Bharti Airtel, one of India’s leading telecom operators, has made waves with its recent strategic decision to exit the low-margin international wholesale voice and messaging segment. This move, confirmed by Gopal Vittal, Airtel’s Vice-Chairman and Managing Director, aims to refocus the company’s resources on high-growth segments like Internet of Things (IoT), cloud solutions, and cybersecurity.
During the Q3 earnings call on February 11, 2025, Vittal explained how this strategic shift would have minimal impact on Airtel’s earnings before interest, taxes, depreciation, and amortization (EBITDA) due to the negligible contribution of the low-margin segment. He said, "This change will de-clutter our management attention and help us focus on the areas the matter.” The determination to steer away from low-margin operations highlights Airtel’s commitment to enhancing its portfolio and emphasizing more lucrative revenue streams.
While the exit from this segment may influence Airtel’s top-line revenue, the company has demonstrated outstanding financial performance for the third quarter of fiscal year 2025. Airtel reported a monumental surge of 505% year-on-year growth in net profit, reaching ₹14,781 crore for the quarter ending December 31, 2024. Factors contributing to this impressive performance included strong mobile broadband user acquisitions, which saw the addition of 6.5 million users, and one-time gains from the consolidation of Indus Towers.
Analysts from ICICI Securities lauded Airtel's quarter results, stating, "Airtel has delivered another strong quarter, focusing on value creation from consistent AGR market share wins, continuing to narrow the gap versus Jio.” The report highlighted the significant growth of Airtel’s average revenue per user (ARPU), which improved to ₹245, making Airtel the biggest beneficiary of the July 2024 tariff hikes. Jio, its closest competitor, saw its ARPU at ₹203.30 during the same period.
The market continues to respond favorably to Airtel’s strategic focuses, indicating the operator's resilience and capacity to outperform. Motilal Oswal noted, "Airtel was the biggest beneficiary of the July 2024 tariff hikes,” adding credence to the telco’s strong positioning moving forward.
Despite Airtel's successes, its withdrawal from the low-margin segment opens doors for competitors like Tata Communications and Vodafone Idea to capitalize on the vacated market space. With the challenging international wholesale segment now less contested, there's potential for these rivals to make significant strides if they choose to pursue these opportunities aggressively.
Market experts are closely monitoring Airtel’s competitive stance as it maneuvers through the telecom sector's continually shifting landscapes. Airtel's exit from the voice and messaging market could lead to increased competition among its rivals and prompt customers to seek alternative service offerings as they adjust to changes.
Airtel's determination to redirect resources toward technology-driven solutions reinforces its focus on digital services, which is increasingly becoming central to telecom operations globally. With the rise of IoT and other digital services, Airtel is leveraging its capabilities to capitalize on these growth opportunities and solidify its market share.
The telecom sector remains dynamic, with market share metrics indicating promising trends for Airtel. Analysts report Airtel’s Revenue Market Share (RMS) has narrowed the gap with Jio significantly, achieving around 170 basis points as of the October-December quarter of FY25, marking substantial progress from the previous 440 basis points gap earlier last year.
Overall, Airtel's strategic exit from low-margin business areas, combined with impressive growth metrics and focused investments, may position the telecom operator favorably for future dominance. The outlook appears positive, with analysts maintaining bullish stances as Airtel continues its pursuit of high-margin segments and innovative technology solutions.
Moving forward, Airtel's management plans to maintain this focus on quality over quantity, dedicatively pursuing areas of higher profitability and sustained growth, which assures stakeholders of long-term viability and financial health. The company's impressive Q3 results and strategic realignment reflect its commitment to meeting the demands of modern telecom environments.