In March 2013, although Sunil Mittal-promoted Airtel was the market leader, there was a sense of siege. Airtel has lost share in a growing market for three years. She was challenged with a $9 billion purchase of Zain’s African business in March 2010. Three months later, in India, she had paid big to buy spectrum for a particular technology, only to learn that Mukesh Ambani’s Reliance had to make a cheaper and full-fledged entry into telecommunications through another technology.

Jio’s entry, with deep pockets and an all-in approach, had huge implications. The number of operators fell to six by March 2020. Airtel’s average monthly revenue per user (Arpu) fell from ₹193 in March 2013 at ₹114 in March 2017, six months after the launch of Jio. Eventually, Jio and Airtel called a truce and Airtel’s Arpu started improving. So is the performance of its shares.

Fine balance

Although it wasn’t until 2024 that Airtel’s stock outperformed the broader market, the basis for this was the painstaking work it has put in over a decade on three levels. First, keep getting subscribers and keep growing. Second, to continue to invest in telecommunications, where the prism is rapidly changing from voice services to data services. That meant taking on debt. Third, run the business profitably so that the free cash flows can service the additional debt.

Airtel has managed that deft balance of current operations and future expansion. In 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 operating earnings grew faster at 12.2%, meaning it was able to make its assets sweat more. This gave it the cushion to expand its debt at an average rate of 11.5% during this period.

3G to 4G to 5G

Airtel had to keep up with technological advancements and provide faster data services. The 2010 auctions saw the stealthy entry of Reliance by acquiring HFCL, soon after the latter acquired the All India Broadband Wireless Access (BWA) spectrum. In those auctions, operators were mainly buying 3G spectrum. In the years that followed, the technology transitioned to next-generation 4G and 5G services.

Keeping pace with technological advancements, acquiring additional customers, managing the explosion in data consumption and preventing Jio from weaning customers, especially in the post-paid segment, meant constant investment in the business. Between 2012-13 and 2023-24, Airtel’s capital employed grew at an average rate of around 9%, from ₹1.08 trillion to ₹2.86 trillion in 2023-24. Airtel’s net debt increased from approx ₹58,000 crore to ₹2.04 trillion. But its ability to service that debt, after shrinking, has improved over the past three years.

Due Dates

Airtel’s next big challenge lies in the form of revenue sharing dues it has to pay to the government until 2031. In 2019, the Supreme Court asked a group of legacy operators, notably Airtel and Vodafone Idea, to clarify ₹1.47 trillion dues in dispute. The operators’ curative petition challenging the calculation was REJECTED by the court in September.

The Department of Telecom has estimated Airtel’s dues at ₹43,980 million euros. The good thing for it is that its core business continues. The “industry kind of chaos,” as Vittal once referred to the cut-and-thrust period in the sector coinciding with the launch of Jio, is largely a thing of the past. A measure of this is the steady and consistent improvement in Airtel’s ARPUs. it was a bruising period, and the low-key Vittal was at the center of it.

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