Should you invest in Bharti Airtel Ltd. for the Long Term? Stock Analysis by Finology

Bharti Airtel Ltd., India’s largest integrated communications service provider, grew at a remarkable 39%+ CAGR over the last 3 years.

Finology Research Desk has analysed the company this week, providing a clear verdict on whether Bharti Airtel Ltd. is a good long-term stock or not. Find out in this article.

What makes the Telecommunications Industry special?

According to Mordor Intelligence's report, India's telecom industry was valued at $53 billion in 2025. It is expected to grow by 9.3% CAGR to reach $83 billion. The telecom sector has been undergoing a remarkable surge of expansion and advancement, with the introduction of 5G technology being one of the most meaningful breakthroughs in recent years.

The Indian telecom market is concentrated with only a few key players - Reliance Jio Infocomm, Bharti Airtel, Vodafone Idea Limited and BSNL. To remain competitive in the market, these players focus on deploying the 5G network and increasing network capacity across the country.
 

 

Source: TRAI

India's telecommunications market is the 2nd largest in the world. According to TRAI, the country had a total telephone subscriber base of ~120 Cr and a broadband subscriber base of ~94 Cr as of 31 March 2025. These are led by wireless subscribers who account for ~95% of the total telephone and broadband subscribers.

 

Source: TRAI

Smartphones account for 94% of all the devices used worldwide to access the internet. Despite 60 Cr+ people using smartphones in the country, the smartphone penetration in the country remains low at 46.5%. According to TRAI, the tele-density (% of population having a telephone connection) in India is 85%. While rural India accounts has 59% of tele-density, urban India has 131% of tele-density.

 

Source: TRAI

The rise in smartphone penetration and telephone subscribers in rural India is expected to drive growth for the telecom industry.

Business Model of Bharti Airtel Ltd.

Bharti Airtel Ltd. provides telecom services, tower infrastructure services, DTH digital TV service and mobile money services. The company is India's largest integrated communications service provider and operates in 17 countries, with Africa being its largest foreign market. As of FY24, the company generated ~69% of its business from India, ~27% from Africa and the balance from other countries.

Revenue Mix of Bharti Airtel Ltd

 

Source: Investor Presentation Q4FY25

1. Mobile Services India: This segment accounts for 55% of the company's revenues. These services cover voice and data telecom services provided through wireless technology (2G/4G/5G) in India. This has been the company's core focus segment over the years. For FY24, ~65% of the total capex done by the company was towards the mobile services India segment. It contributes 44% of the company's profits and operates at a healthy 22% segment margin for FY24.

2. Mobile Services Africa and South Asia: This is the company's second-largest segment and accounts for 27% of its total revenues. It covers the provision of voice and data telecom services through wireless technology (2G/3G/4G) in Africa and Sri Lanka. Africa operations form the majority of the business in this segment.

For FY24, ~15% of the company's total capex was directed towards its Mobile Services Africa and South Asia segments. The African business is a high-margin business for the company, operating at a substantial ~33% segment margin. The South Asia business is a loss-making business, operating at ~225 Cr losses at ~346 Cr revenues.

3. Airtel Business: This is the company's third-largest segment, accounting for 12% of its revenues. It is the company's B2B arm, covering end-to-end telecom solutions catering to large Indian and global corporations. Under this segment, the company acts as a single point of contact for all telecommunication needs across data and voice (domestic + international), long-distance services, network integration and managed services.

For FY24, ~9% of the total capex done by the company was done towards its Airtel Business segment. This is also a high margin segment for the company, operating at 32% segment margins for FY24 and contributing to ~15% of the company’s profits.

4. Home and Digital TV Services: This is the smallest revenue-contributing segment for the company, accounting for 5% of the revenues for FY24. This is a B2C focused segment for the company. Home services cover voice and data communications through a fixed-line network and broadband technology for the home. Digital TV services include digital broadcasting services provided under the DTH (Direct-to-Home) platform.

For FY24, ~11% of the company's total capex was spent on Home and Digital TV services. This is a less margin-lucrative segment for the company, operating at 18% segment margins and contributing to 3.5% of the company's profits.

Unit Economics of Bharti Airtel Ltd

 

Source: Company, Finology Research Desk

For Bharti Airtel, COGS includes network operating expenses, access charges and license fees/spectrum charges. These costs have improved over the years. While they used to account for 40%+ of the revenues earlier, the company has improved its cost efficiencies and reduced these costs over the years to 36% of the revenues.

Employee costs at 4% and SG&A expenses at 6% have remained stable over the years.

Other expenses include bad debts written off, IT expenses, customer care expenses, etc. Other expenses have remained stable over the years for the company.

The company’s business is highly capital-intensive in nature. Depreciation and amortisation expenses accounted for 26% of the total revenues for FY24. Depreciation and amortisation expenses have been high: 25%+ over the last few years for the company.

Finance costs include interest expense on borrowings and lease liabilities for the company. As the company had continuously operated on high borrowings, the finance costs have remained high over the years, ranging 13%-15%.

Tax expenses at 3% of total revenues have remained stable over the last few years (excluding COVID-affected years).

Net profit margins at 6% have remained volatile over the last 10 years, ranging from 2%-9%.

Porter's 5 Forces Analysis of Bharti Airtel 

 

 

Source: Finology Research Desk

1. Low Threat of New Entrants: The company has a low threat of new entrants in the business because of the capital-intensive nature of the business. Also, the need to get a spectrum licence, etc., from the government for setting up assets creates a high barrier to entry for new entrants in the telecom industry.

2. High Bargaining Power of Suppliers: The telecom industry depends on a limited number of suppliers for specialised equipment and technology. Major suppliers include companies like Ericsson, Nokia and Huawei. There are high switching costs for telecom companies due to large investment requirements in network infrastructure. High switching costs, technology dependence and a limited number of suppliers create a strong bargaining power for the suppliers of the telecom industry.

3. Moderate Bargaining Power of Customers: The Telecom industry has a large customer base of subscribers who do not have bargaining power over telecom companies for the prices of voice and data packs. However, switching costs for the company are very low for the customers. Therefore, customers can easily switch between different service providers easily. This limits the players to charging a premium relative to the competitors and keeping competitive prices.

4. High Threat of Substitutes: The industry is fast-growing, and has had rapid innovation and technological changes over the years. The company faces high threats from substitutes, mainly Voice over Internet Protocol (VoIP). Over the years, VoIP services have become increasingly popular. In simple language, VoIP is just calling with the use of the internet (like WhatsApp calling feature). The VoIP industry is expected to grow faster than the overall telecom industry at ~15% CAGR by 2030. 

5. High Competition in the Industry: The competitive intensity is high among players in the telecom industry. When Reliance Jio launched, it disrupted the entire telecom industry with its free voice and data packs initially. Price wars, high spending on marketing and advertisements have become a routine feature of the telecom industry.

What led us to reject Bharti Airtel Ltd. for Finology 30?

1. Highly capital-intensive nature of business: The telecom industry is highly capital-intensive in nature. Not only is the infrastructure investment required to set up a telecom network high, but rapid technological changes lead to high capex cycles in the industry for 8-10 years.

For example, with the recent launch of 5G services, telecom players were required to significantly invest in laying networks even after incurring significant capex for 4G networks a few years preceding the same.

Capital Intensity Ratio Trend of Bharti Airtel Ltd.

 

Source: Company, Finology Research Desk

The capital intensity ratio has remained very high for the company over the years. The capital intensity ratio shows how much worth of assets is required to generate a rupee of sales. For example, Bharti Airtel’s 3x capital intensity ratio for FY25 reflects that ₹3 worth of assets are required to generate ₹1 worth of sales.

High capital intensity and fast technological changes make the company vulnerable to any new disruptions in the industry. In the past, for instance, with the launch of Reliance Jio, a lot of players went bankrupt in the sector, and even surviving companies like Vi, for instance, are struggling to make profits. Although Airtel has survived this, according to us, the risk-reward ratio in the business is unfavourable over the long term.

2. Regulatory Risks: The telecom industry is highly regulated. DOT, TRAI and WPC wings regulate the industry in India. Adherence to strict regulatory requirements creates a barrier for companies in the industry.

Various aspects of the telecom industry, such as the grant of license, frequency of spectrum auction, approval for radio frequency used by telecom service providers, and others, are closely monitored and regulated, exposing telecom players to risk associated with unfavourable policy changes.

For instance, TRAI has recently introduced a new framework that if mobile network services are disrupted in a district for over 24 hours, telecom operators are now required to offer a rebate on the rental charges for postpaid customers and extend the validity of prepaid connections by the same number of days affected by the outage. For fixed-line services, users should be compensated if the service fault is not resolved within three days. While this is a good initiative for telecom customers, it creates additional costs for the telecom operators as this will lead to an uptick in their compliance costs.

Also, Bharti Airtel operates in other geographies as well- Africa and Sri Lanka, which makes them vulnerable to regulatory changes in those geographies as well.

The Bottom Line

Bharti Airtel Ltd., India's largest integrated communications service provider, has demonstrated impressive growth with a CAGR exceeding 90% in profits over the past 3 years.

However, we found concerns about Bharti Airtel’s business environment, its highly capital-intensive nature of business and regulatory risks.

For Finology 30, our ideology has been to focus on simple business models with less susceptibility to sudden disruptions and regulatory risks. For now, Bharti Airtel failed to pass our investment checklist. So, we decided not to go ahead with Bharti Airtel Ltd.