Nov 17, 2022
Rating: buy; Bharti Airtel – Maintaining the momentum
Telecom major Bharti’s Q3 results were broadly in line with our estimates, reflecting healthy growth across segments and an uptick in margins.
Consolidated revenue of Rs 35.800 crore was 2% above our estimate and increased 4% sequentially, reflecting: (i) +2% for India wireless and enterprise; (ii) +4% for homes; and (iii) +6% for Africa. Consolidated Ebitda at Rs 18,450 crore increased 5% q-o-q and was also 2% above our estimate. Consolidated Ebitda margin increased 50bp q-q to 51.5%, driven by strong margin expansion in the India wireless segment. Consolidated reported PAT at Rs 1,590 crore was below estimate, reflecting the impact of an exceptional charge of Rs 670 crore for provision of licence fees in wholly owned subsidiaries and losses from JV/associates.
Bharti’s India wireless segment revenue of Rs 19,340 crore increased +2% q-o-q and was modestly above our estimate due to higher-than-expected subscriber net adds. Reported ARPU increased modestly by 2% q-o-q to Rs 193 (vs Rs 178.2 for Jio) and was in line with our estimate. The end-of-period (EoP) paying subscriber base increased strongly by 4.4mn to 332.2mn, remaining modestly above our estimate of 4mn and lower than that of 5.3mn for Jio . Subscriber mix quality continued to improve, with 4G subscriber net adds at a robust 6.2mn to a base of 216.7mn, now accounting for 65% of the EoP subs.
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Capex increased to Rs 6,380 crore from Rs 3,850 crore in Q2, as 5G outlay ramped up. Bharti’s India revenues of Rs 25,900 crore remained above that of Jio Platforms Ltd (JPL) of Rs 24,900 crore, albeit growing at a modestly lower pace of 2% versus 3% for JPL. Data volume grew 3% q-o-q, with data usage per sub broadly unchanged at 20.2GB/ month. Voice minutes were up 2% q-o-q, with minutes of usage (MoU) on network the highest among peers at 1,094min/month. Bharti added further 8,621 network towers and 18.7k mobile broadband stations in Q3.
Growth across segments
Homes revenue grew 2% sequentially to Rs 1,030 crore and was 2% above our estimate; on a y-o-y basis, revenue grew sharply by 30%. Net adds remained robust at 432k with EoP subscriber base of 5.64 million subscribers, driven by increased presence and coverage expansion to 1,160 cities, benefiting from local cable operator (LCO) tie-ups. Reported ARPU declined 3% sequentially to Rs 624.
Airtel Business (B2B) revenues increased at a healthy pace of 2% q-o-q to Rs 4780 crore, in line with our estimate, benefiting from robust growth for its top 50 accounts. Ebitda at Rs 1,900 crore increased 5% q-o-q and was modestly above our estimate, with a 100bp increase in margins. Bharti remains the market leader in the enterprise segment.
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DTH/Digital TV services Ebitda declined 5% q-o-q to Rs 410 crore (-22% y-o-y), with margins declining 380bp, as ARPU remained broadly unchanged at Rs 154, while net adds grew by 214k subscribers to a base of 15.9million subscribers.
Africa revenue increased 6% sequentially and was up 22% y-o-y to Rs 11,090 crore on a strong net adds of 3.8million to a base of 138.5million subscribers. Reported ARPU for Africa business was steady at $3.1 with a monthly churn of 4.2%. Consolidated capex increased sharply to Rs 9,300 crore in QFY23 from Rs 7,050 crore in Q3, reflecting higher spending on rural and 5G rollout. Reported capex as of 9MFY23 was Rs 22,800 crore versus Rs 19,700 crore in 9MFY22.
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