Bharti Airtel Limited 158 Integrated Report and Annual Financial Statements 2019-20 MANAGEMENT DISCUSSION Integrated Report Integrated AND ANALYSIS Overview Statutory Reports Statutory Telecom sector, which is the backbone of any economy, is extended the pre-paid pack validity for the customers who going through a transformational change. Post the phase were not able to recharge during the lockdown. Airtel also of aggressive price competition, last few years have been extended an additional H 10 of talk time in the pre-paid marked by consolidation in the industry, with the structure accounts of 80 Mn customers to enable them to make calls or changing from more than 8 value players to now a structure send SMS and therefore stay connected with their loved ones. of three private and one government operator. The sector has In addition, to facilitate recharges, Airtel navigated customers gone through turbulent times for past 30 months with industry to digital channels and the offline channels which were open. Financial Statements revenue collapsing, unprecedented capex by the surviving Several new channels were also activated including bank players, and explosion of data and voice usage. India’s internet ATMs, pharmacies as well as grocery stores. Self-care through user base has grown rapidly over this period, propelled by the IVR and Thanks app was doubled down, given call centers decreasing cost and increasing availability of smartphones were operating at a significantly lower capacity. Network and high-speed connectivity at affordable prices. With this, investments were advanced to boost network capacity in India has become the second largest telecommunication order to tackle the upsurge in data consumption and ensure market and has the second highest number of internet users uninterrupted mobile broadband connectivity to its retail and in the world. enterprise customers. Management Discussion and Analysis Management Discussion During this period of turbulence, Bharti Airtel has been able During the year, Airtel continued its focus on quality customers to defend its ground by holding on to its market share. This and maintained its obsession with superior networks and can be attributed to the Airtel’s strategy of not simply being seamless experience to the customers. airtelThanks program a pipe providing connectivity but being an ecosystem of was enhanced to offer a differentiated experience through digital services with an aim to win quality customers across owned and partner ecosystem. By putting customers at the verticals and offer them brilliant experience across all touch heart of the strategy, the company invested heavily into the points. Equally, very strong network investments and a reliable networks and was able to provide best video experience and trustworthy brand has held the company very well even in download speed experience. testing times. Financial discipline being the other focus area yielded various The year gone by was an eventful year during which the deleveraging efforts to enhance the balance sheet strength. sector was at an inflexion point; having seen the much The Company maintained a healthy leverage position through needed repair initiatives besides certain unfortunate judiciary a mix of strategic and organic initiatives. The deleveraging outcomes. The industry took a long awaited move of taking initiatives included one of the largest rights issue in India and tariff upwards for prepaid mobile customers. Telecom players the largest QIP by a private player in India. faced an unfavourable verdict on the AGR definition case from the Hon’ble Supreme Court. The government continues to Operational and financial strength makes the Company be cognizant of the stress faced by the sector and approved truly well poised to capitalize on this once in a lifetime the option for the telcos to defer the payment of the annual transformation in the Indian telecom industry. spectrum auction instalments due for next two financial years Africa’s favourable market dynamics provide Airtel significant while keeping the overall tenure of payments unchanged. mobile data and mobile money opportunities to capitalize Also, based on the plea from the industry seeking a floor tariff on. With presence in underpenetrated geographies with on data; TRAI floated a consultation paper during the year. promising macroeconomics, demographics and tele-density, During the last quarter of the financial year, the whole world Airtel stands to gain from its African operations. struggled with the coronavirus pandemic. India witnessed the impact of the pandemic in the month of March, when the Economic Review government proactively decided a country wide lockdown to reduce the spread of the virus. During the lockdown, Global GDP continued its trend with a growth of 2.9% in importance of the telecom sector was yet again underscored. 2019 vs. 3.6% last year, despite weakness in global trade Telecom infrastructure acted as the backbone of the economic and investment. This weakness was widespread, affecting activity during the challenging time when every business both advanced economies – particularly the Euro Area – and was operating from remote location. Airtel demonstrated its Emerging Market & Developing Economies (EMDEs). The commitment to keep all its customers connected all the time year saw heightened policy uncertainty and weighed on by undertaking special measures to assist low income group international trade, confidence, and investment due to the customers impacted by the COVID-19 crisis. The Company prolonged period of rising trade disputes between United 159 States and China. With the agreement for partial rollback of stress in non-banking financial sector and decline in credit tariffs, the financial markets sentiments improved by the end of growth, having a trickle down impact on the whole economy. the year. During the year, major central banks loosened policy, The year witnessed efforts and policy changes including with interest rates in many advanced economies reaching significant easing of monetary policy with the repo rate cut, unprecedented lows last year. Financial conditions in EMDEs speeding up the insolvency resolution process under Insolvency improved in parallel, except in economies perceived as risky. and Bankruptcy Code (IBC), easing of credit in sector with major hit, reduction in the corporate tax rates, GST rate rationalisation Economic activity in advanced economies grew by 1.7% and some PSU & private banks merger / restructuring. in 2019 as compared to 2.2% in 2018. The slowdown was due to weak manufacturing activity and policy uncertainty Similar to other countries globally, India is also impacted associated with trade tensions. Growth in United States by coronavirus and as it tries to fight with the spread of decelerated amid slowing investment and exports, while coronavirus with measures to contain the virus, its economic consumption was resilient with unemployment being near a growth is projected to drop to 1.9% in 2020. IMF predicts five decade low along with a solid wage growth. Uncertainty the growth to bounce back to 7.4% 2021 with the recovery concerning Brexit and weakness in industrial and automobile through fiscal and monetary policy measures. India may sector had an impact on the growth in Euro area. benefit due to substantial correction in the crude oil prices overs last few months, while some of which will be diluted due Emerging Market and Developing Economies (EMDEs) grew to a steep depreciation of rupee against dollar. by 3.7% during 2019, led by India & China. The growth came at a backdrop of EMDEs continuing to experience substantial weakness, with industrial production, trade flows, and investment decelerating sharply during the year. 7.4% Economies that are deeply integrated into global and regional Projected GDP growth production and trade networks – most notably in Asia and rate for 2021 Europe – particularly suffered from global trade tensions and decelerating trade flows during the year. African Economy The year 2020 has started with the COVID-19 pandemic which is inflicting high and rising human costs worldwide. As a result The Sub-Saharan Africa economy grew by 3.1% in 2019 vs. of the pandemic, the global economy is projected to contract 3.3% last year. The economic activity in Sub-Saharan Africa sharply by (negative) 3% in 2020, while as pandemic fades was impacted by softening external demand, heightened in the second half of 2020, the global economy is projected global policy uncertainty, and falling commodity prices. to grow by 5.8% in 2021. As per IMF, effective policies are Domestic fragilities in several countries further constrained essential to forestall worse outcomes. The pandemic impact activity. The growth was driven majorly by countries like is expected to have two phases: a phase of containment Nigeria, Gabon, Chad, Ghana, Côte d’Ivoire, Ethiopia, Kenya, and stabilization followed by the economic recovery phase. Tanzania, Uganda, and DRC. The economic growth for 2020 may get impacted in the With the recent crude oil price drop, dollar appreciation and first phase due to necessary measures required to reduce global coronavirus impact, economic growth in Sub-Saharan contagion and protect lives. The recovery phase in late 2020 Africa is expected to drop to -1.6% in 2020, followed by is expected to mark substantial targeted fiscal, monetary, and a pickup to 4.1% in 2021. IMF expects sectors such as financial market measures to support affected households construction or services to lead the growth recovery in 2021. and businesses. Actual Projections Global Growth 2018 2019 2020 2021 4.1% Trend (%) Projected GDP growth rate for World Output 3.6 2.9 -3.0 5.8 African economy - 2021 Advanced 2.2 1.7 -6.1 4.5 Economies Sources: Emerging Market 4.5 3.7 -1.0 6.6 World Bank Global Economic Prospects 2020: http://www. and Developing worldbank.org/en/publication/global-economic-prospects Economies IMF World Economic Outlook 2020: https://www.imf.org/en/ China 6.7 6.1 1.2 9.2 Publications/WEO India 6.1 4.2 1.9 7.4 India Economic Survey 2019-20: https://www.indiabudget.