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NEW DELHI: Airtel Business, the B2B arm of Bharti Airtel is the most profitable business for the telecom major given that it contributed 14% to the consolidated revenue and 12% to the EBITDA in FY21, according to a report by ICICI Securities.

“Airtel Business revenue has grown at CAGR of 7.1% over FY17-21 to Rs144bn and EBITDA has grown at 12.9% CAGR to Rs55bn. It has generated FCF (EBITDA minus capex) of Rs132bn in the past five years; in the past three years ROIC has been 35-40%,” it said.

Airtel Business derives 80% revenue from 20% customers, and sees “huge potential in farming and hunting”.

It is also changing business model to capture huge SME opportunity through strategies such as in-source SME sales force; building omnichannel digital capabilities for customer acquisition and servicing; foray into new areas including data centres, Airtel Secure, Airtel IQ, Airtel Cloud and Airtel IoT; and revamped teams’ incentive structure with targets for “hunting and farming”.

The telco’s B2B arm offers products and services including voice, data, collaboration, cloud, data centre, security, IoT, network integration, managed services, and digital services. Its sub-sea cable network of 365-Rkms covers 50 countries.

In the past two years, Airtel Business’ market share has grown by 800bps to 31%, the report underscored.

Airtel also benefits from existing relationships and launch of new digital platforms.

“Nxtra (data centre and cloud offerings) has grown >3x over FY18-20, and is likely to grow over >3x in the next 3-4 years. Digital platforms like Airtel IQ, Airtel Secure and Airtel IoT open doors in new-age digital solutions which are growing fast >30-50%. We see a significant upside risk to our growth estimate of 6.5% CAGR for enterprise revenue (FY21-23E),” the report added.

ICICI Securities said it remains excited about enterprise business within telecom due to rising investment by enterprises into new-age solutions driving a higher total addressable market while telcos have also reasonably invested in digital solutions for enterprise business. Additionally, 5G may also drive higher growth for connected devices which will “augur well” for telcos.

“Further, we like Bharti’s strategy to enter new services such as cloud communications, security and cloud which should help the company grow faster in the next decade… data centre business in Bharti is under-appreciated, which has been growing fast and may continue to do so for the next few years. Carlyle has valued the business at US$1.2bn; we see value for this business growing fast as we see revenue from the segment rise by 3x in next few years,” it added.

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