Bharti Airtel Q4 Review: Brokerages Cheer User Additions, But Raise Concerns Over Second Covid Wave Impact

Pedestrians check their mobile phones under the shelter of parasol featuring a Bharti Airtel Ltd. logo in Malawi. (Photographer: Waldo Swiegers/Bloomberg)

Bharti Airtel Q4 Review: Brokerages Cheer User Additions, But Raise Concerns Over Second Covid Wave Impact

Analysts lauded the strong 4G and postpaid subscriber additions by Bharti Airtel Ltd. in the fourth quarter but cautioned over the impact of the second Covid-19 wave on earnings and average revenue per user.

The telecom operator added 1.37 crore 4G subscribers in the quarter ended March, and reported the highest-ever customer additions in homes business at 2.74 lakh. Its revenue and ARPU, however, fell over the preceding three months, particularly because of the removal of interconnect user charges.

Its India revenue declined 3.5% sequentially. Despite an exceptional gain of Rs 440 crore during the quarter, profit dropped 11%.

Shares of Bharti Airtel dropped as much 2.2% before paring losses. Of the 33 analysts tracking the stock, 31 recommend a ‘buy’ and the remaining two suggest a ‘hold’, according to Bloomberg data. The average of the 12-month consensus price target implies an upside of 34.6%.

Also read: Bharti Airtel Q4 Results: Profit Falls 11% Missing Estimates

Here’s what brokerages have to say about Bharti Airtel’s fourth-quarter results...

Goldman Sachs

  • Reiterates ‘buy’ with a target price of Rs 665 apiece.

  • Bharti continues to outperform peers, with the revenue market share higher by 110 bps/390 bps over the last one/five quarters.

  • Both data subscriber additions and overall net subscriber additions for Bharti maintained their strong momentum.

  • Bharti has added more than 6 lakh postpaid wireless subscribers for three quarters in a row. Cumulatively, additions in the last three quarters account for roughly 12% of Bharti’s overall postpaid base.

  • Short-term headwinds to earnings are due to Covid-19 (moderation in subscriber additions) and competition (ARPU pressure).

  • Expects Bharti’s wireless business to deliver more than 20% revenue and Ebitda growth for the next two years.

  • Marginally lowers FY2022-24 Ebitda estimates by 2%.

Jefferies

  • Maintains ‘hold’ with a target price of Rs 590 apiece.

  • Bharti’s 1.34 crore subscriber additions beat estimates.

  • Subscriber additions were strong in both 4G segment (1.4 crore) and postpaid segment (6 lakh) with churn under control at 2.2%.

  • Subscriber engagement remained healthy with average voice usage up 2.5% QoQ to 1,053 minutes.

  • Indian non-mobile businesses reported a strong quarter with Airtel business and homes segments delivering 6% QoQ growth in Ebitda.

  • Sharp margin expansion in business segment helped Bharti deliver strong Ebitda growth.

  • The company turned free cash flow negative despite stable cash flow from operations due to a near doubling of capex to Rs 14,800 crore, including Rs 6,300-crore upfront spectrum payment.

  • Consolidated net debt was stable at $20 billion and the leverage was comfortable at 3 times Ebitda.

  • Expects 13% CAGR in revenue and 18% CAGR in Ebitda over FY21-23, assuming 10% tariff hikes in 4QFY22.

UBS

  • Maintains ‘buy’ with a target price of Rs 665 apiece.

  • India mobile revenue fell 4.7% QoQ versus the 6.1% decline posted by Jio. Adjusted for interconnect usage charges, mobile revenue rose 4.2% QoQ.

  • Q4 performance was mainly driven by strong 4G subscriber addition during the quarter.

  • Fixed braodband and enterprise revenue grew 5% QoQ and 2.2% QoQ, respectively, whereas the digital TV segment witnessed a 2.8% decline in revenue.

  • Airtel also now has over 20 crore monthly active users across its digital assets.

  • Bharti outperformed Jio on most metrics. However, the impact of the second wave of Covid-19 on subscriber additions and ARPUs will be a key monitorable going ahead.

ICICI Securities

  • Airtel continues to report resilient numbers especially on the Indian wireless business front.

  • Lower-than-anticipated like-to-like APRU growth was offset by higher subscriber addition, thereby resulting in in-line Ebitda.

  • The major positive is continued strong subscriber addition, however, the trajectory of ARPU will hold the key.

  • The reported decline in ARPU and wireless revenues were due to the zero IUC rate.

  • Overall, India margins up 373 bps QoQ at 48.9%, largely driven by Indian wireless margins, which at 47.5%, was up 380 bps QoQ.

  • The optical increase in margins is due to IUC going zero and the resultant reduction of the same from revenue and costs. Africa margin at 47.7%, up 80 bps QoQ, was also robust.

  • Total capex spend for the quarter was Rs 6,846 crore compared with Rs 6,864 crore in Q3. Reported net debt (excluding lease liability) was at Rs 1.15 lakh crore.

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