MOSL: BHARTI AIRTEL (Buy)-Acquisitions, Africa biz to drive growth until ARPU accretion plays out
Bharti Airtel: Acquisitions, Africa biz to drive growth until ARPU accretion plays out
(BHARTI IN, Mkt Cap USD30.8b, CMP INR498, TP INR680, 37% Upside, Buy)
- India wireless EBITDA cushioned by robust Africa EBITDA jump: revenue fell 7% QoQ (-13% YoY) to INR203.2b (2% miss), while consol. EBITDA dropped 6% QoQ (-12% YoY) to INR74.7b (2% beat). India wireless revenue/EBITDA fell 12%/17% QoQ – of which ~10% can be attributed to IUC rate cut and remaining 2/7% to downtrading in the market. Africa revenue declined 1% QoQ, but EBITDA jumped by a steady 10% due to a 7% drop in opex following the sale of Ghana operations. PAT declined 11% QoQ to INR3.1b, higher than our estimate of INR814m due to lower depreciation/interest cost.
- Concall highlights: 1) Capex guidance for FY18 was increased by INR10-15b (earlier: INR250b); FY19 capex guidance stands at INR250b. 2) Fight for market share may continue over the next 9-12 months, as smaller operators churn out and Vodafone-Idea witness merger-related impact. 3) Uptrading of non-bundle, low ARPU subscribers (i.e. 50-60%) may be a big growth opportunity.
- M&A could drive growth in FY19 before ARPU accretion plays out: Recent ARPU decline by RJio was followed by indications by all other players that ARPU accretion may be a few quarters away. However, completion of Telenor and TTSL acquisition by Bharti should add EBITDA of INR30b (~9% of India wireless EBITDA). Our consol. EBITDA is marginally tweaked by 2% for FY18/19E, as Africa operations have largely compensated for the decline in India 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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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