Bharti Airtel: Tariff hike – Finally! ICICI Securities

Bharti Airtel (Airtel) announced a tariff hike in its prepaid segment with ~20% tariff hike across the board, ~25% hike in base entry level 2G tariff (from | 79 to | 99) with effect from November 26, 2021.

The company indicated that tariff hike was taken to “provide a reasonable return on capital that allows for a financially healthy business model and that this level of ARPU will enable the substantial investments required in networks and spectrum, including 5G”.

Our take
With prepaid subscriber and revenues forming ~95%, ~87-88% of overall subscribers, revenues, respectively, the tariff hike will result in wireless revenues increasing by ~19%. Furthermore, assuming conservative pass through of ~75% to EBITDA, the wireless EBITDA will rise by ~29% from current levels. Hike pass through is likely over the next two quarters. We expect peers to follow suit with similar hikes

We highlight that we had built in ~15% step up tariff over Q4FY22 and FY23. Thus, tariff increase implies accelerated (and bit higher) benefits with 5%, 6% upgrade in our FY22, FY23 India EBITDA estimates and ~3.6%, 4.5% upgrade in overall EBITDA estimate in FY22, FY23, respectively.

Key triggers for future price performance:
• Relative market share gain from VIL, given its stressed balance sheet

• Long term potential driven by growth opportunity from 5G

Financial summary

CT Bureau