Airtel Q3 Performance On Higher Than Expectation

Analysts have appreciated Bharti Airtel’s performance in Q3 despite the telecom major making a loss of Rs 1,035 crore.

Airtel share price at 1.30 p.m. at Rs 526.80 +7.90 (1.52 percent) Morgan Stanley said Airtel’s Q3 was better than expectations. Stating that the results were strong, the analyst firm said consolidated revenue increased 4 percent quarter on quarter (ahead of our estimate by 2 percent), led by positive surprise in the India wireless, homes and enterprise business partly offset by miss on the DTH side. EBITDA was 3 percent ahead of our estimate as margins expanded by 31 basis points (bps).

In India Mobile Services, the Gross revenue at Rs 115.4 billion was up 5.1 percent quarter-on-quarter (2 percent ahead of MS estimates). Airtel added 3.6 million subscribers, taking total count to 283 million vs 279.4 million in F2Q20, possibly aided by the introduction of offnet outgoing call charge introduced by Jio during the quarter.

ARPU increased to Rs135 in F3Q20 from Rs 128 in F2Q20 (5.5 percent quarter-on-quarter), which could be a function of accelerated broadband additions along with price hikes taken at the end of December partly offset by some reduction in IUC revenue due to changing call symmetry, we think.

Airtel added 21 million 4G customers during the quarter vs Jio’s addition of 15 million customers. Data usage per customer increased further to 13.9 GB in F3Q20 (compared to 11.1 GB reported by RJio) from 13 GB in F2Q20. In its Homes business Gross revenue increased 1 per cent quarter-on-quarter, while EBITDA increased 12 percent quarter-on-quarter.

Enterprise business: Gross revenue and EBITDA were largely flat quarter-on-quarter, still 3-4 percent ahead of our expectations. DTH business: Gross revenue rose 0.4 percent quarter-on-quarter, led by subscriber additions (101k customers during the quarter vs. 181k during F2Q20) as the ARPU was flat quarter-on-quarter at Rs 162.

BNP Paribas said Airtel is Ticking all the right boxes. The telco’s multi-year high India mobile sales growth, set to accelerate. Bharti Airtel’s India mobile revenue grew 13.2 percent in 3QFY20, the highest in past seven years and growth is set to further accelerate as Airtel has yet to reap benefits of the tariff hike.

Its Operating metrics indicate a positive underlying trend. Airtel’s ARPU increased to Rs 135 compared to Rs 104 in 3QFY19. Data usage per subscriber, at 13.9GB/month, is the highest in the industry. Data volumes surged 72 percent quarter-on-quarter compared to the 40 per cent increase for Jio.

“The company’s revenue growth, margin improvement, capex decline Airtel is ticking all the right boxes – revenue growth is strong, competitive intensity is waning, margins are improving, market share is improving, capex has moderated and Airtel has strengthened its balance sheet”, BNP Paribas said.

Analyst firm CLSA said growth for Airtel will accelerate. It said the company’s India 4G ramp-up ahead of estimates in 3QFY20 with its highest ever 20.7 million 4G data subscriber additions to 124 million, and with usage rising 6 percent QoQ to 13.8GB/month, data traffic was up 15 percent quarter-on-quarter. This led revenue growth in India mobile operations of 2 percent QoQ while Arpu, at Rs 135, up 5 percent quarter-on-quarter, was also boosted by a 6 percent quarter-on-quarter increase in voice usage. Although Bharti Airtel’s churn increased by 50bps to 2.6 percent, net subscriber additions were up to 3.6 million (2.6 million in 2Q).

It further said Bharti Airtel’s India Ebitda was up 3 percent quarter-on-quarter (3 percent ahead of estimate), despite a 19 percent quarter-on-quarter jump in SG&A costs, and its Ebitda margin was flat at 41 percent. Bharti Airtel rolled out 12k broadband base stations in 3QFY20, to 473,859, and consolidated Capex was Rs 52 billion (down 37 percent Year-on-Year).

Net debt (excluding $4.2 billion in finance lease obligations) declined to Rs 848 billion and gearing is under 3x Ebitda before accounting for the post-quarter fundraising of Rs 215 billion ($2 billion QIP & $ 1 billion FCCB).

ICICI Securities said Bharti Airtel posted a robust performance in third quarter. It had Quality revenue growth in which total subscribers net addition was of 3.6 million of which 1.5 million are post paid subscribers.

The 4G subs net add was 21 million. ARPU rose 5.3 percent quarter-on-quarter to Rs 135 despite decline in IUC revenue and only partial coming from tariff hike. Mobile revenue grew 5.4 percent quarter-on-quarter to Rs 113 billion (excluding IUC, +6.1 percent). Bharti incremental revenue market share higher than RJIO. Bharti’s minutes and data usage growth was also higher vs RJIO.

It further said the Mobile EBITDA (adjusted) rose 6.6 percent quarter-on-quarter to Rs 40 billion, incremental EBITDA margin lower at 48 percent due to higher termination payment which will become nil 4Q21. Thus, we are not too worried on lower incremental EBITDA margin.

It generated FCF (free cash flow) of Rs 17 billion after interest cost & capex of Rs 58 billion, and only telco to deleverage organically. The net debt was reduced by Rs 32 billion (despite fund raising of Rs 50 billion) due to payment to pre-IPO investors of Airtel Africa .

Its Africa EBITDA performance continue to remain strong at $394 million, up 5.9 per cent quarter-on-quarter, ICICI Securities said.―Newsd