According to market trackers, Bharti Airtel’s capital expenditure strategy—which has been centred on improving rural coverage and a more cautious non-standalone 5G rollout—has allowed the second-largest telecom company to surpass Reliance Jio in revenue growth. This is due to gains in market share, ongoing improvements in subscriber mix, deleveraging, and the creation of free cash flow.

A major performance indicator for Airtel, average revenue per user (ARPU), climbed to Rs 208 during the quarter, above market expectations. They attributed this to strong additions of 4G/5G subscribers, a steady churn rate, and a 4.2% sequential increase in postpaid user additions.

A day after the BSE released the financial data for the third fiscal quarter that concluded on December 31, 2023, Airtel shares increased 3.28% in early trade to Rs 1150.

In a research note obtained by ET, Morgan Stanley stated, “We believe improving subscriber mix and possibly higher international revenue during the high-season travel quarter would have driven good ARPUs during the quarter.”

In the absence of a tariff increase or pricing changes during the quarter, UBS stated that secular factors, such as the migration from 2G to 4G and prepaid to postpaid plans, were likely the only causes of the 2.5% ARPU growth.

On the other hand, market watchers claimed that Reliance Jio’s quick addition of low-value customers is hurting its ARPU. As a result, Airtel’s revenue growth outpaced Jio’s. According to Citi Research, Bharti Airtel’s India mobile revenue has increased at a cumulative quarterly rate of 4.2%, surpassing Jio’s 3.5% growth.

In a research note, Goldman Sachs calculated that, in spite of no significant rate increases, Bharti’s revenue market share climbed 40 basis points sequentially to 39.6% on the strength of steady double-digit percentage growth in cellular revenue.

According to Goldman Sachs, increased revenue growth in Bharti’s residential broadband and enterprise businesses also contributed to the revenue growth in the December quarter.

After falling for the previous three quarters, the telecom reported an increase in subscribers in its Digital TV services division.

However, Morgan Stanley reported that due to ongoing deceleration in overseas industries, Airtel Business observed moderation in revenue growth, with on-year growth of 8.7% as opposed to 9.5% in the previous quarter.

JP Morgan also noted that Bharti’s better-than-feared capital expenditures, combined with share defence and a return to price repair, can accelerate deleverage and increase return on invested capital (ROIC) even though overall capex remained remarkably unchanged.

According to JP Morgan, “the focus should quickly shift to capital return to sustain valuation after three quarters of healthy FCF generation.”

Goldman Sachs stated that the prepayment of high-cost spectrum debt accounted for the majority of the $1.9 billion in free cash flow created in the first nine months of FY24. The company anticipates additional capex reduction and improved EBITDA, which will enhance its financial performance.