Management Discussion and Analysis

Digital for all Management Discussion and Analysis At Bharti Airtel, our journey so far has been exciting. In In the near term, cheap oil adds to deflationary pressures, July, 2014, we crossed the important milestone of 300 Mn enabling central banks to maintain their ultra-supportive customers. The last 100 Mn additions happened in less than stance. However, the divergent global growth dynamics will two years. We are committed to further bolster our market be mirrored in central bank policy. Persistent concerns over leadership across geographies. Telecom is transforming, and low inflation in the Eurozone and Japan may see the European data-centricity is playing a critical role in it. We launched Central Bank (ECB) and Bank of Japan (BoJ) continue to several industry-first innovations to drive data uptake during ease policy. In contrast, the Fed, buoyed by a strengthening the year through various offerings and partnerships. We have economy and rising wages, may raise rates. Monetary policy steadily enhanced our investments in Africa, and continue to will, however, remain accommodative, with rates remaining believe in the continent’s tremendous growth potential. We low relative to previous cycles. For the emerging economies, are well positioned to derive benefits from increasing tele- inflation levels have also broadly trended lower with a few density in many countries, which have low mobile and data exceptions, and a fall in commodity prices will support this penetration. trajectory. The softening of commodity prices, which is likely to sustain for some time, is expected to weigh on traditional Our endeavour is to maintain the optimum capital structure commodity exporters as opposed to net importers. Net at all times and maintain and solidify our balance sheet’s energy importers, such as India, Turkey, the Philippines are strength. Despite being at very comfortable levels of expected to gain at the expense of countries, such as Brazil, leverage, deleveraging remains on track following initiatives, Indonesia, Russia and the Gulf countries. such as equity infusion, value unlocking through our investee companies and cash-generation through hiving off of our GDP Growth Trend (%) African tower infrastructure assets. The investment grade Actual Projections ratings awarded and reaffirmed by international credit rating 2013 2014 2015 2016 agencies reflect the inherent strengths of our business model, its robustness and scalability. We continue to be committed World Output 3.4 3.4 3.5 3.8 to creating value for all stakeholders, while ensuring highest Advanced Economies 1.4 1.8 2.9 3.2 standards of corporate governance. Emerging and Developing 5.0 4.6 4.3 4.7 Our brand leadership, strong financial performance and Economies sound governance will translate into enhanced stakeholder China 7.8 7.4 6.8 6.3 confidence. This, in turn, will ensure long-term sustainability India 6.9 7.2 7.5 7.5 and value generation for your business. Bangladesh 6.1 6.1 6.3 6.8 Economic Overview Sri Lanka 7.3 7.4 6.5 6.5 Global Review Sub-Saharan Africa 5.1 5.0 4.5 5.1 Financial year 2014-15 was marked by the collapse in crude (Source: International Monetary Fund, World Economy Outlook database, April 2015) prices and other commodities, while legacy risks continued to play their part in slow global growth. Indian Economy Many economic adjustments that these events have triggered India is back on track as an emerging powerhouse of Asia will continue to materialise in the quarters ahead. On the one and the world. Inflation has largely been range bound during the course of the year, building a strong case for a hand, there is visible expansion in the US economy, while on more balanced monetary policy stance. The collapse of the the other, we are witnessing weak and uneven acceleration global commodity prices has reduced stress on twin deficits in some pockets of Europe, though largely macro-economic and inflation, boosting consumer demand at the same time. indicators continue to remain sluggish. There has been a These macro tailwinds are facilitating a gradual recovery decoupling in global growth – while the US is talking about with stable exchange rates, resulting in increased investor starting monetary tightening, in markets of Europe and even appetite and capital flows into the country. Asset prices are China – which contributed largely to global growth – are thus buoyant, with Indian equity indices near all-time highs continuing to talk about easing. The collapse in oil prices and among the best performing in the world. will effectively provide a tax cut for consumers globally. Growth in China has been sluggish, amid slowdown in the Certain lead indicators, also suggest that the headwinds construction and manufacturing sectors. The world’s second buffeting India’s economy seem to be easing at the margin, as largest economy is now rebalancing itself from an investment some of the bottlenecks in key industries are being removed. and export-led model to a consumption-led growth model. Noteworthy is the Government’s focus on infrastructure 78 Annual Report 2014-15 Corporate OverviewStatutory Reports Financial Statements Bharti Airtel Limited investments, and this is expected to strengthen India’s Megatrends that drive the Company’s Business economic growth, going forward. Telecom is also expected to play a significant role in implementing the Government’s Digital India vision. 1 India’s internet users have risen considerably from 50 Mn in 2007 to 100 Mn in 2010 and more than 300 Mn India’s GDP growth during FY 2014-15 is estimated at 7.4% in 2014, with close to 60% users accessing internet under the new method of computing national accounts via mobile, making India the world’s second-largest [Source: CSO]. The economic growth rate has the potential internet market (Source: The Internet & Mobile to overtake that of China in the foreseeable future, if legacy Association of India (IAMAI)). Increasingly, first-time risks do not derail growth. A key driver of India’s macro- users are coming online via mobiles, leapfrogging the economic growth will be the digital consumer as the country’s desktop era. The time taken to add incremental 100 Mn total internet user base is expected to exceed 350 Mn in the internet users has shrunk from 10 years in the previous near future. Thus India’s future growth story will be driven by two important trajectories: the positive macro-economic cycle to under two now. development and the acceleration provided by the internet to India enjoys favourable demographics for internet the aspiring young population. penetration than many countries of the world; around 75% of its online population are aged between 15 and 34. Prospects in Africa Africa is now widely considered as the sweet spot of 2 India is a lucrative market for global and domestic opportunity, where investments in education, employment, smartphone manufacturers. Smartphone shipments healthcare and critical infrastructure can help elevate have doubled year-on-year, which led the total people’s lives. Not only is the region blessed with abundant established base to reach 150 Mn in 2014. Enhanced and diverse resources, both natural and human, it has one of focus on manufacturing affordable handsets with the world’s youngest populations brimming with aspirations indigenous technology will further spur mobile for a better life. However, it still has a long way to go to telephony. At the same time, it will widen and deepen realise its potential. Africa clearly can contribute significantly the internet user base. to global growth, provided Governments focus on sustained reforms to facilitate infrastructure creation, education and 3 Growth in smartphones, therefore, would lead to a skill building, employment opportunities, entrepreneurships significant rise in mobile data usage, which, as per and socio-economic stability. estimates is likely to grow 13 fold in the next five Real GDP growth in Sub-Saharan Africa has been projected years. As per these estimates, mobile data traffic will by the IMF to hover around 5% annually for the next two grow thrice as fast as fixed IP traffic between 2014 and years. Foreign direct investment into the region is targeting 2019 and therefore, is expected to account for 28% of infrastructure sectors, as well as business services, transport the total internet traffic by 2019, up from 9% in 2014 and manufacturing. In 2014, the inflows into the region, (Source: Cisco- VNI Global data traffic forecast). excluding South Africa rose by 5% over the previous year to a projected USD 35 Bn. In fact, even the intra-Africa 4 Demographic dividend and interest penetration investments’ share of cross border Greenfield foreign direct including internet of things are transforming the lives of investment rose to 18% from 10% from 2004 to 2009. 1.25 Bn of people as they rely on it for various purposes Over the last fiscal year, in the backdrop of falling oil and from online shopping, entertainment, education to commodity prices, challenges with oil production, planned healthcare, payment mechanisms and so on. Such a fiscal consolidation, resultant devaluation of most African scenario is driving mobile commerce. currencies, along with security and Ebola outbreak concerns, there were downward revisions in growth forecasts. These 5 Hence, a converged opportunity exists through voice challenges have led to adjustments in Government spends secularity, data uptake and new services in the country and customer wallets. However, following the period of across technologies as consumer needs are diversified economic adjustments, these countries are likely to elevate across the spectrum of offerings. Different consumers to a higher growth trajectory. have widely varying consumption patterns from being first-time users to affluent data-hungry consumers – South Asian Economies providing telecom companies a well balanced portfolio. With regaining political stability and with a renewed focus on growth, Bangladesh is estimated to have grown its GDP by 6 Moreover, India’s Government is committed to usher 6.1% in 2014.

Load more