Bharti Airtel Q3FY21 results on expected lines

Bharti Airtel reported consolidated revenue of ₹26,518 crore and EBITDA of ₹12,178 crore in the quarter ended December 2020. Both were in line with consensus estimates (S&P Capital IQ). Adjusted for discontinued operations, sequential increase of 6 per cent in revenue and 8 per cent in EBITDA were very similar to the growth seen in Reliance Jio. EBITDA margin was stable sequentially at 46 per cent.

Airtel Q3 net profit up 182 per cent at ₹854 crore

Good all-round show

Performance was good in both India and Africa markets. India and South-East Asia (which is primarily India) account for approximately 72 per cent of revenue, and Africa accounts for 28 per cent of revenue. Mobile Services, which brings about 75 per cent of revenues, continues to show improving trends. India business APRU was at ₹166 and showed sequential improvement of 2.5 per cent.

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While the growth is slightly lower than the 4 per cent reported by Jio, Airtel APRU is higher than Jio ARPU of ₹151. 4G subscriber addition momentum continues and 4G subscribers now account for 57 per cent of India subscriber base vs 55 per cent in the September quarter and 49 per cent a year ago. In Africa, 4G subscribers now account for 34 per cent of total subscribers vs 31 per cent same time last year.

Largely there are no surprises in the results. Numbers are in line and operational performance shows consistent improvement as expected across metrics such as 4G subscribers, EBITDA margins, ARPU, etc.

Outlook

With Vodafone Idea still not in the best of shape and BSNL revival plan in doldrums, Airtel remains well-positioned to dominate the Indian telecom landscape along with Jio for the foreseeable future. Emerging trends like 5G, despite the fact that it will require heavy capex, will create further value creation opportunities for the company as this will significantly increase data consumption and provide scope for much higher APRU in future. Hence long-term outlook remains positive for Airtel.

The company now trades at 1-year forward EV/EBITDA of around 7.7 times which appears reasonable, given its approximately 17 per cent EBITDA CAGR for two years into FY23 as per consensus estimates (S&P Capital IQ). Company’s leverage is also well under control with net debt/EBITDA at around 3.

The key factor to watch out for over the near to medium term would be any Supreme Court decision on the application filed by the company highlighting errors in the AGR demand. According to the company, its dues must be ₹13,004 crore vs DoT demand of ₹43,989 crore. Out of this it has already paid ₹18,004 crore. Any favourable ruling on this would be a positive catalyst.