Bharti’s business services, also known as Airtel business with annualized revenue of $2.1 billion, accounted for 20% of its India and 14% of its consolidated revenue (as of 3QFY22 ).
“Our comparison of Bharti’s enterprise services with closest competitor Tata Communications (TCom) reveals Bharti’s revenue to be 1.3x and Ebitda 1.5x higher. Additionally, on 9MFY22, Bharti’s 11% year-over-year business revenue growth is against flat data revenue for Tata Communications,” CLSA said in an analysis note.
“Bharti is a safe haven for growth amid continued geopolitical and economic risks with growth in mobile and enterprise businesses, and we see upside potential for both growth and valuation,” he said. he adds.
Bharti Airtel’s business services grew by 40% in four years through expanding customers and offerings. The telecom operator’s offerings go beyond data and connectivity solutions for MPLS, VoIP and SIP trucking, especially for large enterprises, include network integration, data centers, managed services , IoT, mobility and digital media.
“The ‘cloud’ is also a key growth driver for Bharti’s enterprise services, and customers include 2,000 large enterprises and 1 million small and medium-sized enterprises (SMEs),” CLSA said.
Bharti Airtel’s data center entity, Nxtra, is getting aggressive and plans to invest Rs 5,000 crore by 2025 to triple data center capacity by 2025 in the country to over 400 MW to meet the growing demand from domestic and global customers and prepare for 5G technology.
Airtel’s business Ebitda, at Rs 46 billion for 9MFY22, was up 16% YoY against a 1% YoY decline by Tata Communications (TCom). “As a result, Bharti’s enterprise business is not only larger and growing faster, but also more profitable than TCom with its 7 ppt higher margin at 39%,” CLSA’s analysis showed.
Airtel’s ramp-up in business services will extend its growth trajectory, CLSA said, adding that its strategy in business services includes tapping 80% of customers who account for only 20% of revenue, and deep into accounts where Bharti is already present. to sell new products by increasing switching costs and limiting churn.
“Given this and the upcoming 5G, our Bharti business forecast of 7-8% CAGR on FY21-24CL has upside potential. Meanwhile, this business accounts for around 12% of our price targets Bharti SOTP of Rs915, which values its corporate business at a 9x FY24CL EV/Ebitda, same as TCom, and therefore there is also a likely upside valuation,” CLSA added.
Airtel recently launched its 5G initiative, #5GforBusiness, in which the telecom company is working with telecom equipment vendors, global consulting and technology companies to test 5G-based solutions.
Sunil Mittal-led telecom company partners with Accenture, Amazon Web Services, Cisco, Ericsson, Google Cloud, Nokia and Tata Consultancy to demonstrate enterprise-grade use cases using high-speed, low-latency 5G networks .