Bharti Airtel Q4 preview: Tariff hike, ARPU increase to boost top-line

Bharti Airtel will announce its results for March quarter of FY20 (Q4FY20) today. Analysts expect the company's losses to narrow while revenue and margins are likely to tick up, helped by the impact of tariff hikes initiated last December, increase in average revenue per user (ARPU), and rupee depreciation.

Analysts expect the Covid-19 outbreak to have a limited impact on telecommunications companies (telcos) as compared to other sectors. "Recharge upgrades from smartphone subscribers, owing to increased data usage on account of organizations’ work-from-home policies, are likely to offset the impact on physical recharges for low ARPU subscribers," Motilal Oswal said in a sector note.

Bharti Airtel had reported Rs 20,602.2 crore as revenue and a loss of Rs 1,914.8 crore in Q4FY19. At the bourses, Bharti Airtel declined just 2.8 per cent in Q4FY20, as compared to 28.65 per cent plunge in the benchmark S&P BSE Sensex.

Here's what top brokerages expect from Bharti Airtel's Q4FY20 results

Edelweiss

For Q4FY20, the brokerage is building in 6.5 per cent QoQ consolidated revenue growth at Rs 23,458.3 crore — with a 7.7 per cent YoY jump in India revenue business and 3.9 per cent YoY growth in the Africa business, partially aided by rupee depreciation. With Q4 being the first full quarter after the tariff hike, we are building in an 11 per cent QoQ jump in ARPU and a marginal increase in subscriber base to drive 11.9 per cent QoQ revenue growth in the India mobility business. Airtel may report a profit of Rs 145.6 crore for the quarter. We expect 140bps QoQ increase in Ebitda margin to 43.8 per cent due to operating leverage.

Kotak Securities

Analysts at the brokerage firm expect 8.3 per cent sequential and 13.7 per cent yoy increase in India wireless revenues with bulk of the December's tariff hike impact likely to be seen in this quarter. Ebitda for the segment will likely be up 14 per cent QoQ. "We are building in a 13.7 per cent yoy increase in ARPU to Rs 142/month. We expect sub-5 per cent decline in revenues for the Enterprise and the India DTH business, and marginal uptick in the home broadband segment," they said.

Overall, Bharti Airtel is likely to report net sales of Rs 22,546.6 crore and loss of Rs 573.9 crore for the quarter under review. Ebitda may come in at Rs 9,687 crore and Ebitda margin at 43 per cent.

Motilal Oswal

The brokerage expects the major benefit of the price hike to accrue in 4QFY20 as most subscribers on bundled plans had validities lasting beyond December 2019. This, coupled with the improving mix of mobile broadband (MBB) subscribers, is estimated to improve Bharti's ARPU by around 9 per cent, which is expected to drive a strong incremental Ebitda margin of 60 per cent. "We expect healthy subscriber additions over January-February 2020, with flat subscribers in March 2020 (due to Covid-19)," the brokerage notes.

Airtel is likely to report consolidated revenue of Rs 23,300 crore, up 12.9 per cent on a year-on-year basis, and loss of Rs 380 crore. Ebitda is seen increasing 52.1 per cent on YoY basis to Rs 10,100 crore for the quarter while Ebitda margin is expected to be around 43.4 per cent, a gain of 1,118 basis points (bps) from the year-ago quarter.

Key things to watch out for: status of AGR-related dues and the impact of Covid-19 and tariff hike on customer behaviour, Capex, and network expansion plans.

Dolat Capital

It expects revenues to improve for Bharti Airtel by 11.4 per cent to Rs 22,959.5 crore, driven by headline tariff increase of around 40 per cent in December 2019, the full impact of which will be visible in Q1FY21. The company's loss should be reduced to Rs 296.5 crore for the quarter. Earnings before interest, tax, depreciation, and amortization (Ebitda) is expected to come in at Rs 9,862.7 crore although it is not compared to YoY Ebitda due to IndAS implementation. The gain from Rupee depreciation (for Africa operations) is likely to be off-set by the Covid-19 impact. Ebitda margin is expected at 43 per cent.