Bharti Airtel - Africa Disappoints Again; Result Update Q4FY15 ::Edelweiss

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Bharti Airtel’s (Bharti) Q4FY15 revenue, at INR230.2bn, declined by 0.9% QoQ versus Street’s estimate of 1.6% growth. The disappointment was largely due to 9.4% QoQ revenue fall in USD terms in Africa to USD1bn. India mobile business revenue grew by only 1.9% QoQ in INR terms. Consolidated EBITDA margin, at 35.2%, was ahead of Street’s 33.6% estimate, led by lower network costs even though Africa margins tanked further to 20.7%. Bharti has guided for FY16 capex of USD3bn. With stronger spectrum footprint, we believe the company will be well placed to capture data revenue growth, although economic risks in Africa are a concern.

India: Voice realisations dip

India mobile business reported 3.9% QoQ volume growth, which was offset by the 3.9% drop in realisations, partly owing to the change in termination charges. Data volume growth was 12.1% QoQ, with data usage per subscriber increasing to 656Mb. Bharti will expand its 3G footprint aggressively in the 7 circles where it has acquired spectrum in the recent auction. The company has set aside USD2.2-2.4bn for capex in India and continues to invest ahead of demand and will expand its 3G/4G footprint.

Africa: Currency depreciation compounds Africa woes

Revenue, at USD1bn, fell 9.4% QoQ due to the 8.2% knock from currency movement and 1.2% decline in constant currency. EBITDA margins dipped 110bps QoQ to 20.7%. Bharti has completed sale of towers in one country and regulatory process is at an advanced stage in other countries. Tower sale is expected to conclude in Q1FY16 and should be accretive at PBT level. Although currency has taken a toll on Africa business, the company believes it is a good asset and is continuing with planned investments. It has guided for USD600-800mn capex for Africa in FY16.

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