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Bharti Airtel – Strong India Top Line But
Watch Consol Margins
For Bharti's India business, we expect strong minutes growth in Q3 (+6.9% Q/Q to
~204K), driven by strong net adds tracking at over 3m a month (up 35% from a run
rate of 2.2m in Q2) and a 1.2% increase in MOU. On ARPMs, however, we expect a
slightly bigger Q/Q decline in Q3 driven by holiday promotions – we forecast 1.5%
Q/Q or a 0.7paisa decline to INR0.44 vs. 1.0%/0.4 paisa in Q2. This drives our
estimate for wireless revenue growth of 4.8% Q/Q to INR92.3bn. For the India
business as a whole, we forecast 4.2% Q/Q growth in revenue slightly driven down
by our modest expectations for the Telemedia business.
We are forecasting a 50bp Q/Q decline in India margins to 36.7% driven by a 4%
increase in network opex and an 11% increase in SG&A (on account of re-branding
exercise and acquisition of new subs).
For Bharti Africa, we expect elasticity and strong net adds to have helped the top line
and forecast 9% Q/Q growth. However, we expect the Africa business to see some
margin pressure too and forecast a 77bp Q/Q decline in margin to 23.2% for Q3. On
capex, we do not expect Bharti to be able to spend the entire $800m of capex this
year and estimate US$668m – mainly driven by a later-than-expected agreement with
vendors which we expect will be completed some time in Q4FY11. We expect this
capex to spill into next fiscal year (FY12) and also note that Bharti needs to invest in
some markets.
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