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Bharti Airtel (BHARTI)
Telecom
Takeaways from MTN CY2010 annual results. Early days, but MTN’s 2HCY10
performance in Nigeria and Ghana (two key markets where MTN is Bharti’s largest
competitor) showed little impact of Bharti’s entry. Also note that (1) while
acknowledging increased competitive intensity in some markets, MTN management
showed no signs of concern, and (2) MTN’s capex guidance for Nigeria and Ghana
sums up to US$1.35 bn for CY2011E, much higher than Bharti’s 16-country capex
guidance of US$800 mn for FY2012E.
Bottomline – MTN is a formidable competitor in 5 of Bharti’s 16 African markets
Bharti competes with MTN in 5 of its 16 African markets – Nigeria, Ghana, Uganda, Zambia, and
Congo B. These markets contribute around 50% of Bharti’s Africa revenues and EBITDA. More
importantly, these markets, especially Nigeria, are equally important in MTN’s portfolio as well –
Nigeria contributed 42% to MTN’s EBITDA in CY2010. MTN is the #1 player in 4 out of these 5
markets.
It is also important to appreciate (1) the financial strength of MTN. It has an annual revenue base
of >US$15 bn, EBITDA base of ~US$7 bn, and an unleveraged balance sheet (net cash of US$123
mn at end-Dec 2010) and (2) MTN’s network leadership in these markets, especially Nigeria where
the company now has 9,000+ base stations as compared to ~4,000 for Bharti.
Bharti’s Africa capex guidance continues to perplex us
MTN spent a total of US$1.07 bn in capex in Nigeria and Ghana in CY2010 and has guided for a
capex of US$1.35 bn in these two countries in CY2011E (US$1.1 bn in Nigeria alone).
Interestingly, 54% (or US$600 mn) of planned Nigeria capex is earmarked for 2G access network
alone. Even as MTN clearly stated that its capex plans for Nigeria are geared towards increasing
the company’s network leadership in the wake of increased competitive intensity in the market,
Bharti’s US$800 mn capex guidance for all 16 countries appears low to us. Looking at it
differently, MTN’s consolidated capex guidance for CY2011E (assuming a 10% revenue growth
yoy) translated into a capex/sales of 17.5% on a revenue base of US$16 bn+, while Bharti’s
guidance implies a capex/sales of ~20% on a revenue base of ~US$4 bn.
Other highlights from MTN results
Sharp EBITDA margin improvement in both Nigeria and Ghana – Nigeria OPM was 64.5% in
2HCY10 versus 61.3% in 1H, while’s Ghana’s was 47% in 2HCY10 versus 42% in 1H. Revenue
growth was strong in both these markets – 16% yoy in local currency terms in Nigeria and 14% in
Ghana in CY2010.
Please see our report ‘Not so fast’ dated Jan 6, 2011 that details our thoughts on Bharti Africa.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharti Airtel (BHARTI)
Telecom
Takeaways from MTN CY2010 annual results. Early days, but MTN’s 2HCY10
performance in Nigeria and Ghana (two key markets where MTN is Bharti’s largest
competitor) showed little impact of Bharti’s entry. Also note that (1) while
acknowledging increased competitive intensity in some markets, MTN management
showed no signs of concern, and (2) MTN’s capex guidance for Nigeria and Ghana
sums up to US$1.35 bn for CY2011E, much higher than Bharti’s 16-country capex
guidance of US$800 mn for FY2012E.
Bottomline – MTN is a formidable competitor in 5 of Bharti’s 16 African markets
Bharti competes with MTN in 5 of its 16 African markets – Nigeria, Ghana, Uganda, Zambia, and
Congo B. These markets contribute around 50% of Bharti’s Africa revenues and EBITDA. More
importantly, these markets, especially Nigeria, are equally important in MTN’s portfolio as well –
Nigeria contributed 42% to MTN’s EBITDA in CY2010. MTN is the #1 player in 4 out of these 5
markets.
It is also important to appreciate (1) the financial strength of MTN. It has an annual revenue base
of >US$15 bn, EBITDA base of ~US$7 bn, and an unleveraged balance sheet (net cash of US$123
mn at end-Dec 2010) and (2) MTN’s network leadership in these markets, especially Nigeria where
the company now has 9,000+ base stations as compared to ~4,000 for Bharti.
Bharti’s Africa capex guidance continues to perplex us
MTN spent a total of US$1.07 bn in capex in Nigeria and Ghana in CY2010 and has guided for a
capex of US$1.35 bn in these two countries in CY2011E (US$1.1 bn in Nigeria alone).
Interestingly, 54% (or US$600 mn) of planned Nigeria capex is earmarked for 2G access network
alone. Even as MTN clearly stated that its capex plans for Nigeria are geared towards increasing
the company’s network leadership in the wake of increased competitive intensity in the market,
Bharti’s US$800 mn capex guidance for all 16 countries appears low to us. Looking at it
differently, MTN’s consolidated capex guidance for CY2011E (assuming a 10% revenue growth
yoy) translated into a capex/sales of 17.5% on a revenue base of US$16 bn+, while Bharti’s
guidance implies a capex/sales of ~20% on a revenue base of ~US$4 bn.
Other highlights from MTN results
Sharp EBITDA margin improvement in both Nigeria and Ghana – Nigeria OPM was 64.5% in
2HCY10 versus 61.3% in 1H, while’s Ghana’s was 47% in 2HCY10 versus 42% in 1H. Revenue
growth was strong in both these markets – 16% yoy in local currency terms in Nigeria and 14% in
Ghana in CY2010.
Please see our report ‘Not so fast’ dated Jan 6, 2011 that details our thoughts on Bharti Africa.
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