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Bharti Airtel (BRTI.BO)
2Q – Wireless Hit from Seasonality & 3G; Africa Starting to Shine
EBITDA miss primarily from weak wireless — 2QFY12 consol EBITDA at Rs58.2bn
(+2%qoq; 14%yoy) came in slightly below expectations, primarily due to weaker-thanexpected
wireless business (mix of seasonality, margin pressure from 3G roaming and
dip in non-voice rev) even as Africa delivered another quarter of strong performance.
PAT at Rs10.3bn (-16%qoq) was further hit by an fx loss of Rs2.5bn. We incorporate
2Q and tweak EBITDA (FY12-14E cut by 2-3%) and EPS (2-4% down; FY11E cut 9%
from fx hit). New TP is at Rs452 on roll-over to June-12E DCFs (Core, Tower and Zain).
Wireless was weak but should pick up in 3Q — Wireless revs remained flat qoq as
the decline in volumes (-1.6%qoq) was offset by rev/min uptick (+0.9%; partly from 3G
roaming). Mgmt has attributed the decline to seasonality though we believe it includes
some impact from tariff modifications. The impact of tariff hikes will be gradual (mgmt
indicated bulk of the impact has not yet been felt) but Bharti (like other GSM
incumbents) has also selectively reduced talktime on recharge volumes where impact
on usage would have been felt faster. Topline growth however should revive in 3Q with
the seasonal pick-up in the mins growth. Non-voice rev qoq decline was primarily due
to the 50% cut in 3G tariffs. Meanwhile wireless margins declined 50bps primarily due
to the 3G roaming arrangements (reflected in higher access charge).
Africa delivers another stellar quarter — Top-line growth at 7.4%qoq was the
highest since acquisition. Elasticity continues to be >1 with a 5% decline in rev/min
coming with a 6% MoU increase. Overall mins growth came in strong at 10% qoq
(9.5% in 1Q). Growth has revived after 4Q11 which had been hit by equipment scarcity.
The network roll-out has now revived with ~1,000 sites rolled out in 2Q. Capex
guidance meanwhile has been raised to US$1.4-1.5bn (US$1-1.2bn earlier).
Other businesses were mixed — Towerco revenue growth continues to be steady -
EBITDA grew 4% qoq. Enterprise EBITDA too grew 3% on the back of healthy NLD/ILD
mins growth. However, fixed line fell 2% even as ARPU increased slightly. Maintain
Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharti Airtel (BRTI.BO)
2Q – Wireless Hit from Seasonality & 3G; Africa Starting to Shine
EBITDA miss primarily from weak wireless — 2QFY12 consol EBITDA at Rs58.2bn
(+2%qoq; 14%yoy) came in slightly below expectations, primarily due to weaker-thanexpected
wireless business (mix of seasonality, margin pressure from 3G roaming and
dip in non-voice rev) even as Africa delivered another quarter of strong performance.
PAT at Rs10.3bn (-16%qoq) was further hit by an fx loss of Rs2.5bn. We incorporate
2Q and tweak EBITDA (FY12-14E cut by 2-3%) and EPS (2-4% down; FY11E cut 9%
from fx hit). New TP is at Rs452 on roll-over to June-12E DCFs (Core, Tower and Zain).
Wireless was weak but should pick up in 3Q — Wireless revs remained flat qoq as
the decline in volumes (-1.6%qoq) was offset by rev/min uptick (+0.9%; partly from 3G
roaming). Mgmt has attributed the decline to seasonality though we believe it includes
some impact from tariff modifications. The impact of tariff hikes will be gradual (mgmt
indicated bulk of the impact has not yet been felt) but Bharti (like other GSM
incumbents) has also selectively reduced talktime on recharge volumes where impact
on usage would have been felt faster. Topline growth however should revive in 3Q with
the seasonal pick-up in the mins growth. Non-voice rev qoq decline was primarily due
to the 50% cut in 3G tariffs. Meanwhile wireless margins declined 50bps primarily due
to the 3G roaming arrangements (reflected in higher access charge).
Africa delivers another stellar quarter — Top-line growth at 7.4%qoq was the
highest since acquisition. Elasticity continues to be >1 with a 5% decline in rev/min
coming with a 6% MoU increase. Overall mins growth came in strong at 10% qoq
(9.5% in 1Q). Growth has revived after 4Q11 which had been hit by equipment scarcity.
The network roll-out has now revived with ~1,000 sites rolled out in 2Q. Capex
guidance meanwhile has been raised to US$1.4-1.5bn (US$1-1.2bn earlier).
Other businesses were mixed — Towerco revenue growth continues to be steady -
EBITDA grew 4% qoq. Enterprise EBITDA too grew 3% on the back of healthy NLD/ILD
mins growth. However, fixed line fell 2% even as ARPU increased slightly. Maintain
Buy.
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