Bharti Airtel's Q4FY18 results (Outperformer) - India wireless volume metrics surprise
Q4FY18 result highlights
Inline consolidated financial performance: Cons revenue was down 3.3% qoq and 10% yoy to Rs196.3bn (IDFCe: Rs196 bn) primarily driven by decline in India wireless performance. Cons EBITDA at Rs70.3bn (IDFCe:Rs70.7bn) was down 12% yoy with margins of 35.8% (IDFCe 36.1%). PAT at Rs829mn was down ~78% yoy vs. our expectations of Rs355mn.
India wireless volume metrics better: India wireless revenues were better than expectations Rs103bn (IDFCe: Rs101bn), down 3.7% qoq and 20% yoy. EBITDA was down -16% qoq and -38.5% yoy to Rs29.4bn (IDFCe: Rs30.8bn). The EBITDA margins in India were impacted by higher network opex due to site rollout and access charges due to voice traffic growth of 20% qoq. India wireless ARPUs were at Rs116, down 6% qoq (IDFCe: Rs115). Consumption metrics were good. Bharti added solid 14.4mn wireless broadband customers, breaking out of the 6-7mn per quarter addition run-rate. Total data subscriber base stands at 86mn (penetration of 28.3% of Bharti’s subs). Churn rates dropped from 3.3% in Q3 to 2.8% this quarter.
Key highlights from conference call: Bharti will continue the high capital intensity into FY19 and have guided to India capex of Rs240bn and US$600m-US$700m in Africa. Uninor acquisition is expected to conclude in Q1 and Tata Tele by Q3FY19. Focus remains on 4G market and Airtel is seeing signs of uptrading in their subscriber base. Management indicated that uptrading from 2G to 4G is ARPU accretive (2x).
Key positives: Strong India data sub adds and Africa margins
Key negatives: Weak margins in India wireless.
Impact on financials: FY19E/FY20E EBITDA adjusted by 0.1%/1%
Valuations & view
We believe that pickup in data penetration is a positive and if the momentum is sustained it should cushion the revenue blow due to tariff pressure. Our positive view on Bharti Airtel remains as we think that Bharti will benefit from consolidation and shift towards data. Maintain Outperformer with an unchanged March 2019 target price of Rs515 (set at 8x FY20E EBITDA).
Bharti Airtel provides telecommunication systems and services to individuals and businesses in India with operations in 20 countries across Asia and Africa. In India, Co.'s product offerings include 2G, 3G and 4G wireless services, mobile commerce, fixed line services, high speed DSL broadband, IPTV, DTH, enterprise services including national & international long distance services to carriers. In the rest of the geographies, it offers 2G, 3G wireless services and mobile commerce. Co. had nearly 287 million customers across its operations at the end of Dec 2013.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.