Can Airtel become the Telecom Boss of India?

31 Jul 2021  Read 3319 Views

“Internet is no longer a luxury but is a necessity now”. Isn’t it true? After the pandemic, the internet has become a necessity indeed. From online classes to working from home, everything’s a daydream without the internet. This change has brought about mammoth changes for the Telecom Industry. We will talk about one such company today, “BHARTI AIRTEL”.

A lot of questions have been disturbing investors about this company... How does the company earn? What is their business model? What does the future hold for Airtel? Will the company survive after such massive AGR dues? Too many questions, right? Well, let us address the questions one at a time.

Today one cannot talk about the Telecom Industry without talking about this 3 letter term “AGR”. So, what is this AGR? Let us settle it once and for all!

What is AGR?

AGR or Adjusted Gross Revenue is a fee-sharing mechanism between the government and the telecom companies. AGR was implemented in 1999 when the government shifted from the ‘Fixed Licence fee’ method to a 'Revenue Sharing fee' model in which telcos have to share a percentage of their revenue with the government.

But, what’s the whole matter around AGR?

The dispute mainly arose on the definition of AGR. The government was of the view that telcos should share all revenues from both telecoms as well as non-telecom services, while the telcos argued that they should only share revenue from their core activities.

But, do telcos have a choice in front of the government? Well, no! So, it was decided that the telcos have to pay the remaining AGR. The respective total AGR dues for Airtel, Vi and Tata Tele are Rs 43,980 crore, Rs 58,254 crore and Rs 16,798 crores. The supreme court has given a time of around 10 years to pay the AGr dues.

What’s in it for Airtel then?

If you are an investor in Airtel, this data will give you immense relief. Airtel has already paid Rs 18,000 Cr of the total due amount and you know the best part is that the remaining amount has already been provisioned for. So, the AGR may be a big problem for other telecoms, but Airtel has handled the matter very wisely, and now it seems that it can get over this troubling issue smoothly.

Now, since the AGR issue has been taken care of ( from our and Airtel’s end), let us move on to the next most important topic, “The Business Model of Airtel”.

This segment is going to be quite interesting for you as till now, we all have thought of it as only a “Mobile Services” company, but it is way more than that! Let the exploration begin.

Business Model of Airtel

Airtel has been diversifying its business into various segments. The best part? Well, all these businesses are interconnected and act as an extension of their telecommunication business. Let us have a look at all the services provided by the company:

  1. Airtel Business

This component of the company includes a range of services including voice, data, security, IoT, enterprise mobility, digital media etc. Airtel is one of India’s leading providers of ICT ( Information technology and communications technologies) services for medium/small businesses across India.

Revenues in this segment comprise of:

 a) Enterprise & Corporate Fixed Line

 b) Data and Voice businesses

 c) Global Business, which includes wholesale voice and data.

In layman terms, this segment is basically for the corporates. Airtel is the number 1 player in India in Enterprise mobile and data services. A global fibre network of a whopping 2,50,000 + RKMS is a milestone that the company has achieved. Not only this, next time you need services for your business, here is some more services provided “Airtel Business”:


  1. Mobile Services

Before talking about this segment, let us have a look at the current market share of the telecom companies.

(Source: TRAI)

As we can see, the major market share has been taken by two companies: Jio and Airtel. There has been real competition between these two companies for market share (which, obviously, needs no introduction).

What’s ahead for Airtel?

Corona had an ill effect on most of the industries, but not Telecom! The telecom industry saw a huge opportunity in terms of Work from home, Online meetings, Online education etc. These things are not possible without the internet and telecom companies. Nothing feels good without data, right? So here we are!

Have a look at the industry insights, the telecom sector has shown magnificent growth in terms of 4G subscribers, voice traffic, data traffic and one of the most important - Revenue. This was much needed for this sector.

Talking about Airtel, the company has shown a constant increase in all the above-mentioned sectors (as we can see in the image). But one thing that requires special attention is ARPU or Average Revenue Per User. This 4-lettered word is as important for a telecom company as fuel is for a car, and Airtel has done a decent job in increasing it steadily. Recently, the company has increased the amount of the lowest plans available, which in turn, will help the company to further increase the ARPU.

  1. Tower Infrastructure

This might seem a bit confusing to you as you have always assumed the company is in the business of mobile services only. But that’s not it. Let’s explore!

Bharti Infratel was incorporated in 2006 as a subsidiary of Bharti Airtel. Bharti Infratel is India's leading provider of tower and related infrastructure and it deploys, owns and manages telecom towers and communication structures for various mobile operators.

Recently, Bharti Infratel merged with Indus towers to form Indus towers Limited. The combined strength of both these companies has made Indus towers limited one of the largest telecom tower companies in the world.

 I know these numbers are a bit shocking, but you know what? The shocking fact is in the next line.

Indus towers' leading customers are Bharti Airtel (together with Bharti Hexacom), Vodafone Idea Limited and Reliance Jio Infocomm Limited.

The company has more than 180,997 towers and 325,355 co-locations (as of 30th June 2021) and a nationwide presence covering all 22 telecom circles.

  1. Home Services

Under this segment, Airtel provides fixed-line telephone and broadband services. They are present across 111 cities in India. The increasing need for high-speed internet for various purposes like gaming, online education, work from home etc have made this segment quite huge. With the increasing need for high-speed internet, the growth prospect for this segment is also increasing at a rapid pace. The company is also undertaking measures to increase the speed of the internet that they provide to their customers.

  1. Digital TV Services

Airtel Digital Tv services are one of the leading DTH (Direct To Home) services in India with more than 16.6 million subscribers. Let us have a look at the portfolio of Airtel DIgital TV services :

During the infancy stage of OTT content in India, the company sensed the need to provide a world-class seamless experience to consume both linear and non-linear content on the biggest screen in the house. Thus, they came up with the Airtel Xtreme box. Airtel DTH services have also played a pivotal role in fulfilling the vision for connectivity and quality content delivery to the customers.

  1. Airtel Payments Bank

In 2015, Airtel applied for a Payments Bank license with Kotak to acquire a 19.9% stake in Airtel M Commerce Services Limited (now Airtel Payments Bank Limited).

Airtel payments bank is the first payment bank in the country with active operations in all the states in the country. It also allows the user to use the facility of NEFT. 

The company has increased the revenue from this segment consistently. It’s trying to come up with various new facilities for providing “safer options” to its customers to tackle online theft. The company has done quite a decent job in the UPI segment too. Have a look:

(Source: NPCI)

These were the major key products and services of the company. All this is fine, but how does the company earn or what is the contribution of all these products to the total revenue of the company. You might be wondering this, right?

Well, your wish, our command! Let us look at the revenue mix of the company.

Revenue Mix

In the revenue mix of the company, we can see that the major portion of the company’s revenue comes from the “Mobile Services” segment. Airtel business also contributes a huge 14% followed by 7% contribution by the tower infrastructure segment. The “Home services” and “Digital services” don’t have a major contribution yet, but are expected to increase in future.

As we have already discussed the company’s business model and revenue mix, the only thing that is left is to analyse the financials of the company.

Financials of Bharti Airtel

  1. Balance Sheet 

Due to the AGR issues, the balance sheet may not look that encouraging but there are some points that you can look up to. The company has seen a consistent increase in its reserves of the company. As we discussed before, this is mainly due to AGR. The company also saw an increase in the total investment.

One concern for the investors is the rising borrowings of the company. There has been a ~20% increase in the borrowings of the company from Mar’20 to Mar’21. Not only this, the current liabilities of the company saw an increase of more than 100% during the same period. 

  1. Profit and loss account

This is one of the most interesting parts for the investors right? Well, let's explore more about the P&L of the company.Net sales saw a considerable increase from Mar’19 to Mar’20. Total expenditure saw a decrease which is a good sign for the company. Operating profit has shown an increase of almost 50%, this is something to cheer upon for the investors, right? Well, wait!

Did you notice the exceptional items, well that is because of the AGR issue and that amount is expected to reduce in future, which in turn, will help the Net profit of the company to grow? So, there you are.

  1. Ratios

Debt to equity stood at 1.53 which indicates that the company needs to take measures to reduce it. Not only this, the company has an interest coverage ratio of -2.11 which is quite alarming. Price to cash flow stood at 17.01 which is quite high compared to the peers.

These ratios might not be encouraging but this is due to the AGR issue, so in future, the ratios are expected to improve by huge margins.


Although the times have been really difficult for all the telecom companies. The AGR issue acted just like a time bomb on Airtel and its investors. But with the fundamentals and strong business model of the company, the company will sail through these issues and come out stronger than before! At least that’s what is expected.

Anyway, what do you think? Can Airtel become the telecom leader of India?

About the Author: Ishan Goyal | 15 Post(s)

Ishan Goyal has pursued BBA from ITM University, Raipur, with a finance & marketing specialisation. He was also Founder & Director of a start-up "Tac Cabs". Apart from being a financial enthusiast, he likes to explore new subject areas and has also got a certification in Digital Marketing & is aiming to be a Financial Analyst.

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