Bharti Airtel – Q2FY23 First Cut, ICICIdirect

Airtel continues to report healthy performance on Indian wireless business front with resilient and industry leading KPIs in terms of India postpaid/4G subscribers, ARPUs and margins. Management commentary on overall growth drivers would be key monitorable ahead. We remain constructive on Airtel given the disproportionate benefits of market consolidation in Telecom Sector. ICICIdirect first cut reaction.

Healthy Operating Performance
(CMP:832; MCap:4.7 lakh crore)

Bharti Airtel’s Q2FY23 performance was healthy with beat on India ARPUs and margins.

Q2FY23 earnings summary

• Consolidated topline came in at | 34,527 crore, up 5.2% QoQ and 21.9% YoY. India wireless revenues were up 4% QoQ (up 24.8% YoY) at | 18958 crore, led by ARPU, which came in at | 190, up 3.7% QoQ (vs. 2% growth expectations), driven by higher no. of days and subscriber mix improvement. On the other segment of India business, Homes Services (broadband) revenues were up 6.8% QoQ at | 990 crore, Airtel business (enterprise) revenues were up 6.8% QoQ at | 4665 crore and DTH reported revenues witnessed a decline of 2.6% QoQ at | 729 crore. The Africa revenues were up 7.7% QoQ at | 10,445 crore, tad better than expectations of | 10052 crore
• India Wireless business KPI: Overall sub base saw a modest addition of 0.5 mn QoQ at 327. 8 mn (our expectation was addition of 2 million). It witnessed healthy 4G Net adds of ~5 mn during the quarter, with 4G data sub base at 210.3 mn (overall data customers base of 219.1 mn). The post-paid subscriber base also saw robust addition of ~283k subscribers at 18.3 mn. Data usage per sub was up 4.2% QoQ to 20.3 GB. Voice Usage per customer was down 2% QoQ to 1082 minutes
• Consolidated EBITDA came in at | 17594 crore, up 6.4% QoQ, with margins of 51%, up 57 bps QoQ. India wireless margins was at 52.4% (up 116 bps QoQ) was driven by lower SUC charges after new spectrum purchase. Recall, that spectrum purchased in last auction had zero SUC, while the Department of Telecommunications (DoT) had also removed the 3% floor rate on spectrum usage charge. Overall Indian margin was up 85 bps QoQ at 51.8%. The Africa margins which was at 49.1%, was up 23 bps QoQ
• The company reported PAT of | 2145 crore vs. expectations of | 2358 crore, owing to higher forex fluctuation losses and lower profit from associates of | 356.7 crore (vs. | 600 crore expected) as Indus Tower provided for dues of Vodafone Idea during the quarter
• Total capex spends (excluding spectrum) for the quarter was at | 7047 crore vs. |6398 crore in Q1. Reported Net debt (excluding lease liability) was at ~| 1.57 lakh crore (up | 37769 crore, owing to deferred liabilities of spectrum worth | 43084 crore, purchased during the auction

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