MANAGEMENT DISCUSSION AND ANALYSIS
At Bharti Airtel, we are transforming at a rapid pace; and catering to the aspirations of millions of people in South Asia and Africa as a leading global telecommunications company. Our life-enrichment network transcends geographic barriers, cultural differences and linguistic diversities to emerge as a unifier on a global scale. With over 300 Mn customers across 20 countries of the world, the Airtel family is growing stronger each day, touching almost every aspect of life. We emerged as the world's third largest operator during FY 2016 in terms of customer base. This landmark was achieved in only two decades of operations, underlining the strength of our business model and global scale.
We continue to be committed towards our customers and maintain our leadership position across geographies. We are happy to be leading in an industry (Telecom), which is itself transforming and creating plenty of opportunities for us. Data has seen a significant uptake in the past year with 4G launches across India. Our entry into Mobile banking in India with the grant of a Payments Bank license gives us the opportunity to enter into a complementary category. We launched many industry-first initiatives and entered into strategic partnerships. We will continue to enhance our investments in Africa and reap benefits of the exponential opportunities the continent offers. We are well positioned to derive advantages from low mobile broadband penetration in India and Africa, significant growth in smartphone shipments, favourable demographics and industry consolidation.
We are focusing on deleveraging in Africa through strategic stake sale in subsidiaries, tower sales and other asset monetisation. Our investment grade ratings (awarded and reaffirmed by international credit rating agencies) validate the fact that we have built a robust, scalable and sustainable business model. Our focus is to maintain the optimum capital structure at all times and enhance our financial strength. We stay committed to creating value for our stakeholders, while ensuring highest standards of corporate governance.
Economies Overview Global Review
Global economic activity in 2015 remained largely subdued. Global growth is projected at 3.4% in 2016 and 3.6% in 2017. Gradual slowdown and rebalancing of economic activity in China, lower prices for energy and other commodities, and gradual tightening of monetary policy in United States influenced the global outlook. Growth in emerging and developing economies contributed to 70% of global growth in 2015.
Economic adjustments on the back of global slowdown will have material impact on economic recovery. While deflation and revitalization of European Union and Japan has led to central banks undergoing quantitative easing programmes, United States is looking at rate hikes this year on the back of strengthening economy and wage escalations. Some improved data releases like firming of oil prices, support by major central banks, and lower capital outflows from China are resulting in improved investor sentiments.
1. The US economy grew by 2.4% in CY 2015, just as it did in CY 2014. The challenges were weaker than expected domestic demand, lacklustre performance of the manufacturing sector, declining exports due to stronger dollar and adverse external trade environment.
2. The Euro Area as a whole grew by 1.6% in CY 2015, faster than CY 2014. The economy received robust support from three tailwinds: a) lower oil prices (bolstering consumer expenditure / domestic demand); b) expansionary fiscal policies; and c) an accommodative ECB. The challenges, however, were: sub-zero inflation, high non-performing loans and debt trajectories, low investment and eroding skills of the working population due to long-term high unemployment in the region.
3. Economic growth for China was 6.9% in CY 2015. The slowdown and rebalancing of the economy led to a decline in investment in real estate, manufacturing and allied industries.
4. The economic performance of many African economies was lower than expectations. Resource-rich countries in Africa suffered owing to a decline in commodity prices and also because their frontier markets were adversely affected by tighter global financing conditions.
India's economic growth for 2015-16 was 7.6%, overtaking its formidable economic rival China (Source: CSO). The decline in oil price, while affecting large parts of the world, has helped the economy lower its huge import bill. The Government of India has also ushered in a series of reforms in agriculture, manufacturing, infrastructure and services sectors to bolster economic performance and make growth more inclusive. Declining fiscal deficit, moderating inflation and a comfortable interest rate trajectory were definite positives as well. India stands out as one of the rising stars in a world characterized by volatility and financial turbulence on account of its economic stability, favourable demographics, proactive Central Bank and a Government focused on consistent reforms.
1) The Union Budget 2016-17 focused on enhancing farm output and welfare of farmers.
2) Consistent fiscal consolidation has reduced Government's fiscal deficit to close to 4% of GDP (on a 12-month rolling basis), down from a peak of 7.6% in 2009.
3) The Government's Make in India initiative has been a resounding success. It has encouraged domestic entrebrneurship and even attracted FDI to the country significantly. In the period of 17 months (October 2014 to February 2016) after the launch of Make in India, FDI inflows increased by 37% (Source: Ministry of Commerce and Industry).
4) Digital India will have a transformational impact on Indian society. It rebrsents a connected society, where every citizen will be connected to the internet. This will help enhance education, employment, efficiencies, governance and controls.
5) Internet penetration is around 30% in India; and is projected to touch around 35% next year (Source: IAMAI).
6) The Government's Smart Cities Mission is a revolutionary concept in terms of overall infrastructure, sustainable real estate, communications and market viability. There are many technological platforms involved, including but not limited to automated sensor networks and data centres.
Africa's economy as a whole remained more resilient to global volatilities, compared to many other emerging and developing regions. The continent's growth enablers comprise: the vastly improved macroeconomic environment, benefiting businesses; reduction of external debt and social conflicts; improved political and economic governance; growing domestic demand; buoyant services sector; financial services growth in line with an upswing in information and communications technology; and rapid internet penetration.
Poverty in the continent is also seeing a declining trend. Africa's young and aspirational population is acting as an agent of change in largely conservative societies. The continent's youth bulge will drive the next era of growth and transformation.
1) A large African middle-class is emerging, over 350 Mn people, driving the culture of innovation and policymaking.
2) Africa is the world's second fastest growing FDI destination, just behind Asia Pacific.
3) Sustainable policies for urbanisation, manufacturing growth, agricultural output, along with education and empowerment can act as key catalysts.
4) Less focus on oil exports and other commodities will augur well for the economy, going forward.
South Asian Economies
Bangladesh shows significant potential in South Asia. It has a stable democracy with focus on empowerment from grassroots. The economy's key growth enablers comprise: growing manufacturing and construction sector, robust service sector and higher private consumption bolstered by remittances. These pivots have resulted in sustainable economic growth for the nation.
Sri Lanka is also a stable, democratic society with focus on inclusive growth. The island nation's economic potential is considerable. The country has a strong base of human capital and reliable infrastructure. It also occupies a strategic position in Asia, the fastest growing region in the world; and investments over the last decade (especially in ports and other transport-related facilities) can take advantage of this opportunity.
1) Bangladesh's GDP grew by 6.6% in 2015 vis-à-vis 6.1% in 2014.
2) Growth is expected to further inch up to 6.7% in 2016, led by strong garments exports and rising private consumption as government employees get wage increase.
3) Real GDP growth for Sri Lanka was 4.8% in 2015 (broadly unchanged from 2014), driven by robust growth in services and agriculture, as well as a positive contribution from manufacturing.
4) Sri Lanka's economy is expected to grow by 5.3% and 5.8% in 2016 and 2017, respectively on back of strong domestic demand, and higher private and public investments.
Megatrends that drive the Company's business
1. Internet users in India have risen from 50 Mn in 2007 to 100 Mn in 2010; and more than 300 Mn in 2015. Of the 306 Mn internet users as on December 2015, 219 Mn users are from urban India. The urban user base grew by 71% year-on-year. On the other hand, the rural user base went up by 93% from December 2014 to reach 87 Mn at the end of December 2015.
2. India is a lucrative market for global and domestic smartphone manufacturers. Smartphone shipments increased by 55% between 2014 and 2015 (Source -IDC). The country has an established base of 184 Mn users. Enhanced focus on manufacturing affordable handsets with indigenous technology will further spur mobile telephony.
3. With rise in affordable smartphones and more users brferring 3G / 4G, data usage is likely to grow by 12 times from 2015 to 2020. Mobile data traffic increased by 89% between 2014 and 2015; and mobile data traffic grew by 2.4 times faster than India's fixed IP traffic (Source: Cisco VNI forecasts). Network migration from
2G to 3G / 4G is driving a change in data consumption from low bandwidth to high-bandwidth applications, along with more availability of relevant content.
4. India is in a sweet spot to leverage market opportunities emerging through Internet of Things (IoT). A strong ecosystem of IT organisations, renewed focus on manufacturing, significant opportunities in education, healthcare and agriculture; and enormous growth in mobile internet usage will act as key catalysts in supporting investments in IoT. The Government of India's initiative of smart cities requires seamless digital and physical infrastructure to be shared efficiently across devices and applications; IoT will play a critical role in fulfilling this vision.
5. Convergence is a global trend for the telecom business of the future. It enables a user to have a uniform experience, both at home and on the move. Combination of conveniences, freedom of movement, and personalised services, along with high quality and speed of fixed communications will enable a seamless network experience for the end user.
6. India is on the cusp of a huge digital revolution. Digital Literacy Mission will touch 60 Mn rural households as per the Union Budget of India 2016. The Government of India also plans to connect 550 farmer markets in the country through the use of technology. The Digital India drive will bring along a transformative impact on every citizen through the medium of internet.
7. The proposed policy environment through M&A rules, spectrum sharing guidelines and 20-year spectrum positions for telecom operators not only enhances business certainty, but also encourages industry consolidation and healthy growth. The gains in network efficiency that sharing can provide will benefit operators and customers alike. Upcoming auctions will further help in building stronger networks.
8. Mobile banking is on a rise in India and Africa. India's largest wallet company has around 120 Mn wallets with other companies estimated to have 30 Mn+. This is significantly more than the number of credit cards in India. Additionally, mobile phone banking technology is bringing more people in Sub-Saharan Africa into the formal financial sector and the economy more broadly.
9. Africa, with a median population of less than 20 years, is on the cusp of a mobile data revolution as 3G and 4G deployments gather scale with more affordable handsets available. Mobile data is helping people elevate their lives with a large proportion of the population relying on the internet for education, financial transactions, healthcare, and so on.
10. E-commerce is at the epicentre of Africa's thriving economy. The continent's digital evolution is a promising prospect with the e-commerce market expected to be worth approximately USD 50 Bn by 2018. India has an exciting ecommerce story as well, with online retail growing 4.5x in the last three years. India's e-commerce industry is likely to be worth USD 38 Bn by 2016, a 67% surge over the USD 23 Bn revenues for 2015 (Source: Deloitte).
Industry Overview Indian Telecom Sector
India's total customer base stood at 1058.86 Mn with a tele-density of 83.36%, as on March 31, 2016, having grown from a base of 996.49 Mn and tele-density of 79.38% last year. The urban tele-density stood at 154.01%, whereas the rural tele-density stood at 51.37%, as on March 31, 2016. India's telecom market is witnessing a strong growth of internet users; and now has the world's second highest number of internet users. The wire-line customer base is 25.22 Mn at the end of March 31, 2016 vis-à-vis 26.59 Mn at the end of March 31, 2015.
Among the service areas excluding metros, Himachal Pradesh has the highest tele-density (127.41%) followed by Tamil Nadu (118.12%), Punjab (106.09%), Kerala (102.27%), Karnataka (101.88%), Gujarat (100.05%) and Maharashtra (98.98%). Among the three metros, Delhi tops with 236.30% tele-density. On the other hand, the service areas, such as Bihar (54.31%), Assam (57.55%), Madhya Pradesh (64.18%), Uttar Pradesh (65.83%) and Odisha (69.09%) have comparatively low tele-density Rural penetration (low at nearly 50%) rebrsents huge headroom for growth. With urban tele-density crossing 150%, internet penetration and experience will be the key drivers of growth in urban areas. With the government's favourable regulation and policies and the developing 4G ecosystem, India's telecommunication sector is expected to witness an explosive data growth in the next few years.
During the year, the Company introduced a combrhensive network transformation programme - Project Leap aimed at delivering a world class network. This programme will see an investment of Rs. 600,000 Mn in the next three years. The programme will help Airtel build a smart and dynamic network that will significantly improve the quality of both voice and data services across India. The programme aims to deliver a truly differentiated customer experience and reinforce its commitment to build a future-ready network.
Airtel has acquired rights to use 2x5 MHz spectrum in the 1800 MHz Band from Videocon Telecommunications Limited (VTL) which was allotted to VTL by the Department of Telecommunication (DoT) on April 05, 2013 for six circles, namely, Bihar, Haryana, Madhya Pradesh, UP (East), UP (West) and Gujarat at an aggregate consideration of Rs. 44,280 Mn.
Bharti Airtel Limited and its subsidiary, Bharti Hexacom Limited entered into definitive agreements with Aircel Limited and its subsidiaries Dishnet Wireless Limited and Aircel Cellular Limited to acquire rights to use 20 MHz 2300 Band 4G TD spectrum for eight circles namely, Tamil Nadu (including Chennai), Bihar, Jammu & Kashmir, West Bengal, Assam, North East, Andhra Pradesh; and Odisha at an aggregate consideration of Rs. 35,000 Mn. The closing of the said transaction is subject to certain customary regulatory approvals and other closing conditions.
During the year, the Company had launched 3G services in its gap circles and the high-speed 4G services were also commercially launched across India.
With the proposed spectrum acquisitions from Videocon and Aircel, the Company is set to become a pan-India 4G operator.
African Telecom Sector
Africa is among the fastest growing regions, but had faced significant headwinds in the last year as a result of global trends and region specific issues. The global commodity super-cycle has come to an end, sharply lowering the price of oil, gas, metals and minerals. As a net commodities exporter, Africa is deeply affected by falling commodity prices, putting brssure on the current account and fiscal balances.
The revenue-weighted currency debrciation vis-à-vis the US Dollar across 17 countries in Africa over the last 12 months (exit March 31 rates) has been 5.7%, primarily caused by debrciation in Malawi Kwacha by 54.9%, Zambian Kwacha by 45.1% and Tanzanian Shilling by 17.3%. In terms of the 12-month average rates, the revenue-weighted Y-o-Y currency debrciation has been 18.3%, mainly caused by debrciation in Zambian Kwacha by 51.8%, Malawi Kwacha by 32.1%, Ugandan Shilling by 25.1%, Nigerian Naira by 18.0% and CFA by 14.2%.
However, Africa's market with a billion-plus population promises considerable opportunities for African telecom sector. Data and mobile money have a significant potential for sustained growth; and with increasing adoption of smartphones this trend is set to continue.
Development in Regulations
The year saw several regulatory changes and developments. The significant regulatory changes were:
• Sharing of Active Infrastructure: In February 2016, the Department of Telecommunications issued Guidelines for Sharing of Active Infrastructure among service providers, based on mutual agreements. As per the guidelines, active infrastructure sharing will be limited to antenna, feeder cable, Node B, Radio Access Network (RAN) and transmission system only.
• Valuation and Reserve Price of Spectrum: In January 2016, TRAI issued its recommendation on Valuation and Reserve price of Spectrum in 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500
MHz Bands. As per the recommendation, auction in all the bands should be conducted simultaneously. DoT should carry out carrier re-assignment exercise in the 800 MHz band at the earliest; and ensure that the entire spectrum that is available for commercial use is put to auction and it should be in contiguous blocks. Spectrum in 700 MHz band should be offered in the block size of 5 MHz (paired). In case a TSP is able to win more than one block of spectrum in the upcoming auctions, it should be allocated spectrum in contiguous blocks.
• Liberalisation of Spectrum: On November 05, 2015, the Department of Telecommunications issued the Guidelines on Liberalisation of Administratively allotted spectrum in 800 MHz and 1800 MHz band in a service area for the balance validity period of right to use of spectrum, after payment of auction determined price, prorated for the balance validity period. The entry fee paid will be pro-rated for the balance validity period of the right to use spectrum; and will be deducted from the total amount to be paid by the TSP for liberalising the spectrum. In case the spectrum gets liberalised, the One Time Spectrum Charges (OTSC) will be charged and the same has to be paid by the licensee.
• DoT guidelines on Spectrum Trading: In October 2015, the DoT issued the guidelines on Spectrum Trading. Spectrum Trading shall be allowed between two access service providers, holding Cellular Mobile Telephone Service (CMTS) / Unified Access Service License (UASL) / Unified License (Access Services) (UL(AS)) / Unified License (UL) with authorisation of Access service in a licensed service area. All access spectrum bands earmarked for Access Services by the Licensor will be treated as tradable spectrum bands. Only that spectrum can be traded that has been assigned through an auction in 2010 or afterwards, or on which TSP has already paid the brscribed market price.
• TRAI releases Telecom Consumers Protection (Ninth Amendment) Regulations, 2015 on Call Drop: On
October 16, 2015 TRAI releases Telecom Consumers Protection (Ninth Amendment) Regulations, 2015 on Call Drop, which mandates the originating service provider providing Cellular Mobile Telephone Service, for each call drop within its own network compensate the consumer by crediting the account of the calling consumer by 1 rupee subject to a maximum of 3 dropped calls in a day; and inform the consumer within four hours of the occurrence of a call drop. The Subrme Court ruled in favour of Telco's where it struck down TRAI's directive.
• Spectrum Sharing: On September 24, 2015 the Department of Telecommunications issued the guidelines on Spectrum Sharing. Spectrum sharing will be allowed only for the access service providers holding CMTS license, UASL, UL (AS) and UL with authorisation of Access Service in a Licensed Service Area (LSA), where both the licensees are having spectrum in the same band. Both the licensees shall ensure that they fulfill the specified roll-out obligations and specified Quality of Service norms.
TRAI's recommendations on 'Introducing Virtual Network Operators in Telecom Sector': In May 2015, TRAI made its recommendations on Introducing Virtual Network Operators in telecom sector to DoT. Virtual Network Operators (VNO) to be introduced through a proper licensing framework. The terms and conditions of sharing of infrastructure between the Network Services Operator (NSO) and VNO should be left to the market i.e. on the basis of mutually accepted terms and conditions between the NSO and the VNO. An NSO shall allocate a numbering range to their VNO(s) from the numbering range allocated to it by the licensor. VNOs shall also utilise the LRN and network codes of the parent NSO for the purpose of routing of calls.
Zambia, Tanzania, Malawi and Other SADC Countries: The Governments within the SADC region have commenced bilateral arrangements to implement the Roam Like at Home tariffs imposed by the SADC governments.
Burkina Faso and Congo B: The Regulator has performed a cost study to determine the interconnect rates that will be applicable in 2016. Basis that, the Regulator has kept the rates unchanged.
Rwanda: The interconnect rates glide path, which had been set by the Regulator has come to the end of the term. Operators are now awaiting new rates from the Regulator.
Uganda: The Regulator has indicated that it will review the interconnect rates; and is in the process of recruiting a consultant to handle the process.
Burkina Faso: The Regulator is proposing the introduction of a tax on incoming international traffic. The industry is in discussion with the Regulator on this matter. So far no decision has been taken for its implementation.
Tanzania: The Government of Tanzania in October 2015 had passed a new regulation that requires Telco's to list on the Dar es Salaam Stock Exchange within 12 months, failing which they have to make a contribution of 0.6% of its annual gross revenues to the ICT development fund.
*¦ Uganda, Kenya and Rwanda: The Governments in these three countries are pushing forward the agenda of the One Area Network. In the last quarter these Governments have proposed to expand the scope of services under the regulated tariffto SMS and Data.
* Nigeria: Nigerian Communications Commission (NCC) has released the Information Memorandum for 2.6 GHz spectrum auction for LTE and has also shared the consultation paper on Procedures and Guidelines for the provision of Value Added Services in Nigeria.
* Ghana: The Regulator has proposed to license frequency in the 800 MHz band. This comes with an obligation for local shareholding of up to 40%. Consultations between the industry and the Regulator have taken place and the final decision is awaited.
' Zambia: The Regulator is proposing to introduce a unified licensing regime. If this proposal is adopted, it will affect the existing rights and obligations under the current licensing. It will also affect our spectrum holding and introduce new acquisition costs.
4 Kenya: The Regulator has agreed to make available to Airtel at least 10 MHz of the available 800 MHz spectrum for LTE. The price for the same is under discussion with the Regulator.
Niger: The Government has put in place a new law proposing the introduction of an exclusive international gateway, which is in violation of the mobile operators' license.
* DRC: There is a proposed new law that will if passed; affect the terms and conditions of the license. Some of the proposals include restrictions on license ownership, nationalisation of infrastructure and tariff control. Industry is in discussion with the Regulator to review the proposed law.
4 Malawi: There is a requirement in the license that the Company should have a minimum of 20% local shareholding. Airtel has received a written extension of the 20% local shareholding obligation for another 1.5 years from February 2016.
1. Spectrum: Strong and expanding network - Pan India 4G spectrum and 3G spectrum in 21 circles. Wide spectrum brsence with 21.1% spectrum market share (post deals with Videocon and Aircel); 4G and 3G carrier aggregation available in 12 and 8 circles, respectively.
2. Presence: #1 telecom player in India and #3 worldwide. The Company is brsent in 20 countries across South Asia and Africa.
3. Scale: The Company's revenue market share is the highest in the industry. It also has the highest subscriber market share with the largest net additions this year.
4. Diversified Portfolio: Vast product line, which includes telecom services like DTH, Telemedia, Airtel Business and Tower Infrastructure. The portfolio also includes other bundled services like Wynk music, movies, and mobile wallet.
1. Data Usage: Data explosion is at its cusp with the proliferation of affordable smartphones. Data uptake has also increased with usage moving from low to high bandwidth content.
2. Convergence: Newer and converged needs across technologies and services targeted to specifie customer segments.
3. Internet Space: Significant opportunities thrown up by the internet across payment mechanisms, e-commerce, m-commerce and IoT.
4. Investments: Large residual opportunity with bulk investments in place. Best pan-India spectrum assets with prime spectrum to yield data uptake, largest optical fibre network amongst private players. Challenges
1. Operations: Geographically varied brsence, integrating operations across India, South Asia and Africa leveraging common platform.
2. Customer Needs: Understanding changing customer expectations and perceptions in a fast evolving multi-cultural, multi-lingual, and multi-technological environment.
3. Technological: Harmonisation of multi-band sub 5MHz of spectrum.
1. Competition: Competitor launches and its impact on the overall industry structure and profitability, especially data rates across 4G + 3G.
2. OTT: Cannibalisation of traditional voice and messaging - further aggravated by OTT applications gaining scale.
3. Regulatory: Political and economic uncertainties in Africa and India due to changes in policies.
4. Currency Exposures: Volatility in currencies due to global macro-economic uncertainties
Financial Review Consolidated Figures
The Company's consolidated revenues grew by 4.9% to Rs. 965,321 Mn for the year ended March 31, 2016 (growth of 6.9% after normalising for impact of IUC in India and impact of divestment of tower assets in Africa). The revenues for India and South Asia (Rs. 723,881 Mn for the year ended March 31, 2016) rebrsented a growth of 9.6% compared to that of brvious year (growth of 12.2% after normalising for impact of IUC in India). The revenues for Africa, in constant currency terms, grew by 3.1% (growth of 4.2% adjusting for the impact of divestment of tower assets).
The Company incurred operating expenditure (excluding access charges, cost of goods sold, license fees and CSR costs) of Rs. 413,886 Mn rebrsenting an increase of 2.9% over the brvious year. Consolidated EBITDA at Rs. 341,902 Mn grew by 8.7% over the brvious year. The Company's EBITDA margin for the full year touched 35.4% vis-à-vis 34.2% in the brvious year, primarily due to tighter opex controls (after adjusting for the impact in reduction of termination rates, EBITDA margin for the brvious year was 34.6%). Debrciation and amortisation costs for the year were higher by 12.4% to Rs. 174,498 Mn primarily on account of spectrum related amortisation cost in India. Consequently, EBIT at Rs. 166,434 Mn increased by 5.0%, resulting in a flat margin of 17.2% vis-à-vis the brvious year. The cash profits from operations (before derivative and exchange fluctuations) for the year ended March 31, 2016 stood at Rs. 289,152 Mn vis-à-vis Rs. 285,280 Mn in the brvious year
Net finance costs at Rs. 68,866 Mn were significantly higher by Rs. 20,403 Mn, compared to that of brvious year, primarily on account of higher interest on borrowings due to spectrum borrowing cost, higher interest on finance lease obligation and lower investment income. The Forex and derivative losses were lower at Rs. 18,108 Mn (PY: Rs. 21,530 Mn). Consequently, the consolidated profit before taxes and exceptional items at Rs. 106,200 Mn has declined by 8.2% over the brvious year.
The consolidated income tax expense (before the impact on exceptional items) for the full year ending March 31, 2016 was almost flat at Rs. 53,180 Mn, compared to Rs. 52,928 Mn for the brvious year. The effective tax rate in India for the full year came in at 30.2% (28.8% excluding dividend distribution tax) compared to 26.5% (25.5% excluding the impact of dividend distribution tax) for the full year ended March 31, 2015. The increase in the underlying effective tax rate in India is primarily on account of expiry / reduction of tax holiday benefits in select units. The tax charge in Africa for the full year at USD 189 Mn (PY: USD 203 Mn) has been lower, primarily due to change in profit mix of the countries.
Exceptional items during the year accounted for net gains of Rs. 7,097 Mn. These included impact of gains / losses on divestment of telecom towers, settlement of various disputes, few restructuring and integration activities and revisiting certain accounting positions. After accounting for exceptional items, the resultant consolidated net income for the year ended March 31, 2016 touched Rs. 54,842 Mn, a 5.8% escalation over the brvious year. Net income before exceptional items for the full year touched Rs. 47,745 Mn, a 21.5% decline over the brvious year
The capital expenditure for the full year was Rs. 205,919 Mn (USD 3.1 Bn), an increase of 10.3%, vis-à-vis the brvious year. Consolidated operating free cash flow for the year reflected an increase of 6.4% to Rs. 135,982 Mn.
During the year, the Group has designated the USD denominated finance lease obligations ('FLO') resulting from the sale and lease back of telecom tower assets in Africa, as a hedge against the net investments in subsidiaries with USD functional currency. The effective portion of the foreign exchange movements on the hedging instrument has been recognised in other combrhensive income, so as to offset the foreign exchange movement on the net investments being hedged. Accordingly, during the year, foreign exchange loss of Rs. 708 Mn (net of tax and non-controlling interests) has been recognised in other combrhensive income.
Liquidity and Funding
During the year, the Company undertook several initiatives to meet and manage its long term funding. Primarily in Q1, the Company raised USD 1,000 Mn through the issuance of 4.375%, Guaranteed Senior Notes due 2025 at an issue price of 99.304%.
As on March 31, 2016, the Company was rated 'Investment Grade' with a 'Stable' outlook by all three international credit rating agencies namely Fitch, Moody's and S&P. It had cash and cash equivalents of Rs. 37,087 Mn and short- term investments of Rs. 30,059 Mn. During the year ended March 31, 2016, the Company generated operating free cash flow of Rs. 135,981 Mn. The Company's consolidated net debt as on March 31, 2016 increased by USD 1,982 Mn to USD 12,661 Mn as compared to USD 10,679 Mn last year, mainly on account of deferred payment liabilities to the DoT being included in debt. The Net Debt excluding the DoT obligations stood at USD 7,508 Mn as on March 31, 2016
i.e. it decreased by USD 884 Mn over the brvious year (USD 8,392 Mn as at March 31, 2015). The Net Debt - EBITDA ratio (USD terms LTM) as on March 31, 2016 deteriorated to 2.47 times as compared to 2.08 times in the brvious year, mainly on account of increase in debt during the year. The Net Debt-Equity ratio increased to 1.28 times as on March 31, 2016, compared to 1.08 times in the brvious year.
Awards and Recognition
• Airtel is No. 1 Telecom Company in the 'Best Telecom companies to Work for in India' survey conducted by Business Today and No. 8 across all sectors.
• Airtel has won the 'Golden Peacock Award for Sustainability' for 2015. It is indeed an honour to receive this award as it recognises Airtel's efforts in embedding sustainability in the services we provide; and the way we conduct our business. This award brings Airtel a step closer to achieving our vision of becoming the most loved brand.
• Airtel wins Innovation Award 2016 for excellence in Internal Auditing by the Institute of Internal Auditors (IIA).
• Airtel has been honoured as the Firm of the year -Telecommunication at the CNBC TV18 India Risk Management Awards.
• Airtel Global Revenue Assurance & Fraud Management team wins the Operator Excellence award in the category of Business Innovation in Risk Management at Subex user conference organised at Prague, Czech Republic.
• Airtel wins Annual Cybermedia ICT Business Awards for being 'India's Top Mobile Services Operator', Top Internet Services Operator" & "Top Broadband Wireless Access Operator" award for the year 2015.
Mobile Services: India
The last year saw significant business and regulatory developments, which also include the release of spectrum sharing and trading guidelines by the Department of Telecommunications. The Company launched 3G services in its gap circles and was the first operator to launch high speed 4G services across India. With the spectrum acquisitions from Videocon and the proposed spectrum acquisition from Aircel, the Company is set to become a pan-India 4G operator. It also widened its content portfolio by launching Wynk Movies and Wynk Games mobile application.
As on March 31, 2016, the Company had 251.2 Mn mobile customers. The churn has increased to 3.4% for the current year, compared to 2.7% during the brvious year, primarily on account of enhanced market intervention and competitive brssure; however, it still remains the lowest in the industry. Data revenues, as a percentage of total revenues, significantly increased from 15.2% to 21.8% in the current year. Of its total number of mobile subscribers, the Company had 58.2 Mn data customers at the end of March 31, 2016, of which 35.4 Mn were mobile broadband customers.
The segment witnessed significant improvement in the EBITDA margin to 39.0% during the year, compared to 37.6% in the last year. Improvement in margin is primarily due to the sustained top line growth and tighter control over operating expenses. EBIT margin for the year declined to 22.8%, compared to 24.0% in the last year, primarily on account of incremental amortisation cost on new spectrum acquired, which has an impact on EBIT margin of 2.3%.
During the year, the Company accelerated its spends on capex, which were largely directed towards building data capacities, increasing 3G / 4G coverage and improving the all-round customer experience. During the year, the Company rolled out over 63 K mobile broadband (MBB) base stations in India. This is one of the largest global rollouts of MBB base stations in a single year. The Company had 154,097 network towers, compared to 146,539 network towers in the last year Mobile broadband (MBB) base stations were 118,197 at the end of the year, compared to 54,381 at the end of last year
• Airtel has introduced its new range of 'Infinity Plans' and an industry first technology platform - Flexpage. While the Infinity Plans rebrsent an industry first plan to offer unlimited voice calls on mobile, along with bundled movies and music, the Flexpage is an automated platform that allows customers to track their data usage and get real-time usage alerts.
• Airtel launched 'Wynk Movies' - it's an all new carrier agnostic mobile application offering customers thousands of movies and other video content. Launched following the success of Wynk Music, the app is India's first curated video marketplace that offers an exhaustive library of popular movies, TV shows and other entertainment videos across genres. It also has a combrhensive library of 5,000+ movies and 25,000+ videos.
4 Airtel mobile moves all its brpaid mobile customers to per second billing. Rolled out under the new Pay for What You Use initiative as part of the Company's Customer First commitment, this will help ensure that customers pay only for the time they use the Airtel network.
4 Airtel revolutionised the smartphone experience for every customer by offering irresistible data benefits and surprises ranging from 50% daily Data 'Cashback' offer, sharing of 3G / 4G packs in Family as well as Smartphone Surprise offers; a pioneering initiative in India. With this, Airtel has further established itself as an undisputed brferred partner for data experience on any smartphone.
4 Airtel launched India's first unrestricted-validity data plan for its brpaid mobile customers. The Company reinforced its commitment of Customers First by enabling its brpaid users to enjoy unrestricted validity towards consuming their data quota.
4 Airtel expanded its content portfolio by launching beta phase of 'Wynk Games' mobile application - the Company's latest OTT addition to the Wynk portfolio. The app offers a library of over 2,000 global and local games from across genres. 'Wynk Games' subscription is free for Airtel users and at a promotional price of Rs. 29 for other customers in the current beta phase of the app.
4 Airtel invited customers in its network modernisation drive by, launching a microsite www.airtel.in/leap. It allows the customers to know everything they want to know about project leap; and get a transparent view of the coverage of voice and high speed broadband services, along with other details in their respective localities. This is an industry first initiative.
* Airtel network transformation programme Project Leap is now focusing on a series of fresh initiatives towards creating a greener environment and building a sustainable network for the future. The Company announced the migration of 40,000 of its network sites across India to green technology, while committing to bring down its carbon emission footprint by 70% by 2018.
f Airtel became the first mobile operator in India to commercially deploy LTE-Advanced (4G+) technology on a live 4G network in Kerala. LTE-Advanced carrier aggregation technology combines TD LTE (2300 MHz) with FD LTE (1800 MHz) bandwidths to deliver mobile data speeds up to 135 Mbps. This is also an industry first initiative.
r Airtel announced the launch of its Platinum 3G network for customers in the North East. Airtel's Platinum 3G will deliver faster internet speeds, enhance voice clarity and offer a superior network experience for customers in the circle.
4 RBI approved Payments Bank License to Airtel Payments Bank Limited (APBL) (formerly known as Airtel Commerce Services Limited (AMSL)). The Reserve Bank of India had decided to grant an 'in-principle' approval to APBL to set up a Payments Bank in India. APBL already offers Airtel's flagship semi-closed wallet under the brand name 'Airtel Money'.
*¦ Airtel has acquired rights to use 2x5 MHz spectrum in the 1800 MHz Band allotted to Videocon Telecommunications Limited (VTL) by the Department of Telecommunication (DoT) on April 05, 2013 for six circles, namely, Bihar, Haryana, Madhya Pradesh, UP (East), UP (West) and Gujarat at an aggregate consideration of Rs. 44,280 Mn.
f Bharti Airtel Limited and its subsidiary, Bharti Hexacom Limited entered into a definitive agreement with Aircel Limited and its subsidiaries Dishnet Wireless Limited and Aircel Cellular Limited to acquire rights to use 20 MHz 2300 Band 4G TD spectrum for eight circles namely, Tamil Nadu (including Chennai), Bihar, Jammu & Kashmir, West Bengal, Assam, North East, Andhra Pradesh and Odisha at an aggregate consideration of Rs. 35,000 Mn. The closing of the said transaction is subject to certain customary regulatory approvals and other closing conditions.
4 Airtel signed an agreement to acquire 100% equity stake in Augere Wireless Broadband India, which holds 20 MHz of BWA spectrum in the telecom circle of Madhya Pradesh and Chhattisgarh.
« Kotak Mahindra Bank Limited (KMBL) and Airtel Payments Bank Limited signed the Share Subscription and Shareholders Agreement, wherein, KMBL agreed to acquire 19.90% of the paid-up capital of APBL.
The Company provides fixed-line telephone and broadband (DSL) services for homes, as well as offices in 87 cities across India. The Telemedia business witnessed a record high DSL net addition of309 k, seven times compared to brvious year primarily driven by launch of innovative pricing plans and an aggressive Go-to-Market strategy. As on March 31, 2016, Airtel had 3.7 Mn customers. Of these, 1.8 Mn customers subscribed to its broadband / internet services, rebrsenting 49.6% compared to 44.2% last year. The higher number of broadband customers also resulted in a significant increase in ARPU to Rs. 1,063 during the year, compared to Rs. 1,026 in the brvious year. Consequently, non-voice revenue as a percentage of total Telemedia revenues now rebrsents 68.2% as compared to 64.9% in the last year
In the Homes segment, the offerings include high-speed broadband on copper and fibre, up to the speeds of 100 Mbps. Besides, the product portfolio also includes local, national and international long-distance voice connectivity, IPTV and other VAS services. Majority of the DSL Net additions as referred above has come in the Homes Segment.
In the Corporate Business segment, Airtel is a trusted ICT solution provider for fixed-line voice (PRIs, SIP trunking), data solutions (ILP, MPLS, NLD) and other connectivity solutions like Enterprise Mobility (Resource Tracking, IOT / M2M). Additionally, the Company offers solutions to businesses to improve employee productivity through collaborative solutions (Audio, Video and Web Conferencing). Cloud portfolio is also an integral part of its business solutions suite, which offers storage, compute & Microsoft Office 365 on a pay-as-you-go model.
• On the Homes front, significant progress was made in the endeavour to pioneer high-speed broadband through FTTH and VDSL rollouts in the top markets. Another key intervention was improvement in the quality of acquisition through focused interventions and plan / price rationalisation, resulting in lower churn. Focus on high-speed internet during both - acquisition and base migration, resulted in high-speed base (defined as greater than or equal to 4 Mbps) moving to 59% at the end of the year as against 46% last year
• On the Corporate Business front, significant progress was made in ICT solutions both in terms of increasing geographic coverage - making all sites RF ready & faster implementation with defined timelines. On product front, layered internet offerings created for servicing customer needs of all segments.
• Airtel rolled out irresistible offers on its home broadband plans for existing as well as new customers, called as "Airtel Surprises". It enables the existing customers to upgrade to higher speeds or additional data benefits on their existing plans completely free of cost and enables its new customers to avail the best possible internet speed at their home at no extra cost.
Digital TV Services
The Company served a customer base of 11.7 Mn on its Direct-to-Home platform (Airtel digital TV), as on March 31, 2016, adding 1.7 Mn customers during the year. During the year, the Company launched its first indigenously manufactured set-top-boxes
The Company currently offers both standard and high definition (HD) digital TV services with 3D capabilities and Dolby surround sound. The Company currently offer a total of 504 channels including 42 HD channels, 4 international channels and 5 interactive services. Affordability of HD set-top boxes, demand for HD channels and upselling efforts led to ARPU increasing by Rs. 19 to Rs. 226 as compared to brvious year on an underlying basis. Consequently, DTH business turned EBIT positive on full year basis at Rs. 1,843 Mn compared to EBIT losses of Rs. 1,581 Mn in the brvious year
• Airtel Digital TV launched its first 4K-Ultra HD (UHD) channel. With the launch of UHD channel, Airtel enables its customers to experience the 4 times superior picture quality as compared to HD channels.
• Airtel Digital TV announced the launch of its first indigenously manufactured set-top-boxes. The Made in India set-top-boxes will be available in HD to begin with; and soon all of Airtel Digital TV's set-top-boxes will be manufactured in India. With this, Airtel Digital TV has become the latest corporate to join the Government's Make in India initiative, contributing to its growing proliferation across sectors.
B2B Services Airtel Business
Airtel Business is India's leading and most trusted ICT services provider. Its diverse portfolio of services includes voice, data, video, network integration, data centre, managed services, enterprise mobility applications and digital media. Airtel Business consistently delivers cutting-edge integrated solutions, superior customer service and unmatched depth / reach to global markets, to enterprises, governments, carriers, and small and medium businesses.
Revenues in this segment include those from: a) Enterprise & Government Business (EGB), which is brdominantly Data, and b) Global Business which includes wholesale voice and data. The EGB revenues (included in Airtel Business) together with the Corporate Mobile revenues (included in India Mobile) and Corporate Fixed Line revenues (included in Telemedia) is Rs. 92,327 Mn in this year; this is now 13.0% of the total India revenues, and has grown by 18.8% over the last year.
Global Business, the international arm of Airtel Business, offers an integrated suite of global and local connectivity solutions, spanning voice and data to the carriers, Telcos, OTTs, large multinationals and content owners globally.
Airtel's international infrastructure includes the ownership of i2i submarine cable system, connecting Chennai to Singapore and consortium ownership of SMEWE4 submarine cable system, which connects Chennai and Mumbai to Singapore and Europe. It also includes cable system investments like Asia America Gateway (AAG), India, the Middle East and Western Europe (IMEWE), Unity, Europe India Gateway (EIG) and East Africa Submarine System (EASSy). Along with these seven owned subsea cables, Airtel Business has a capacity on 20 other cables across various geographies.
Its global network runs across 225,000 Rkms with over 1,000 customers, covering 50 countries and five continents. This is further interconnected to its domestic network and direct terrestrial cables to SAARC countries and China, helping accelerate India's emergence as a brferred transit hub. Global business now serves more than 60% of the SAARC internet requirement.
Leveraging the direct brsence of Airtel in 20 countries across Asia and Africa, Global Business also offers mobile solutions (ITFS, signaling hubs, messaging), along with managed services and SatCom solutions.
4 Airtel has launched Smart MPLS services, wherein customers would be provided access to application performance management in addition to network performance management.
* Global Business has launched Direct Internet Access (DIA) product in partnership with various global carriers. The DIA product would enable global telecom organisations to deal multiple providers, multiple billings and different SLA when procuring local Internet for their customers across multiple countries.
*> Airtel launched a unique, one-of-a-kind gamut of corporate applications known as EAS- Enterprise Application store, which will empower an enterprise by providing the one stop shop experience to achieve its mobility objectives, provide completely online / touch free consumption and self-care for enterprise application user
Airtel launched the digital engagement solutions with long-term contracts in the government space. Main pillars of the solutions, include IVR, USSD, Bulk SMS and toll-free internet.
* Airtel continued its drive to localise the content, which improves user experience, along with lowering the cost of accessing content. Airtel now serves more than 50% internet requirements from India and have partnered with various global OTTs for content delivery service.
' Airtel has expanded its cloud service portfolio with the launch of Connexion, which will ensure a more secure, scalable and seamless private connection between enterprises, cloud service providers, and data centre partners. This will help customers seamlessly and more securely connect to Microsoft Azure, by bringing down their network cost substantially and improving performance.
»* Airtel has strategic tie-ups with various global operators for satellite business. The objective is to reach destinations, where we have limited or unreliable connectivity. Airtel is focusing primarily on satellite communication, media and broadcast solutions, along with managed solutions and consulting projects.
* Airtel is adding new capacity in new and existing cables assets in the Pacific and Atlantic routes to further expand its footprint globally.
*• Airtel has launched two new POP in Kenya and South Africa for IP Transit and MPLS services.
• Innovations like 'Call me free' and 'Share credit with friends' in Airtel Talk helped in winning 'Innovations Award' in the Consumer Services category at the Global Telecom Awards 2016, London.
• Airtel Talk also won the Gold Stevie Award in the 'Utility and Services app' category at the 12th annual International Business Awards, 2015. Stevie's is one of the world's most brstigious awards and celebrates distinguished accomplishments of companies worldwide.
4 Airtel Corporate Business won Frost & Sullivan ICT Award for the second year in a row.
f Airtel Business has won the coveted Aegis Graham Bell Award for its mHealth solution. mHealth solution aims to improve the delivery of primary health services, specifically for expecting mothers in rural India, by leveraging technology. The application successfully works in tandem with the National Rural Health Mission's (NRHM) initiatives to improve local health indices and quality of life
Passive Infrastructure Services
Bharti Infratel Limited, a subsidiary of Bharti Airtel, provides passive infrastructure services on a non-discriminatory basis to all telecom operators in India. Bharti Infratel deploys, owns and manages telecom towers and communication structures in 11 circles of India. It also holds 42% share in Indus Towers (a joint venture between Bharti Infratel, Vodafone and Idea
Cellular). Indus Towers operates in 15 circles (four common circles with Bharti Infratel, 11 circles on an exclusive basis). Hence, the Company has a nationwide brsence with operations in India's all the 22 telecommunications circles.
As on March 31, 2016, Bharti Infratel owned and operated 38,458 towers, while Indus Towers operated 119,881 towers. Bharti Infratel's towers, including its 42% interest in Indus Towers, comprised an economic interest in the equivalent of 88,808 towers in India, as on March 31, 2016. Bharti Infratel is listed on the Indian Stock Exchanges, NSE and BSE.
The revenue-weighted currency debrciation versus the US Dollar across 17 countries in Africa over the last 12 months (exit March 31 rates) has been 5.7%, primarily caused by the debrciation in Malawi Kwacha, Zambian Kwacha and Tanzanian Shilling. In terms of the 12-month average rates, the revenue-weighted Y-o-Y currency debrciation has been 18.3%, primarily caused by the debrciation in Zambian Kwacha, Nigerian Naira, CFA, Malawi Kwacha and Ugandan Shilling. To enable comparison on an underlying basis, all financials up to PBT and all operating metrics mentioned below are in constant currency rates as on March 05, 2015 for all the periods. (PBT as mentioned below excludes any realised / unrealised derivatives and exchange gain or loss for the period).
During the year, sale and lease back of 8,740 towers in seven countries was completed for a total consideration of USD 1.8 Bn.
As on March 31, 2016, the Company had 80.6 Mn customers in Africa across 17 countries, compared to 76.3 Mn customers in the brvious year, an increase of 5.6%. The total minutes on the network during the year increased by 14.7% to 136.0 Bn, compared to 118.6 Bn in the brvious year. At the end of the year, 15.8 Mn data customers accounted for 19.6% of the total customer base, compared to 16.1% in the brvious year (on the basis of revised definition of 'data customer' as one who uses at least 1 MB in last 30 days). Data traffic had been more than doubled to 74.0 Bn MBs from 35.3 Bn MBs in the brvious year with usage per customer increasing from 277 MBs to 435 MBs. Voice realisation per minute, however, declined from 2.53 cents to 2.14 cents for the full year, due to competitive brssures. Consequently, the overall ARPU in Africa declined from USD 4.6 to USD 4.2. Total sites in Africa as on March 31, 2016 were 20,196 (PY: 18,819), of which 13,128 (PY: 10,011) were 3G sites, rebrsenting 65% of the total sites, compared to 53% for the brvious year.
The revenues of Airtel Africa grew by 3.1% to USD 4,059 Mn, compared to USD 3,935 Mn in the last year (growth of 4.2% adjusting for the impact of divestment of tower assets). Underlying EBITDA at USD 906 Mn (PY: USD 869
Mn) reflected a similar margin of 22.1%, compared to the brvious year. EBIT at USD 79 Mn was lower in comparison to USD 155 Mn in the brvious year, primarily due to lower EBITDA. After accounting for the full year capex of USD 771 Mn (PY: USD 1,066 Mn), operating free cash flow was USD 81 Mn, compared to cash burn of USD 197 Mn in the brvious year
• Airtel Kenya launched a new plan, which offers flat rate for roaming across Africa. One Airtel provides flexible and simple tariff within the Airtel Network footprint. The customers of Airtel Kenya roaming in 16 Airtel Africa's countries will be treated as local customers on the visited network in terms of pricing, including receiving calls free of charge, while retaining their home SIM card.
• Airtel Ghana launched the first ever tap-and-pay mobile money payment service in Ghana. The OpCo has added another first to its credits, as it has rolled out an innovative service through its Airtel Money that allows a tap-and-pay, contactless payment, based on the Near Field Communications (NFC) technology.
• Airtel signed a three-year global agreement with the World Food Programme for cash and value voucher distribution services in Madagascar, Malawi, Tanzania, DRC, Congo B and Zambia
* Airtel DRC and Korongo Airlines have signed an agreement for air tickets purchase through Airtel M-Falanga - Airtel Money.
4 Airtel Africa partners with customer engagement software provider IMImobile, to launch Airtel Artist Management System. The Airtel Artist Management System is a new service innovation, enabling upcoming music artists to upload and make available their music to potential audiences out of its 83 Mn subscribers.
' Airtel DRC & UBA officially launch 'LIBIKI', the new microloan service through mobile phones. LIBIKI is the new Airtel Money services, which offer small amount of loans to the entrebrneurs or craftsmen, who have no access to the bank credit system.
4 Airtel and I&M Bank Ltd have announced a partnership that enables I&M Bank customer's access to their accounts via Airtel Money free of charge. The Bank account holders will now be able to pull money from their bank accounts into their Airtel Money wallets or push money from their Airtel Money wallets to their I&M Bank accounts.
*> The year has continued to see Airtel's involvement in the community across Africa, such as:
o Airtel Kenya participated in the First Lady's half marathon aimed at eradicating maternal deaths by providing better healthcare systems for brgnant mothers.
o Airtel Chad together with UNICEF launched and executed a nationwide campaign to fight Malaria, Ebola and Cancer.
o Airtel led a breast cancer awareness campaign in partnership with the Think Pink Foundation.
o Airtel Zambia donated various items for the Malnutrition ward as well as food stuff for the cancer ward.
o Airtel Kenya reached 43 schools with free internet connectivity.
o Airtel Ghana helped millions of flood victims by giving them an opportunity to communicate with their loved ones and friends for free through an emergency offer 'Airtel Too Much Relief' Pack.
4 Airtel and Liquid Telecom signed pan-African agreement to provide fibre connectivity to towers. Airtel's mobile broadband subscribers in Africa will soon enjoy faster Internet access speeds on its 3G and 4G networks. The framework agreement enables Airtel operations to leverage Liquid Telecom's existing 20,000 km-long fibre network across East, Central and Southern Africa, as well as enjoy new purpose-built fibre infrastructure, to connect Airtel's mobile base stations and enterprise customers with fibre.
4 During the year, sale and lease back of 8,740 towers in seven countries (Ghana, Uganda, Kenya, Burkina Faso, Zambia, Nigeria and Congo B) was completed for a total consideration of USD 1.8 Bn (sale and lease back to Eaton tower - 2,681 towers for USD 0.54 Bn, IHS towers - 949 towers for USD 0.15 Bn, Helios towers - 393 towers for USD 0.05 Bn and ATC - 4,717 towers for USD 1.06 Bn).
4 Airtel has signed a definitive agreement with Orange to sell its operations in Burkina Faso and Sierra Leone. The companies had signed an initial agreement in July 2015 for the acquisition of Airtel's operations in Burkina Faso, Sierra Leone, Chad and Congo B. The agreement over the latter two countries has lapsed.
4 The Company's subsidiary in Tanzania and American Towers Corporation and its subsidiaries have entered into an agreement for the sale of over 1,300 telecom towers in Tanzania.
4 Airtel Rwanda in a drive to extend affordable telecommunications products and services to Rwandans, has partnered with ITEL to introduce a new trendy and affordable data enabled phone dubbed KEZA. It now stands as one of the most affordable data enabled phones in the Rwandan market.
Awards & Recognition
*¦ Airtel Rwanda received the award of best 4G Mobile Network Operator for 2015 for exceptional performance in 4G LTE.
* Airtel Money Malawi was commended for being the mobile financial services leader in Malawi at 62.2% market share by Malawi Communications Regulatory Authority in conjunction with the National Statistical Office.
4 Airtel Money Seychelles won the best innovative product in the Seychelles chambers of commerce award (SCCI) in November 2015.
* Airtel Tanzania has lifted awards in a recent Tanzania Leadership Awards 2015. Airtel emerged winners in two categories, the best use of social media in marketing and brand excellence within the telecom sector in the country.
4 Airtel Sierra Leone has received an award in recognition of the role the Company played in the fight to contain and eradicate the Ebola Virus Disease (EVD) from the Office of the President.
' Airtel Ghana was bestowed with four awards at the 2015 Ghana Telecom Awards. The Company has won these awards for five consecutive years. Airtel Ghana swept awards in the following categories - Telecom Brand of the Year; Marketing Campaign of the Year - Talk Chaw; Innovative Enterprise Product of the Year - One Network and Special Recognition to the Telecom Industry Award -Lucy Quist.
' Airtel Nigeria emerges Telecom Company of the Year for its laudable contributions to the growth of the telecoms industry in Nigeria. Airtel Nigeria has been named Africa's Telecommunications Company of the Year at the 6th African Business Leadership Forum & Awards 2015.
»> Airtel Uganda won two awards at the Digital Impact Awards Africa for its innovations in the Finance and Entertainment sector. Airtel Uganda's mobile money transaction service was recognised and awarded in the category of Best Financial Inclusion Impact. The talent search music competition, Airtel Trace Music Star, was recognised in the category of the Best Digital Marketing Campaign.
Airtel Money Tanzania was recognised for the Best Mobile Money Product Innovation at Kalahari mobile money awards.
As on March 31, 2016, South Asia had 10.2 Mn mobile customers on the Company's network. Data customers rebrsented 28.7% of the total customer base as on March 2016, compared to 25.5% in the last year (on the basis of revised definition of 'data customer' as one who uses at least 1 MB in last 30 days). As on March 2016, the Company had 7,083 sites on network, compared to 6,867 sites in the last year. Of the total number, 3G sites were 4,115 (PY: 3,050) in number, rebrsenting 58.1% of the total sites, compared to 44.4% for the brvious year.
The Company's full year revenues of South Asia increased by 4.4% to Rs. 16,454 Mn, compared to Rs. 15,759 Mn in the brvious year. EBITDA loss for the year was at Rs. 801 Mn, compared to a loss of Rs. 196 Mn in the brvious year. EBIT losses for the year reported at Rs. 6,394 Mn, compared to a loss of Rs. 6,138 Mn in the brvious year. Capex for the year was Rs. 3,321 Mn, compared to Rs. 3,233 Mn in the brvious year.
• Airtel Sri Lanka commenced 2016 by being the Principal Sponsor of the Battle of the North (annual cricketing tournament) for the third consecutive year.
• Airtel Sri Lanka launched Smart Byte facility in order to facilitate customers to enjoy data usage at discounted rates.
Airtel Sri Lanka won a Gold Award for the Best Multinational Corporations in Sri Lanka and silver award for Medium Sized Enterprise Category. Airtel Lanka is the youngest organisation in terms of market existence in Sri Lanka to receive these brstigious accolades; and the only telecommunication operator to be listed on the GPTW (Sri Lanka) Hall of Fame.
Axiata Group Berhad and Bharti Airtel Limited signed a Definitive Agreement to merge their respective telecommunication subsidiaries in Bangladesh, namely, Robi Axiata Limited (Robi) and Airtel Bangladesh Limited (Airtel). The agreement followed the September 09, 2015 announcement of both parties entering into an exclusive discussion to explore the possibility of combining the business operations in Bangladesh.
• Airtel Bangladesh has won the brstigious Asia Communication Award 2015 in the Category of 'Customer Experience Initiative' for 'Online Airtel Experience Centre'.
Risks and Concerns
At Bharti Airtel (the Company), we have thrived globally by building a culture of innovation and high performance. We explore new markets and business models across the world; evolve new ways of customer and stakeholder engagement; enter into new strategic partnerships; adopt new technologies; and build exponential efficiencies in existing systems. While these initiatives unveil a universe of possibilities, potential risks and uncertainties arise in a volatile business environment. The distress signals need to be addressed with urgency for smooth operations. Therefore, we have created a robust risk management framework in our operating landscape. We have a sound practice to identify key risks across the Group and prioritise relevant action plans for mitigation.
At the Board Governance level, the Risk Management Framework is reviewed bi-annually by the Company's Risk Management Committee. The Board of Directors performs an annual review. These apex reviews include: discussing the management submissions on risks, prioritising key risks and approving action plans to mitigate such risks. The Internal Audit function is responsible to assist the Risk Management Committee on an independent basis with a full status of risk assessments and management. Every quarter, the Risk Management Committee also obtains periodic updates on certain identified risks, depending upon the nature, quantum and likely impact on the business.
At the Management level, the respective CEOs for the Management Boards (AMB and Africa Exco) are accountable for managing risks across their respective businesses, viz., India and South Asia, and Africa. The strategic risk registers capture the risks identified by the operating teams (Circles or Operating Companies) as well as the functional leadership teams at the national level. The AMB / Africa Exco ensure that the environment - both external and internal - is scanned for all possible risks. Internal Audit reports are also considered for identification of key risks.
At the operating level, the Executive Committees (EC) of Circles in India and Operating Companies in the international operations are entrusted with responsibilities of managing the risks at the ground level. Every EC has local rebrsentation from all functions, including many centrally driven functions like IT Legal & Regulatory, Finance and SCM, besides customer-facing functions, such as Customer Service, Sales & Distribution and Networks. It is the responsibility of the Circle CEO or Country MD to pull together various functions and partners to manage the risks. They are also responsible for identification of risks, and escalating it to the Centre for agreeing mitigation plans. Operating level risk assessments (RACM) have been concluded at Function / OpCo risk assessment and mitigation plans agreed and kicked off
Internal Audit Plans are being drawn up to ensure scope and coverage of these critical risks during the course of next year
The key risks that may impact the Company and the mitigating actions undertaken by the Company comprise:
1. Regulatory and Political Uncertainties (Legal & Compliance)
The Company operates in India, Bangladesh, Sri Lanka and 17 African countries. Some of these countries (or regions within countries) are affected by political instability, civil unrest and other social tensions. The political systems in a few countries are also fragile, resulting in regime uncertainties; hence, the risk of arbitrary action. Such conditions tend to affect the overall business scenario. In addition regulatory uncertainties, like escalating spectrum prices, call drops / EMF penalties, among others are potential risks facing the business.
As a responsible corporate citizen, we engage proactively with key stakeholders in the countries in which we operate; and continuously assess the impact of the changing political scenario. We contribute to the socio-economic growth of the countries in which we operate through high-quality services to our customers, improved connectivity, providing direct and indirect employment, and contributions to the exchequer. Our annual Sustainability Report is a document, which highlights to the larger external environment the role we are playing in the countries we are operating in. We maintain cordial relationships with governments and other stakeholders in every country where we operate. The Country MDs and Circle CEOs carry direct accountability for maintaining neutral Government relations. Through our CSR initiatives (Bharti Foundation etc.), we contribute to the social and economic development, especially in the field of education.
4 We actively work with industry bodies like COAI, CII, and FICCI on espousing industry issues e.g. penalties, right of way, tower sealing, and so on.
2. Economic Uncertainties (Operational)
The Company's strategy is to focus on growth opportunities in the emerging and developing markets. These markets are characterised by low to medium mobile penetration, low internet penetration and relatively lower per capita incomes, thus offering more growth potential. However, these countries are also more prone to economic uncertainties, such as capital controls, inflation, interest rates and currency fluctuations. Since the Company has borrowed in foreign currencies, and many loans are carrying floating interest terms, we are exposed to market risks, which impact our earnings, cash flow and balance sheet. These countries are also affected by economic downturns, primarily due to commodity price fluctuations, reduced aid, capital inflows and remittances. Slowing down of economic growth tends to affect consumer spending, including telecom.
• As a global player with brsence across 20 countries, we have diversified our risks and opportunities across markets.
• Through a variety of services including voice, data, Airtel Money and value added services, we have also sbrad our portfolio.
• To mitigate currency risks, we follow a prudent risk management policy, including hedging mechanisms to protect our cash flow. No speculative positions are created; all foreign currency hedges are taken on the back of operational exposures. A prudent cash management policy ensures that surplus cash is up-streamed regularly to minimise the risks of blockages at times of capital controls. We have specifically renegotiated many operating expenditure / capex Fx contracts in Africa and converted them to local currency, thereby reducing Fx exposure.
• To mitigate interest rate risks, the Company is further sbrading its debt profile across local and overseas sources of funds and to create natural hedges.
• Finally, the Company adopts a pricing strategy that is based on twin principles of mark to market, profitability and affordability, which ensures that we protect margins at times of inflation, and market shares at times of market contraction.
3. Poor Quality of Networks and Information Technology Including Redundancies and Disaster Recoveries (Operational)
The Company's operations and assets are sbrad across wide geographies. Our telecom networks are subject to risks of technical failures, partner failures, human errors, or wilful acts or natural disasters. Equipment delays and failures, spare shortages, energy or fuel shortages, software errors, fibre cuts, lack of redundancy paths, weak disaster recovery fall-back, and partner staff absenteeism, among others are few examples of how network failures happen. Repeated outages and / or poor quality of networks cause disruption of services, resulting in revenue losses, customer attrition, market share losses and damage to brand image and Company reputation. Regulators are now also levying stiff monetary penalties for poor quality of services.
The Company's IT systems are critical to run the customer-facing and market-facing operations, besides running internal systems. In many geographies or states, the quality of IT connectivity is sometimes erratic or unreliable, which affect the delivery of services e.g. recharges, customer query, distributor servicing, customer activation, billing, etc. In several developing countries, the quality of IT staff is rudimentary, leading to instances of failures of IT systems and / or delays in recoveries. The systems landscape is ever changing due to newer versions, upgrades and 'patches' for innovations, price changes, among others; the dependence on IT staff for turnaround of such projects and changes is huge. Unauthorised access to network and IT systems can result in wrong configurations, poor quality of service, frauds and regulatory non-compliances.
• Network Planning is increasingly being done in-house, to ensure that intellectual control on architecture is retained within the Company. The recently announced Rs. 600,000 Mn Leap Programme in India continuously seeks to address issues (congestion, indoor coverage, call drops, modernisation and upgrade of data speeds, among others) to ensure better quality of network. Recent efforts also include transformation of the microwave transmission, fibre networks, secondary rings / links and submarine cable networks. The Company consistently eliminates systemic congestion in the network, and removes causes of technical failures through a quality improvement programme, as well as embedding redundancies. Tighter SLAs are reinforced upon network partners for their delivery. The Company's Network Team performance is measured, based on network stability, customer experience and competitor benchmarking. The Revenue Assurance team constantly monitors revenue leakages due to failure of systems or configuration errors. The Company follows a conservative insurance cover policy that provides a value cover, equal to the replacement values of assets against risks, such as fire, floods, and other natural disasters.
• In Africa, a sustained concentrated investment programme started in FY 2015-16 based on market revenue mapping will ensure that our network quality in these areas are comparable if not better than competition.
• The Company's philosophy is to share infrastructure with other operators, and enter into SLA-based outsourcing arrangements. We have been proactively seeking sharing relationships on towers, fibre, VSAT data centres and other infrastructure. The disposal of towers in Africa to independent and well-established tower companies and long-term lease arrangements with them will ensure high quality of assets and maintenance on the passive infrastructure. We have also put in place redundancy plans for power outages, fibre cuts, VSAT breakdowns, and so on, through appropriate backups such as generators, secondary links, among others. Similar approaches are deployed for IT hardware and software capacities; and internal IT architecture teams continuously reassess the effectiveness of IT systems.
• Information Security is managed by dedicated IT professionals, given the huge dependence on automated systems, as well as to ensure that customer privacy is protected.
4. Inadequate Quality of Customer Lifecycle Management from Acquisition to Churn (Operational) Risk Statement
In a market dominated by brpaid customers, several inefficient processes have crept in over the years across the industry, in respect of customer acquisitions. Such practices are resulting in high rotational churn, high acquisition costs, low lifetime value of new customers, diversion of focus of sales force on acquisitions, rather than revenue generation, trade frauds, among others.
Customer mind-sets and habits are shifting rapidly, reflected in their ever-rising expectations in terms of quality, variety, features and pricing. The competitive landscape is also changing dramatically, as operators vie with one another to capture customer and revenue market shares. Failure to keep pace with customer expectations would result in customer churn, leading to erosion of revenues, profits and cash flows; and market share losses.
4 Improved customer acquisition process like monitoring new customer acquisition churn, high acquisition recharge denominations, direct distribution, trade margins structures and so on have been introduced.
4 The Company constantly refreshes its ways of working, especially in customer service, innovation, marketing and distribution. These are now captured in the Company's integrated Customer Lifecycle Management approach, which ensures that every customer's behaviour is studied, classified and segmented, followed by segmented service and price offerings. Organisational effectiveness is enhanced through appropriate design and creation of leaner and multi-functional teams. Technologies and tools (business intelligence, scientific pricing models) are deployed in managing the customer lifecycle.
5. Non-compliance with Subscriber Verification and KYC Regulations (Operational)
Regulators are introducing more stringent subscriber verification and KYC guidelines, including verification processes capturing biometrics, such as retina scan, fingerprints, among others. The quality of KYC documents is also being stringently scrutinised. Non-compliance with these guidelines entail severe penalties, which is reflected by instances of such actions by regulators on other operators.
4 The Company is investing significantly in KYC tools, including biometric scanners to improve the quality of subscriber activation and documentation processes as per required legislation. Self-compliance and reinforcing of 'tone at the top' to ensure compliance is the bedrock of our control. Focus on quality of partners and IT systems, staff training, proactive maker-checker controls and internal audits, as well as robust internal MIS help achieve adherence to compliances. Internal MIS on compliance scores, activation time taken, etc. has been standardised to achieve greater focus on compliances. Staff involved in such processes have been revamped to reflect clear responsibilities for compliance to verification and KYC guidelines. Severe management action is taken in case of any non-compliance.
6. Increase in Cost Structure (Capex / Operating Expenditure) Ahead of Revenues (Operational) Risk Statement
Across markets, costs structures have been increasing both from volumes (new sites rollouts, capacity) or / and rate increases (inflation, Fx impacts, wage hikes and so on). These costs may not be naturally compensated through revenue increases, which are linked to telecom mark to market issues e.g. market tariffs, competitive positions, and idle capacities. Consequently, Company margins / cash flows can come under brssure, putting the financial health of a Company at risk.
f The Company has institutionalised the War on Waste (WOW) Programme, an enterprise-wide cost-reduction programme. This has been rolled out across all functions and countries. All functions / countries are targeting cost reductions and cost efficiencies. Capex Committees have been introduced, ensuring stringent monitoring of capex proposals. The proposals now systemically need to cover issues like revenue generating capex ratio, capex trigger, risks, alternates, competitors, among others.
' Reduction in capex spends and improvement in capex productivity has happened with significant programmes like ICR, fibre sharing IRU, fibre co-build and Africa tower disposal.
»* The Company has introduced more science into the decision-making criteria for investments in new sites.
7. Entry of New Competition with Disruptive Business Models (Strategic)
Entry of any new operators, including MVNOs into an already crowded telecom market is a potential risk. Entry of new operators into the market will create surplus capacities, leading to pricing brssures in the industry; and at the same time accelerate customer migration from legacy 2G / 3G networks. This may put brssure on margins / cash for the Company, in the short term before industry consolidates and / or the surplus capacity is absorbed.
f Airtel has prided itself on being the # 1 network operator across the country. Its long term spectrum strategy, based on future technologies and consumer needs have been ahead of the market. The Company in Q3'15, was the first 4G operator to launch 4G across India in 296 cities, firming its positions as the only 4G operator in the country. The Company has become the only company with 3G spectrum across 21 of the 22 circles in India. A record breaking 63,816 broadband data sites were rolled out across India this fiscal, which is well ahead of all the operators. Airtel has also been the brferred network for high value customers; and has the highest ARPU in the industry. The Company has strategic programmes for driving down churn through an integrated and end-to-end experience through sharp propositions for high-value customers.
8. Issues Arising out of Emerging Businesses and New Technologies (Strategic)
Evolving technologies result in change in customer value propositions. The quality of internet experience, especially in a seamless manner and indoor environment has emerged as a key competitive parameter. Digital content and apps have now become the favourites for mobile customers. Digital Mobile money technologies, innovative mobile apps, Cloud, M2M, SaaS and other technology-based VAS products are also evolving. Such rapid technology evolution may impact the functionality of existing assets and accelerate obsolescence. Keeping pace with changing customer expectations is a big agenda for the telecom sector.
There is also a serious risk of unavailability of right skills to grow these emerging businesses and / or deploy the new technologies. Talent availability in emerging economies is also limited, since the overall demand for good talent far outstrips the supply, specifically for IT and Networks, affecting the performance of our partners also. In addition, there is a need for constantly upgrading skills and competencies of the existing work force. Skill mismatch leads to failed launches, ill-planned projects, sub-optimal cost structures, faulty asset configurations, among others, which in turn leads to financial losses.
• Airtel's strong strategic vendor relationships - especially in the areas of network technologies, IT mobile money and a few other key VAS technologies help us keep pace with technology shifts and retain market leadership. The Company's own digital innovations such as Wynk under which OTT apps like Music, Movies and Gaming have been launched, My Airtel App, etc. are few examples of its keeping pace with the changing landscape.
• The potential risks of asset obsolescence are managed through leaner order pipelines, demand-based capacity sourcing and formal swap arrangements with vendors. In several countries, the Company is proactively leading the development of 3G, 4G, digital content partnerships, mobile money, among others ahead of the curve to leverage big opportunities. The Company has also entered the digital payments space with the receipt of a Payments Bank license, which will enable it to become a key player in this rapidly evolving ecosystem.
9. Adverse Regulatory Taxation or Fiscal Taxation Developments including Risks Related to Tax Positions (Legal & Compliance) Risk Statement
Regulatory developments in India, South Asia and Africa can pose several challenges to the telecom sector. The telecom sector is highly taxed with high revenue share-based license fees and significant spectrum acquisition costs in auctions, multiple levies, such as service taxes, excise duties, Sim tax, VAT, and so on. The corporate tax rates on profits, combined with withholding taxes on remittances have made the overall tax structure extremely heavy. In several countries, tax litigations are getting prolonged due to ambiguous interbrtations and / or lack of judicial brcedents. In some countries, which are undergoing economic challenges, unfortunately, the telecom industry is being seen as a 'cash cow'. The stringent regulatory requirements in respect of rollout / coverage and quality of services accompanied by unreasonable demands also pose another threat. Such adverse regulatory or taxation developments have affected the telecom sector, including the Company.
The Company has always stood for a fair, transparent and non - discriminatory government policy on telecom regulation. It has insisted governments of all countries that sustainable regulatory regimes will lead to a healthy growth of the sector, leading to higher investments and modernisation, which in turn benefits the industry and society. The Company stands for a regime that promotes healthy, competitive pricing keeping two objectives in mind - customer interests and health of the sector. As an industry participant the Company provides adequate facts and figures to prove how healthy telecom growth strengthens a country's economic growth. The Company has been at the forefront of industry cooperation to share infrastructure, minimise impact on the environment, lower operational cost and make services more affordable. As a responsible operator, the Company participates in government consultation and industry association events, to foster collaboration and knowledge sharing for best industry policies and practices.
10. Gaps in Internal Controls (Financial and Non-financial) - (Operational) Risk Statement
The Company serves over 357 Mn customers globally with a daily average of 4,037 Mn minutes of voice and 1,887 terra bytes of data carried on wireless networks located at more than 181,000 sites. Gaps in internal controls and / or process compliances not only lead to wastages, frauds and losses, but can also adversely impact the Airtel brand.
• Airtel's business philosophy is to ensure compliance with all accounting, legal and regulatory requirements proactively. Compliance is monitored meticulously at all stages of operation. Substantial investments in IT systems and automated workflow processes help minimise human errors.
• Besides internal audits, we also have a process of self-validation of several checklists and compliances as well as a 'maker-checker' division of duties to identify and rectify deviations early enough. The Company has also implemented GRC systems (Governance, Risk and Compliance) to embed systemic controls.
The Company has introduced Internal Financial Controls and the Corporate Audit Group has tested such controls. The Audit Group has asserted that the Company has in place adequate tools, procedures and policies, ensuring orderly and efficient conduct of its business, including adherence to Company's policies, safeguarding of its assets, brvention and detection of frauds and errors, accuracy and completeness of accounting records; and timely brparation of reliable financial information.
The Company's philosophy towards internal controls is based on the principle of healthy growth with a proactive approach to risk management.
The Circle and Country Finance Heads are held accountable for financial controls, measured by objective metrics n accounting hygiene and audit scores. They are fully responsible for accuracy of books of accounts, brparation of financial statements and reporting the same as per the Company's accounting policies. Regulatory and legal requirements, accounting standards, and other pronouncements are assessed regularly as to whether and to what extent they are relevant and their related impact on financial reporting. The relevant requirements are defined in the Group Accounting Manuals, which are communicated to relevant units and, together with the financial reporting calendar evidencing the tasks and timelines that are binding throughout the Group, forms the basis of the financial reporting process.
The Company deploys robust system of internal controls that facilitates fair brsentation of our financial results in a manner that is complete, reliable and understandable, ensure adherence to regulatory and statutory compliances, and safeguards investor interest by ensuring the highest level of governance and periodic communication with investors. M/s. S.R. Batliboi & Associates LLP, our Statutory Auditors, have done an independent evaluation of key controls over financial reporting (ICOFR) and exbrssed an unqualified opinion stating that the Company has, in all material respects, adequate internal financial control system over financial reporting; and such internal financial controls over financial reporting were operating effectively as on March 31, 2016. Independent validation was also led by Corporate Audit Group for assessing the effectiveness of Internal Financial Controls (IFC) and no reportable material weaknesses in the design or operation were observed.
The Company has in place an Internal Assurance Group (IAG) headed by Group Director - Internal Assurance.
M/s. KPMG and M/s. ANB & Co (ANB) are the Internal
Auditors of the Company which conducts financial, compliance and process improvement audits each year. Our Audit Committee oversees the scope and evaluates the overall results of these audits, and members of that Committee regularly attend meetings of Board of Directors. The Audit Committee also reviews the effectiveness of the internal control system, and invites functional Directors and senior management personnel to provide updates on operating effectiveness and controls, from time to time. A CEO and CFO Certificate from all operating entities, forming part of the Corporate Governance Report, confirms the existence and effectiveness of internal controls and reiterates their responsibilities to report deficiencies to the Audit Committee and rectify the same. The Company's code of conduct requires compliance with law and Company policies, and also covers matters such as financial integrity, avoiding conflicts of interest, workplace behaviour, dealings with external parties and responsibilities to the community.
Audits are categorised into defined assurance tracks with M/s. KPMG responsible to audit Finance and Technology track and ANB responsible to audit Customer and L&R track. M/s. KPMG is also engaged to perform forensics work. Bottom-up risk assessment and directional inputs from the Audit & Risk Management Committee formed the basis of audit priorities. The Company was awarded for 'Innovation in Internal Audit 2016' by the Institute of Internal Auditors,
India. The award recognises entities for innovation in the use of technology, controls, business process and internal auditing in an innovative manner for business impact.
The Airtel Centre of Excellence ('ACE') based in Gurgaon and Bengaluru, is the captive shared service for Financial Accountage, Revenue Assurance, SCM and HR processes. It continues to expand its footprint across 20 countries thereby ensuring standardisation of all these processes across the organisation with inbuilt embedded controls. Digitisation of ACE is being aimed as a part of the transformation agenda and includes initiatives like system based reconciliation, reporting processes with vividly defined segregation of duties. ERP integration in Africa into an Oracle Single Instance has been accomplished across all African countries, ensuring uniformity and standardisation in ERP configurations, chart of accounts, finance and SCM processes across countries. Quality of financial reporting and controls continues to show improvement. We continuously examine our governance practices to enhance investor trust and improve the Board's overall effectiveness. Initiatives undertaken in the brvious year's such as virtual desktop interface for ultimate data security, self-validation checks, desktop reviews and regular physical verification are producing measurable outcomes through substantial improvement in control scores across both India and Africa.
Oracle Governance Risk & Compliance (GRC) module has been implemented for India and Africa to strengthen existing controls pertaining to access rights for various ERPs, ensuring segregation of duties and brventing possibilities of access conflicts.
Material Developments in Human Resources
At Bharti Airtel, talent has always been key to our sustainable growth. From the roll-out of 4G technology to the latest digital apps, brilliant customer experience and new service propositions, our people are involved in both design and execution. We realise that our ability to continue and sustain our growth and extraordinary success strongly depends on our ability to grow and nurture this talent. Through our 10-point Talent First agenda, the people pillar of the Airtel GPS, our endeavour is to provide an enabling environment that empowers our employees to learn, grow and succeed.
In 2015-16, we encouraged a culture of performance excellence by providing employees complete clarity on their goals. Employees were expected to set only four KRAs, three operational and one strategic. Mid-year and year-end performance assessments and dialogues provided a view of the employee's performance to his / her reporting manager, who in turn provided feedback to the person concerned. Employees' performance and potential were then discussed in Talent Councils to enable 'One View of Talent' across the Company; and ensure that leaders are made accountable for talent development. The Company's leadership development strategy is focused on nurturing in-house talent through need-based interventions. With an internal succession rate of over 70% and over 16% of employees with cross-functional experience, the Company has been able to provide accelerated career and development opportunities to its young talent
At the senior leadership level, succession planning was conducted for critical roles to ensure a ready pipeline. A 360-degree feedback survey was administered for over 370 senior leaders across India and Africa to enhance leadership effectiveness. The year saw the launch of Airtel's new Learning Management System, iLearn, with interactive features like social learning, virtual connect sessions, e-libraries and so on. There was a continued focus on role-based academies for critical talent like the Zonal Business Manager Academy. The Company's high impact functional learning programmes in Sales, Marketing, Network, Finance, SCM and IT and brstigious external leadership development programmes, also enabled enriching learning experiences. We also launched an induction module giving an overview of Bharti Group, Airtel and its business verticals.
As a part of our commitment to build a diverse workforce, we increased our Maternity leave policy from the existing 12 weeks to 22 weeks, along with the Company's pledge to provide the same or an equivalent role to the woman employee on return.
The Company has also launched the Mood-o-Meter app, which gives employees an option to provide feedback throughout the year. With thousands ofemployees working in the market, field and stores, this unique feature of feedback-on-the-go is useful to regularly feel the organisational pulse.
The past year also saw multiple initiatives to brand Airtel as an Employer of Choice. Some of them are: Airtel Stories (highlighting the career journey of employees); launching a refurbished Airtel careers website; and enhanced brsence on LinkedIn (over 238,790 followers) and Facebook.
Airtel was ranked No 1 in Business Today's Best Companies to Work For survey in the telecom sector, and No 8 overall. In Africa, Airtel was awarded the Best Organisation in the L&D category in the Cafe Africa 2015 eLearning International
Conference. In another brstigious recognition, an Airtel employee in Seychelles, Ms. Erna Hoarau, was bestowed with the National Employee of the Year award for the ICT Industry by the Ministry of Labour & HRD.
India's telecommunications sector continues to be an integral part of the country's engine of growth, innovation and disruption. With a subscriber base of nearly 1,058.86 Mn at the end of March 2016, India has the world's second largest telecom network. Mobile based Internet is a key component of the country's internet usage, with seven out of eight users accessing internet from their mobile phones. The availability of affordable smartphones is driving industry growth. Smartphones will likely account for over 80% of annual phone shipments by 2018. Thanks to e-commerce, mobile banking and high quality content viewing (anytime anywhere), India is set to witness an exponential data growth, while voice growth is largely stabilising.
Africa's telecom sector has seen exponential growth in mobile phone usage since the early 2000s. Over the past year, digital innovation continues to transform the continent's economic and business landscape. There are substantial growth opportunities in the data market in Africa, both in terms of data connectivity and data based services. Africa bypassed fixed lines to develop mobile networks. Additionally, mobile money has significantly enhanced financial inclusion in Africa. Africa's mobile Money Market is expected to grow nearly sevenfold by 2020.
Telecom operators continue to invest heavily on networks to tap the increased demand from the sector. Bharti Airtel's pan-India 4G footprint, payments bank license, South Asian brsence, diversified product portfolio, and network rollouts in Africa will act as a major stimulus to the Company's growth.