Bharti Airtel’s capital expenditure is expected to fall further this fiscal as its focus shifts from consumer network rollout to growing its enterprise business.
During its fourth quarter earnings call, the telecom operator’s management had indicated that capital allocation would be towards its enterprise business like cloud and data centres.
“For FY25, India capex (excluding Indus) at Rs 30, 300 crore was lower than Rs 33,400 crore in FY24, in line with the management’s guidance,” analysts at Motilal Oswal said.
Analysts at ICICI Securities said the major reduction in capex was due to a drop in radio deployment with near-completion of 4G rollout (except in a few challenger circles of Madhya Pradesh, Maharashtra and Gujarat) and 5G rollout remaining stable.
The analysts expect Airtel’s capex to further unwind in FY26, and going forward, priorities for capital allocation would be investments in the transport layer, home broadband, data centres and business-to-business (B2B), while radio capex would decline, with the completion of the rural rollout.
The company management has said that Airtel is already deploying more capital towards the B2B segment through investments in cloud, data centres, and undersea cables landing in the country.
Airtel aims to reach capex intensity of 15-17% of revenue on a par with global levels. This is also expected to help in generating free cash flows.
“Most of the incremental revenue is now flowing into Ebitda (85-90%), which is further translating to free cash flow as capex intensity is declining,” analysts at DAM Capital said.
Airtel’s free cash flows in Q4FY25 stood at Rs 13,000 crore, showing a slight decrease from Rs 19,900 crore in the previous quarter. Analysts attribute this to an increase in quarterly capex on account of seasonality and investments on cloud.
“We will continue to channelise our investments to future-proof Airtel and build digital services at scale,” Gopal Vittal, vice-chairman and managing director, Bharti Airtel, said during the earnings call.
Vittal mentioned the data centre business which operates under Nxtra saying that so far Airtel has been modest in its data centre aspirations, and can meaningfully step up growth of the business. “The fact is that in a market that is growing quite rapidly and a market that is very fragmented, we are a player with potentially less than 12% market share. We’re not pleased with that,” he said.
Vittal added that several data centres are at the build stage and substantial capacity will be created in the next 18 months. He, however, did not call out capex allocation towards data centres separately.
Airtel had last year outlined Rs 5,000-crore investments in its data centre business over the next three years.