Bharti Airtel is expected to end FY19 on a weak note, with analysts estimating that the company will report a consolidated net loss of 1200 crore for the three months of January-March 2019.
While the India wireless business is expected to report a minor uptick with the full impact of minimum recharge coming in this quarter, improvement in operating income still remains illusive on a consolidated level.
Bharti Airtel’s top line is estimated to decline by 1.5% sequentially to 20,200 crore, while consolidated Ebitda (earnings before interest, tax, depreciation and amortisation) is expected to decline 2.5% quarter-on-quarter to 6060 crore despite expected stability in India wireless Ebitda on a q-o-q basis, according to analysts at Kotak Institutional Equities (KIE).
However, importantly, the reported Arpu (average revenue per user) will likely see a sharp 14% q-o-q uptick to `120 per subscriber per month, largely optical on account of the sharp subscriber base clean-up done in December 2018, analysts said in the note. Bharti had indicated an exit Arpu of 118 for Q3FY19. Post the introduction of the minimum recharge move, Bharti saw its customer base reduce by 48 million users in Q3FY19, bringing its total subscriber base down to 284 million from 332 million earlier.
“We expect India wireless Ebitda of 2010 crore, broadly stable versus the 1950 crore for Q3FY19. We bake in modest uptick in voice volumes and 20% q-o-q growth in data volumes,” they said.
India wireless, therefore is expect to see a modest 1% sequential uptick in revenues to Rs 10,290 crore. “Underlying assumption of stable q-o-q revenues in the mobile broadband (MBB) segment and marginal uptick in revenues from 2G subscribers, led by the full-quarter impact of the ‘minimum recharge construct’,” analysts at KIE observed.
Bharti just managed to stay in the black with a small profit of 86 crore on the back of an exceptional gain of 1017 crore in the three months of October-December 2018. On February 5, ratings firm Moody’s had downgraded senior unsecured rating for Bharti as well as the backed senior unsecured notes issued by Bharti’s wholly owned subsidiary, Bharti Airtel Int’l (Netherlands) BV.
The ratings firm had assigned a Ba1 corporate family rating (CFR) to Bharti and withdrawn the company’s Baa3 issuer rating, while keeping the ratings outlook negative. “The downgrade reflects uncertainty as to whether or not the company’s profitability, cash flow situation and debt levels can improve sustainably and materially, given the competitive dynamics in the Indian telco market,” lead analyst at Moody’s said.
Moody’s estimated the profitability of Bharti’s Indian mobile segment will remain low over the next several quarters in the absence of a fundamental change in the pricing of mobile services, together with proportional shift in the composition Bharti’s subscriber base to high-end 4G customers. However, the company has taken steps to improve revenues and profitability including its minimum recharge plans.
In addition, Moody’s estimates that Bharti’s adjusted consolidated leverage registered 4.5x at December 31, 2018 remaining above levels consistent with a Baa3 rating. Bharti’s consolidated total debt in FY18 stood at 1.11 lakh crore versus 1.07 lakh crore in FY17. The company’s standalone debt was at 65,416 crore at the end of March 31, 2018 against 60,095 a year ago.
On February 28, Bharti finalised a fundraising plan of up to 32,000 crore through a combination of 25,000 crore rights issue and a 7000 crore perpetual bonds float to build a war chest to reduce debt and increase 4G network coverage to compete with Reliance Jio.―The Financial Express