Bharti Airtel reported financial results for the June 2022 quarter matching expectations — revenue of ₹32,804 crore; EBITDA of ₹16,604 crore and adjusted EPS of ₹2.88. The headline net income, meanwhile, was around 30 per cent lower, due to one-off exceptional items and markets are likely to ignore the same. Adjusted for this, profit for the quarter was fine. 

The headline numbers reflected robust growth with revenue growing 22 per cent y-o-y and EBITDA growing 26 per cent. EBITDA margins were up 150 bps at 50.6 per cent on a y-o-y basis and flattish on a sequential basis. For comparison, close peer Jio Platforms reported EBITDA margins of around 49 per cent. India mobile business ARPU for Airtel (75 per cent of domestic revenue; 55 per cent of consolidated revenue) was at ₹183 (Jio ARPU was at ₹175.7). This was up 2.8 per cent on a sequential basis and 25.4 per cent on y-o-y basis. Consistent growth in ARPU in recent quarters lends confidence that pricing wars are largely behind and also shows the company’s ability to pass on increasing costs in an inflationary environment. At the end of the June quarter, customer base in consolidated mobile business was at 496 million, up 5 per cent on y-o-y basis and 1 per cent sequentially. Out of this, India accounted for 362.4 million (Jio customer base was at 419 million).

At an overall level, both the India business (around 71 per cent of consolidated revenue and EBITDA) and Africa business (around 29 per cent of consolidated revenue and EBITDA) performed well and met expectations at the financial and operating level. Within India business, Airtel Business (enterprise connectivity and allied solutions) is the other major segment accounting for around 20 per cent of domestic revenues.

Effect of results, auction

Airtel participated actively in the recently concluded 5G spectrum auctions and based on its wins, has created a good spectrum bank that aligns with its plans for rolling out services pan India. Investors, however, need to note that 5G is more of a long-term story and there may not be immediate implications for the stock. On a long-term basis, that only two companies (Airtel and Jio) dominate a large opportunity that India offers in this space, implies Airtel remains well-positioned to garner an outsized share of this opportunity. This bodes well for the long term.

As far as results are concerned, Airtel has shown consistent progress quarter after quarter over the last one year. The stock currently trades at 8.1 times one year forward EV/EBITDA and at a discount to its 5-year average of 8.7 times. Given its progress and strong position in the markets in which it operates (India and Africa), the stock remains attractive from a long-term perspective. We had recommended an accumulate rating on the stock and maintain the same for now.