment on a single quarter's CapEx. Look at the full year's CapEx, the CapEx is at an elevated level, and we had indicated this will be a peak year of CapEx. We do expect a moderation in CapEx in the coming years. Soumen, you want to just comment on the one-offs on the B2B side?
Yes. So our B2B business had a bit of one-offs this quarter, which is primarily related to fiberization. So we bought some fibers and some spends on the data center business. The data center business isn't the linear business. So you buy land, you build building, you put it in the MEP. So it doesn't follow a rhythm per se. Also, we do have some other large CapEx items, I'm taking this opportunity to explain. For example, on submarine cables. Submarine cables are large investments, which happens on milestones. So B2B will always remain a little lumpy because of these businesses. But otherwise, it was a steady state, nothing exceptional.
If I can get a last one. Very nice to see the dividend being announced. If the FCF conversion keeps improving meaningfully for the next year, should we expect you to think about including incremental cash flows towards that end?
I think let's cross that bridge when we come to it.
The next question is from Sanjesh Jain.
I got one question on enterprise side, Gopal. It appears to be there is a moderation in the growth on enterprise side and it's for your peer as well, we have seen, both on India and international. And we also hear that there is an increased competitive intensity in the market. How do you see enterprise business shaping up? And again, you highlighted that you expect domestic business to grow at 18% to 20% while the growth rate appears to be significantly lower than that, how should we see that?
No, Sanjesh, I think the domestic enterprise business continues to grow strongly. I was referring to that. I was not talking about forecast for the business, but I was saying the domestic enterprise business continues to grow at 18% to 20%. The problem has been in the global business side. And if you look at our portfolio, I think there are 3 parts to our business: Data centers, which is about 10% of the portfolio, that's having a secular growth of 14%, 15%. And then there is, of course, the global business, which is largely the wholesale business, it's OTTs, it's messaging, it's cables. And then there's a domestic business. The global business is still about 50% of the portfolio. That's the one that's under pressure. Those are the ones where the OTT companies have cut back on some of the cable investments, order books on fiber build-out and so on and so forth.
And there's an overall broader optimization that is happening at that end. There's also some movement of messaging traffic away from telco SMSs into an in-app notification on many of these OTT platforms. That's another trend that we see. The domestic business is still growing strongly, and we feel that there's a big opportunity in the domestic business because the adjacencies, which are adjusted to connectivity are areas where we are -- we have very low shares but they have some bearing, and they have some cross-linkage with the connectivity. This is where a substantial amount of investment is currently going. That's really what I was trying to say.
So Gopal, can you give more color because 18% to 20% growth domestic looks significantly faster than one of our listed peers who grew at mid-single digits. So what is driving such outperformance in the domestic enterprise business for us?
I think it's a combination of all of the parts of it, which is connectivity in itself, where we've grown some share. The second, of course, is CPaaS, where some of our solutions that we have launched with our -- particularly our SpamShield product on Airtel IQ, that has given us some wins. There is some early -- the IoT has been a very big driver of our growth. And this is where we're trying to expand the addressable market beyond connectivity into both cloud and analytics. I think the opportunity for growth in all of these segments is still there. And yet, we haven't even begun in the cloud area, which is where we signed this deal with Google recently. So that's another very large market.
And will it be fair to assume that these growth rates are sustainable because the underlying trend still remains strong for us?
I think let's see how that plays out. I think we would be -- I won't comment on where the growth rates are, but this market on the adjacencies is growing very rapidly. Core connectivity in itself is growing only at 6%, 7% as an industry, but the adjacencies are growing very rapidly.
The next question comes from Mr. Aditya Bansal.
This Aditya Bansal from Kotak. Can you shed some more color on what it has led to significant decline in mobility churn? And can you also talk about the competitive intensity in the market as we see MNP requests are still at elevated levels? So some more color on this would help.
I think there is -- there are a lot of structural interventions that we are looking at. We've identified about 20 to 25 potential markers of churn. We have a program, which is basically being tracked, and we've divided the whole country into what are called grids, which are 1 kilometer x 1 kilometer grids. We have tooling to understand the experience at each of these grids. The sales of the network team work together to take charge of the grid and the experience of the grid. And at the back from our network operating center, we look at about 20 markers, which have a whole bunch of things, I won't go in that detail, to really identify what are the drivers of churn because a large part of it is really related to the network. And the focus of the team is to really get all of those experiences right, so that we cut our churn. So the structural actions that we've taken about 5 to 6 months ago.
The intensity in the marketplace on acquisitions continues to be higher. And it surprises me as to why it is so high, particularly in a market where the organic growth of customers, if you take a longer-term basis, is still -- is very modest, but it's a competitive market and some of this leads to churn, which is kind of rotational because people buy SIMs and throw away the SIM. So we look at churn in 2 parts: We look at the quality of acquisition, which is the first 4 months of the customer on the network and a tenured customer, which is after 5 months. And our churn effort is really focused on month 5 onwards, which is tenured churn, but our first 4 months is all about quality of acquisition. So we divide the churn into really 2 parts. First 4 month, which is noise and quality of acquisition and then, of course, the genuine experience-related churn.
Second question is on the pending calls on rights issue. Any update there? Is there a possibility of extension? Or do we have to do it compulsory by September?
I think we have -- Harjeet, do you want to take this?
Yes. Sure, Gopal. Aditya, obviously, the guidance was 3 years, and we have about 6 to 8 months left to that guidance. Our understanding is more a guidance and we'll have to chew on what is the outlook for the free cash flows. So maybe by the next 3 to 5 months, we'll come out with a more formal either a revised guidance or whatever commentary that we have to provide for the rest of the calls.
[Operator Instructions] Now I would like to invite Gopal for his closing remarks for Bharti Airtel.
Thank you very much for joining this call. I think overall, it's been a satisfactory year. There's a big job to be done on several areas. We talked about broadband. We've talked about continuing to do work on structural churn. And I want to thank you for all your questions. I want to hand it back to Soumen for Bharti Hexacom.
[Operator Instructions] The first question comes from Mr. Dayanand Mittal.
This is Dayanand Mittal from JM Financial. A couple of questions on Hexacom. First, if you can just explain any particular reason which explains the sharp INR 4 jump in BHL's ARPU vis-a-vis is a modest INR 1 for Airtel, any specific one-offs there? Second, if you can just throw some light on what would be any rough guidance you would like to share on Hexacom CapEx for FY'25 and '26 and any net debt position that you would be comfortable with?
I think these 2 circles have their own uniqueness. And what happened, one of the reasons which is one-off, is Manipur. Manipur, a large part of telecom services was closed, and it reopened around the first week of December. So in last quarter, Manipur revenue was there only for about 3 weeks of the quarter, whereas this quarter, it was there for the full year -- full quarter. And we have seen a general improvement in our data customers. So the upgrade story has played out better in Rajasthan and in Northeast in this quarter. Difficult to comment how it will progress in Airtel also, we put in a lot of efforts to ensure that we improve our ARPU continuously quarter-on-quarter. Some of the tricks work out. So we hope that this continues. But yes, there was a one-off. As far as guidance on CapEx is concerned, we don't provide the guidance, but like in case of Airtel, even in Bharti Hexacom, there will be some unwinding of CapEx during this year compared to last year.
Just a follow-up on CapEx. Given the higher rural population in these 2 circles, is it possible that the CapEx might stay a bit elevated even in FY'25, given rural rollout is still in progress or FY'25 will see a moderation like in case of Bharti Airtel?
I would like to believe that this will see a moderation. Then the reason being, see this rural rollout happens at various time and various places. So as I mentioned in my opening remarks, we've done about 4,000 sites last year in these 2 circles, which is a pretty large rollout. We will continue to roll out more sites, but it should moderate.
The next question comes from Mr. Kirtan Mehta.
This is Kirtan Mehta from BOB Capital Markets. In your earlier opening remarks, basically, I think it was mentioned that the -- particularly, I think it was in the Bharti Airtel where we said that the 9.5% ROE is sort of quite less for the mobility kind of business. We see that number at 11.5% in Hexacom. And where would you want this number to be in the steady state? Would it be 12% to 14% or 14% to 16%? What could be considered as a sustainable ROE for this kind of business?
Well, so Kirtan, I cannot give you a direction of ROCE or ROE for the business. But like any other investor, we would like this to improve. Bharti Airtel is a mixture of multiple businesses, which has mobility, of course, but also has some places where there is a lot of rollout, a lot of churn, like DTH and homes. So it's an admixture of multiple businesses. I think we would certainly like to see this grow. And as mentioned earlier in the call by Gopal, the tariff repair is very important. It's very, very important for the financial health of the company. How much will happen? We will wait and see, let the first round of tariff repair happen. We'll see how costs go.
In the earlier part, there was also a mention around the customer acquisition. There's a lot of money which is today spent on customer acquisition and the quality of that acquisition is not great. So we will see how the industry shapes up and hence, how the profit and loss of the operators shape up to deliver higher ROCE. But as of now, we cannot give you a number that is a target. And once we achieve that, then everything will stop? No. It will be a continuous work. And as you know, we don't only rely on tariff increase. We do a lot of work on war on waste where we generate our fuel for growth. A large program this year, our network site costs have come down in some places. So a lot of work goes in to find that fuel. But no, no target specifically for what the ROCE should be.
The second question was about the -- basically, the dividend policy. While we understand in case of the parent, I think it's a bit away from the perspective of the generation of the cash. But from our perspective, Hexacom perspective, I think we have already seen a net debt reduction last year. We are at 11.5% ROE. So how far we are from defining the dividend policy for Bharti Hexacom?
So first of all, I would like to iterate that -- reiterate that the dividend has increased a lot, whilst on the face of it, it may seem that it has moved from INR 3 to INR 4 last year to this year, you must remember that there has been a stock split. So effectively, this moved from INR 1.5 to INR 4. So there is significant improvement in dividend.
Now coming to when do we define our dividend policy and all of that? I think, we still have some debt in our books, bank debts, which we expect to get repaid over the next few quarters. Once we get rid of the debt or come close to getting rid of the debt, we will evaluate as to how do we define our dividend policy. So till then, we would evaluate the profit, the cash generated, the amount of future requirement towards debt and CapEx. Remember, we have got spectrum repayment commitments as well. So there are a few things. Once we get a complete handle, we will evaluate of coming up with a new dividend policy.
Now I would like Soumen to give his closing remarks for Bharti Hexacom.
I think the listing of Bharti Hexacom shares was a great success, and we thank through this all investors and people associated for showing trust in the organization. It has been a great quarter, and we will work harder and better to improve our deliverables in the next year. Thank you.
Thank you, everyone, for joining us today. Recording of this webinar will also be available on the websites of the companies for your reference. Thank you, and have a great day ahead.
