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3QFY11 Results
Bharti Airtel’s consolidated revenue beat our expectations, up by 4%QoQ in
3QFY11, reflecting continued easing of competition in India and growth in
Africa operations. Ebitda margins net of one-time brand re-launch costs were
stable at 33.8% but profits were lower than expectations with restatement
losses and high tax provisioning. Although Bharti’s debt funding for Africa will
dilute FY11 earnings, the African expansion will add to future growth
alongside India mobile and towers businesses driving our FY12-13CL earnings
growth. Bharti remains our pick in the sector. Maintain Outperform.
3QFY11 results, positive surprise in revenues
Bharti’s 3QFY11 consolidated revenue at Rs157.6bn up 4%QoQ was 1.5% above expectations
following a positive surprise in India revenue per minute (RPM) remaining flat QoQ at Rs0.44p
and Africa revenue growth of 4%QoQ. Bharti India mobile Arpu down 2%QoQ are still at
+30% premium to industry. Further in encouraging trends Bharti’s Africa mobile MoU grew by
a robust 7%QoQ to 120min and Arpu was flat QoQ despite tariff cuts across 16 countries.
Bharti consolidated Ebitda margin net of one time brand re-launch cost of Rs3.4bn was flat at
33.8%. Pre exceptional consolidated profit at Rs16.4bn was below our expectations, mainly
due restatement losses (exchange fluctuation) of Rs1.5bn (gains of Rs2.5bn in 2Q) and high
tax provision at 22% (26% in 2Q) resulting in FY11 cut in profits but we maintain our FY12-
13CL forecasts. Capex for the quarter was Rs43bn including Africa and guidance for Africa
market capex is maintained at US$800m.
Encouraging mobile trends, 3G rollouts and tower business
Bharti’s India mobile operations registering flat RPM and 4%QoQ and 30%YoY increase in
network traffic to 199bn minutes, reflects continued easing of 2G competition and led by
these, revenue beat expectations. Alongside encouraging trends for India mobile, in Africa
Bharti reported an active subscriber base of 42m (of aggregate 208m across India & SA and
Africa) and Ebitda margin improvement of 117bps to 25.1%. Further, Africa Arpu at US$7.3, a
66% premium and MoU at 120minutes, a significant 73% discount to India, underline future
growth potential. Our Bharti Africa forecasts are 20% lower than management target
reiterated in the 3QFY11 conference call. Meanwhile in India mobile number portability has
had a limited impact so far when Bharti’s ongoing 3G rollouts will help market share gains and
also drive newer value-added/ data services. Alongside 3G, Bharti’s tower business is seeing a
step-up. In 3QFY11, the passive infrastructure Ebitda margin was up150bps QoQ with Bharti
Infratel having 32,424towers with 1.68x tenancy and Indus 107,789 towers with 1.8x tenancy.
Gearing, regulatory risks and valuations.
Despite all debt financing for the Africa deal, Bharti gearing is comfortable at 2.9x net debt to
Ebitda and in 3QFY11 company has repaid US$415m of debt and the deleveraging will
continue. However, with the Comptroller and Auditor General and India government of the
view that licences assure only 6.2MHz of GSM spectrum, Bharti and eight other GSM operators
face regulatory uncertainty for additional payments besides the linked issue of 2G licence
renewals, which starts in 2014 with Bharti's important Delhi circle. Also the upcoming Telecom
policy of 2011 may delink spectrum from licence grant, paying the way for Reliance Industries
4G voice and data services to compete with Bharti’s 3G services. However with the stock
trading at 12.5x consolidated PE, Bharti remains our pick in the sector. Maintain Outperform.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
3QFY11 Results
Bharti Airtel’s consolidated revenue beat our expectations, up by 4%QoQ in
3QFY11, reflecting continued easing of competition in India and growth in
Africa operations. Ebitda margins net of one-time brand re-launch costs were
stable at 33.8% but profits were lower than expectations with restatement
losses and high tax provisioning. Although Bharti’s debt funding for Africa will
dilute FY11 earnings, the African expansion will add to future growth
alongside India mobile and towers businesses driving our FY12-13CL earnings
growth. Bharti remains our pick in the sector. Maintain Outperform.
3QFY11 results, positive surprise in revenues
Bharti’s 3QFY11 consolidated revenue at Rs157.6bn up 4%QoQ was 1.5% above expectations
following a positive surprise in India revenue per minute (RPM) remaining flat QoQ at Rs0.44p
and Africa revenue growth of 4%QoQ. Bharti India mobile Arpu down 2%QoQ are still at
+30% premium to industry. Further in encouraging trends Bharti’s Africa mobile MoU grew by
a robust 7%QoQ to 120min and Arpu was flat QoQ despite tariff cuts across 16 countries.
Bharti consolidated Ebitda margin net of one time brand re-launch cost of Rs3.4bn was flat at
33.8%. Pre exceptional consolidated profit at Rs16.4bn was below our expectations, mainly
due restatement losses (exchange fluctuation) of Rs1.5bn (gains of Rs2.5bn in 2Q) and high
tax provision at 22% (26% in 2Q) resulting in FY11 cut in profits but we maintain our FY12-
13CL forecasts. Capex for the quarter was Rs43bn including Africa and guidance for Africa
market capex is maintained at US$800m.
Encouraging mobile trends, 3G rollouts and tower business
Bharti’s India mobile operations registering flat RPM and 4%QoQ and 30%YoY increase in
network traffic to 199bn minutes, reflects continued easing of 2G competition and led by
these, revenue beat expectations. Alongside encouraging trends for India mobile, in Africa
Bharti reported an active subscriber base of 42m (of aggregate 208m across India & SA and
Africa) and Ebitda margin improvement of 117bps to 25.1%. Further, Africa Arpu at US$7.3, a
66% premium and MoU at 120minutes, a significant 73% discount to India, underline future
growth potential. Our Bharti Africa forecasts are 20% lower than management target
reiterated in the 3QFY11 conference call. Meanwhile in India mobile number portability has
had a limited impact so far when Bharti’s ongoing 3G rollouts will help market share gains and
also drive newer value-added/ data services. Alongside 3G, Bharti’s tower business is seeing a
step-up. In 3QFY11, the passive infrastructure Ebitda margin was up150bps QoQ with Bharti
Infratel having 32,424towers with 1.68x tenancy and Indus 107,789 towers with 1.8x tenancy.
Gearing, regulatory risks and valuations.
Despite all debt financing for the Africa deal, Bharti gearing is comfortable at 2.9x net debt to
Ebitda and in 3QFY11 company has repaid US$415m of debt and the deleveraging will
continue. However, with the Comptroller and Auditor General and India government of the
view that licences assure only 6.2MHz of GSM spectrum, Bharti and eight other GSM operators
face regulatory uncertainty for additional payments besides the linked issue of 2G licence
renewals, which starts in 2014 with Bharti's important Delhi circle. Also the upcoming Telecom
policy of 2011 may delink spectrum from licence grant, paying the way for Reliance Industries
4G voice and data services to compete with Bharti’s 3G services. However with the stock
trading at 12.5x consolidated PE, Bharti remains our pick in the sector. Maintain Outperform.
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