Bharti Airtel Q3: ARPU may rise up to 4%, clarity on fund raising plans key

Bharti Airtel is slated to announce to its December quarter earnings today

Telecom major Bharti Airtel is slated to announce its December quarter earnings today.  The result will be watched for clarity on fundraising plans and commentary on competitive intensity. TIt had reported a 65.4 per cent drop in consolidated net profit at Rs 119 crore for the second quarter ended September 2018.

Bharti Airtel board in December 2018 constituted a committee to explore options for raising funds to strengthen the company's balance sheet. According to reports, the company has plans to raise around $2 billion.

"The company at its meeting held today has formed and authorised 'special committee of directors for fundraising' to comprehensively explore/evaluate various options of fundraising for the company to strengthen its capital structure and balance sheet," Bharti Airtel said in an exchange filing.

 

Here’s what top brokerages expect from Bharti Airtel’s December quarter earnings today-
 
Motilal Oswal 
 
We expect consolidated revenue to grow 1 per cent on quarter-on quarter (QoQ) and year-on-year (YoY) to Rs 20, 600 crore, and consolidated EBITDA to grow 2 per cent QoQ to Rs 6,340 crore. This is mainly on the back of a decline in India wireless business getting arrested coupled with a modest uptick in Africa and enterprise business.

India wireless revenue is likely to drop 1 per cent QoQ to Rs 10,170 crore as the decline in subscribers will outweigh the benefits of Average Revenue Per User APRU (ARPU) uptick. India wireless EBITDA (earnings before interest, tax, depreciation and amortization) is expected to remain flat QoQ at RS 2,140 crore.

We expect India wireless ARPU to grow 4 per cent QoQ to Rs 104 and subscriber base to drop 6 per cent QoQ. Africa revenue/EBITDA is expected to grow 2 per cent/3 per cent QoQ to Rs 5760 cr/Rs 2130 crore.

Bharti Airtel is expected to report a net loss of Rs 520 crore. Bharti trades at an EV/EBITDA of 9.7x FY19E and 9.4x FY20E. We maintain ‘Buy’ rating.

The key monitorables to watch for include consolidated revenue (expect 1 per cent QoQ growth), consolidated EBITDA (expect 2 per cent QoQ growth), India wireless revenue (expected to decline 1 per cent QoQ), India wireless EBITDA (expected to remain flat QoQ decline).

 
ICICI Securities

Bharti's Indian wireless business is expected to witness a subscriber churn (of nearly 1 crore) on account of the introduction of minimum recharge conditions. Moreover, revenues will be impacted by lower intra circle roaming (ICR) revenues. Reported ARPU is likely to witness optical growth of nearly 2 per cent QoQ to Rs 103, aided by exits of low/no revenues customer exits.

Indian wireless revenues are expected to decline 1 per cent QoQ to Rs 10,153 crore. In contrast, Africa is likely to witness healthy revenue growth traction, with growth of 3.8 per cent QoQ to Rs 5863 crore. Consolidated revenues are expected to be muted at Rs 20, 543 crore, up 0.6 per cent QoQ. Given the higher network operating costs and muted topline, we expect nearly 100 bps sequential decline in India EBITDA margins at 26.3 per cent. Africa margins are expected to be robust at 37.1 per cent. Consequent consolidated margins are seen at 30.6 per cent, up 60 bps QoQ.

The key monitorables to watch for include clarity on fundraising plans and commentary on competitive intensity.

ICRA on Telecom industry

According to ICRA, the telecom industry woes are expected to persist well into FY2020 amid intense competition and pricing pressures. The recovery in the pricing power of the telcos has been prolonged. While the improvement in ARPU levels is essential for the health of the industry, ICRA expects the same to manifest only by the latter half of FY2020.

ICRA expects the industry debt levels to be in the range of Rs 4.5-4.6 lakh crore by March 31, 2020, with debt/EBITDA estimated at more than 9.0x.