Bharti Airtel's Q3FY19 results (Outperformer) - Africa remains in brightest spot, India wireless stabilizing
Q3FY19 result highlights
Mixed consolidated financial performance: Cons. revs was up +0.5% qoq and +1% yoy to Rs205.1bn (IDFCe: Rs205 bn) .Cons EBITDA at Rs 63.0 bn (IDFCe:Rs 64.2 bn) is below estimates, driven by weak performance in India wireless segment. Cons EBITDA margins at 30.7% vs. IDFCe 31.3%.Reported PAT was Rs 862 mn largely due to (i) net credit of Rs 7.4 bn due to reassessment of levies and settlement of litigations and (ii) gain of Rs 8.7 bn due to de-consolidation of ABPL (Airtel Payment Bank). Cons capex for Q3FY19 at USD 915 mn (USD 1,099 mn for Q2). Cons net debt at ~USD 15.2 bn – down USD 0.4 bn sequentially.
Massive change in India Wireless business: The implementation of Rs35/- minimum monthly recharge led to 15% reduction of wireless subscriber base to 284mn. India wireless revenues were inline with our estimates at Rs 101bn (IDFCe: Rs101 bn), down 2 % qoq due to sustained pricing pressure. India wireless EBITDA at Rs 21.4 bn was below our estimates (IDFCe: Rs23.3 bn). The EBITDA margins in India were impacted by higher network opex. India wireless ARPUs were at Rs104 vs IDFCe Rs. 103 , up 4.1% qoq. Bharti showed a strong growth in data subscriber additions (added 11mn data subs this quarter). Overall 4G customer base stood at 77.1 Mn at the end of the quarter & Data traffic grew 21% QoQ to ~2,317 bn MB.
Key highlights from conference call: Company plans to win high ARPU 4G customers in cities with focus on (i) good quality network and (ii) bundled content offering. Bharti does not plan to compete in VoLTE feature phone market. Management has not given any capex guidance for FY20. Bharti mentioned that they will continue to invest in network building. As per the company, network cost has gone up due to spending on network expansion (added towers, BTS) and increase in tenancy post Vodafone-Idea exit from BHIN towers & network cost is expected to remain high.
Key positives: Africa business & strong additions in data subscribers of India.
Key negatives: Weak performance in India wireless business
Impact on financials: No change in estimates.
Valuations & view
We expect Bharti to benefit from operating leverage as ARPU erosion subsides. Strong performance in Africa is likely to sustain. Strong growth in data subscribers in this quarter gives us confidence of Bharti’s strategy for focusing on value based customers & its competitive positioning. The pace of price war is settling down and monetization of Airtel Africa is a key catalyst. Maintain Outperformer with a target price of Rs400 (SOTP based). ​
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.