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

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Bharti’s 4QFY15 results :: HDFC Securities

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Bharti Airtel: India business saves 3QFY15 but can't prevent forecast cuts ::Kotak Sec, report

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India business saves 3QFY15 but can’t prevent forecast cuts. A disappointing 3QFY15 and subdued prognosis on Africa drive a 3-4% cut in consolidated EBITDA and 8-16% in consolidated EPS forecasts for FY2016/17E. Our India business estimates are broadly unchanged. We roll over our SOTP to Dec 2016E from Mar 2016E; upside from rollover is lost to EBITDA cuts and we cut our TP on the stock to `420 (from `430). BUY stays primarily on the back of inexpensive valuations even as Idea remains our preferred idea in the sector

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Data aids revenues; African margins a drag • Bharti Airtel :: ICICI Securities, report

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Bharti Airtel - Currency Headwind Derails Africa; Result Update Q3FY15 ::Edelweiss, report

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Bharti Airtel: Africa foray continues to hurt; India saves yet another quarter :: Kotak Sec, report

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Africa foray continues to hurt; India saves yet another quarter. Bharti reported broadly in-line revenues and EBITDA for 3QFY15 despite another quarter of sharp miss on Africa financials. Africa remains a story of constant misses on progressively lower expectations. Poor Africa performance coupled with the crude-led pressure on several African economies will likely drive another round of massive cuts in Africa estimates. India wireless and DTH continue to be the two bright spots. Even as inexpensive valuations bake in the obvious (Africa) and the potential (spectrum/ R-Jio) negatives, Bharti’s 3QFY15 once again lends weight to the case for Idea as a better pick.


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Telecom: Making VoIP expensive - a smart or a bad move by Bharti? :: Kotak Sec, report link

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Bharti Airtel: Undervalued. Upgrade to BUY :: Kotak Sec, report link

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Bharti Airtel - Inks Fourth Tower Sale Deal in Africa ::Edelweiss, link

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Bharti Airtel - Inks Third Tower Sale Deal in Africa:: Edelweiss

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Operationally in line, PAT higher due to exceptions • Airtel :: ICICI Securities, PDF link

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Buy: Bharti Airtel; Target 480 :: ICICI Securities, with PDF link

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Divests 3500 African towers to Eaton Towers
Bharti Airtel has announced that the company has entered into an
agreement with Eaton Towers for divestment of its 3500 African tower
assets for an undisclosed sum. The deal is a sell and lease back
arrangement between the two companies with a time frame of about 10
years. This deal is the second after the 3100-tower deal to Helios Towers,
Africa, which was also concluded in July. The deal value, as per media
sources, was about | 2400 crore ($ 400 million).
Airtel had about 15,000 towers across 17 continents in Africa, which it
plans to divest. Deals for about 6600 towers have materialised so far. We
may see further deals for the remaining 8400 towers, going ahead.
Though Airtel will have to incur an additional operating expenditure for
tower rentals it will save considerably on depreciation and interest.
However, the entire tower portfolio could fetch Airtel | 15000-18000 crore
($2.5-3 billion) the proceeds of which could be used for its debt reduction
which stands at hefty levels of | 64688.5 crore (net debt as of FY14). This
can lead to significant yearly interest cost savings to the tune of | 990-
1188 crore. We will, however, factor this in our estimates once clarity on
the deal valuations is available.
We maintain our BUY recommendation on Bharti Airtel. We value it using
the DCF methodology and arrive at a target price of | 480.


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Technicals: Coromandel, Bharti Airtel, Hyderabad Ind, GSPL, Wipro, Voltas :: Business Line

 

Morgan Stanley Research, India Telecommunications Analysing the impact of FX movement on Bharti and Idea

India
Telecommunications
Analysing the impact of FX
movement on Bharti and Idea
The macro environment is getting tougher with INR
depreciation over 25% since early May and
expectations of lower GDP growth. We reiterate our
bullish stance on Indian telcos with better earnings
growth visibility, improving tariffs and margins. Idea
remains our top pick, followed by Bharti.
INR has depreciated by over 25% vs. US$ since
early May and ~15% since the close of F1Q14: We
have now revised our average INR/US$ assumptions
from Rs58/US$ to Rs62/US$ for F2014, and from
Rs60/US$ to Rs67/US$ for F2015. For balance sheet
impact, we have assumed a closing rate of Rs68/US$
for F2014E as compared to Rs59.7/US$.
Bharti is the most affected: However, the forex loss is
largely negated by the higher African EBITDA in Indian
currency in the P&L in F2014E. The balance sheet
impact is Rs73bn or ~Rs18/share, which brings down
our price target. In our bear case, assuming a closing FX
rate of Rs80/US$ for F2014E, the balance sheet impact
is Rs179bn or Rs45/share.
Idea is least affected: We estimate P&L impact at only
~2% and balance sheet impact at We remain bullish on Indian telcos: 1) Competitive
intensity has eased; voice tariffs should inch up. 2)
Traffic growth continues for incumbents. 3) Data
volumes are picking up. 4) Incremental revenues are at
higher margins, implying margin upside. 5) Capex is
under control, aiding FCF.
Prefer Idea, then Bharti: Idea is likely to have the highest
revenue growth and margin improvement via earnings
sensitivity to ARPMs. For Bharti, despite slowdown in
Africa and lower INR, at close to an all-time low valuation
(6.7x F2014E EV/EBITDA), much is priced in.
Key risks remain: Regulations, RIL’s Jio Infocomm entry

Bharti Airtel - Robust India business offsets Africa weakness :LKP

Pricing power and overall operational mix improves in Q1

Bharti’s Q1 FY14 results were strong, driven by Indian operations, where we saw tariff increase coming in with improvement in RPM.  Africa revenues went down sequentially as traffic growth was more than offset by tariff de-growth as there was a cut in interconnection rates and select markets like Nigeria faced socio-political issues where revenues went down. However, on a consolidated level, the underperformance in Africa was more than offset by superior performance in India. Consolidated revenues grew by 9.3% yoy and 3.6% qoq at Rs203 bn, while at EBITDA levels, margins grew by 120 bps qoq to 32.2% as SG&A expenses showed an improvement to 17% from 17.9% qoq as a % of sales. Access charges also went down to 13.3% from to 14% qoq. This improvement in margins were purely driven by Indian business where pricing power was seen returning to the market leader and cost control measures provided the benefits. Competition also slackened in the quarter and there was an overall improvement in the operating metrics. Even below EBITDA levels, costs remained under control. Depreciation expenses as a % of sales declined qoq from 19.4% to 19%, while tax zoomed up as African operations posted mix results with losses widening in some countries. Hence, at PBT levels, profits grew by 31% qoq at Rs 16.12 bn, while PAT came in at Rs6.4 bn which was a 26% qoq growth, which was still robust.

Outlook and valuation

In line with improvement in regulatory scenario and competitive environment in India, we continue our positive stance on Bharti’s domestic operations. The structural improvement in pricing and proliferation of data services is boosting Bharti’s performance to the core. Overall improvement in subscribers and total MOUs coupled with ARPU improvement remains the key going forward.  Africa business reported a disappointing quarter in Q1, however better than Q4 as the business showed a margin improvement sequentially. We believe African operations will show a sequential improvement as the socio-political situation in Nigeria, the largest market for Bharti will help to boost the performance. Also, expansion of 3G services in most of the countries in Africa will somewhat offset the weakness over there and alsdo reduce the tax rate with countries narrowing their losses gradually. In line with a strong Q1 from India, we have raised our estimates for Bharti by 3%/5% at earnings level in FY14E/15E. We therefore raise the target price for Bharti from Rs360 to Rs398. We maintain BUY on the stock factoring in the regulatory outgo of Rs32 in case associated with spectrum renewal in the metro circles coming up shortly.

LKP Research

Bharti Airtel: Jun-13—Pricing power visible; expect strong earnings growth ::Credit Suisse

● Bharti reported strong Jun-13 quarter numbers with 2% beat each
on revenues/EBITDA, and 11% adj. PBT beat. Higher taxes and
one-time non-cash costs led to reported profit miss of 14%.
Adjusted for exceptionals, profits came in-line. Full report.
● The results show that the business momentum in India has
definitely turned – with RPM increasing 4% QoQ without any loss
of minutes. The pricing improvement flowed through into
profitability with a 180 bp margins increase (QoQ). Management
comments and our channel checks indicate such pricing
improvement could continue in coming quarters.
● Cash flow is growing, with the company generating $470 mn in
free cash in Jun-13, compared to $750 mn in the whole of FY13.
RoCE – which has been falling ever since the Africa acquisition,
bottomed out and improved for the first time.
● Our estimates go down 1-4% on building the quarter's
exceptionals and higher taxes. We expect consensus upgrades to
Bharti in the near future, and retain our OUTPERFORM rating

Religare Research | Bharti Airtel : Solid India performance; Africa remains a drag – Hold

Solid India performance; Africa remains a drag – Hold
Bharti reported a strong Q1 as India ARPM increased by a sharp 4% QoQ,
shoring up wireless margins by 185bps QoQ. Africa remained sluggish (-5%
QoQ), impacted by lower interconnect even as margins rose 130bps QoQ.
While we already build in a margin recovery in FY14, Bharti’s ability to take
more price hikes without hurting volumes remains the key to further
upgrades. Growth in Africa remains below-par, with the underperformance
weighing on EBITDA upgrades. We adjust our estimates to factor in a better
India wireless performance and raise our TP to Rs 370 (from Rs 320). HOLD

Bharti Airtel: 4QFY13 results - on balance, good performance ::Kotak Sec,

Bharti Airtel (BHARTI)
Telecom
4QFY13 results—on balance, good performance. Despite the modest revenue
growth, there were encouraging signs as the India/SA wireless business delivered robust
performance with 5.1% qoq minutes growth, 100 bps OPM expansion and acceleration
in data growth. Marginal decline in RPM can be termed disappointing. We expect Bharti
to benefit from consolidation in the industry that would drive sustained increase in RPM
and profitability. Retain ADD with 12-month forward target price of Rs350; Idea,
despite the recent run-up, remains our preferred pick in the sector.

Investment Focus - Bharti Airtel: Buy :: Business Line

With a shakeout happening in the telecom sector, the pressure on call charges has been easing. The exit of players, whose licences have been cancelled, is likely to put incumbents in a strong position. Bharti Airtel, the country’s top mobile operator, may be a good bet for investors with a two/three-year investment horizon.

By bidding selectively in the recent spectrum auctions, top operators have also signalled they will not overpay for air waves, as they did during the 3G auction.

It is Advantage Bharti Airtel thanks to its large share of subscribers as well as revenues, stable realisations and a focus on adding active customers. But the progress on turning around the African operations has been slow. Non-mobile businesses such as towers (Bharti Infratel), DTH and telemedia (landline and broadband) have seen significant operational improvements.

At Rs 311, the Bharti Airtel share trades at 18 times its likely per share earnings for FY15, which is lower than the levels it has traded and is marginally cheaper than Idea Cellular.

In the first nine months of the current fiscal, Bharti’s revenues increased 13.5 per cent to Rs 59,863 crore, while net profits fell 45.7 per cent to Rs 1,767 crore due to higher tax outgo and interest costs. With peak spending on expansion out of the way and the return of pricing power, profitability is likely to improve from here.

Bharti has the highest share of subscribers and revenues in the domestic telecom space. Its revenue market share is in excess of 30 per cent, placing it comfortably above competitors. Realisations have been stable at 42-43 paisa a minute over the past several quarters, while minutes of usage are rising steadily. The increased usage can begin to pay off once tariffs are put up.

Bharti’s focus has increasingly been on adding lucrative subscribers and weeding out those who do not recharge regularly. As with its competitors, such as Idea Cellular and RCom, Bharti’s subscriber base declined (by about four million users) in the last couple of quarters as it let go of inactive and non-lucrative customers.

The proportion of active subscribers (those that recharge regularly) has increased significantly to 95 per cent, placing it behind Idea Cellular. The African operation has seen a decline in the ARPU (average revenue per user) as well as revenue per minute the past three-four quarters. This has dragged the profit performance. Bharti’s DTH division continues to add subscribers at a healthy pace and ARPU in this segment has risen steadily over the past several quarters and is now at Rs 186 — among the highest in the industry.

Bharti Airtel - "India shines, Africa whines!" -LKP

Q3 results disappoint on higher costs below operating levels in Africa business

Bharti’s Q3 FY13 results were below our expectations due to lower than expected African metrics. On revenue front, the company reported numbers which were inline with our expectations. Consolidated revenues grew by 10% yoy, while remaining flattish qoq at Rs202 bn, while at EBITDA levels, margins declined by 80 bps qoq to 30.5% as network costs expanded to 23.9% of sales from 22.8% qoq, while SG&A expenses showed an improvement to 17.8% from 18.3%. Access charges also went down to 14.4% from 14.6% qoq. However, below the operating levels, depreciation and amortization costs went up by 9% yoy and 1% qoq as the company is expanding its network in Africa. Interest expenses also plummeted to Rs13.3bn, a growth of 30% qoq mainly driven by a derivative loss of Rs2.47 bn. Excluding this charge, interest expenses remained flattish qoq. Tax expenses also showed lumpiness as it included a one-time expense of Rs600 mn associated with tax credits recognized earlier. Excluding this charge as well, adjusted PAT came in at Rs 5.91bn, which was 18% down qoq and 41.5% yoy. Reported PAT came in at Rs2.84 bn which was grossly below our as well as market expectations.

Consol margins to improve

Domestic margins in the quarter came in at 30.3%, while African margins were 26.5%. All the other businesses showed a strong improvement in margins taking the consol margins at 30.5%. Management also mentioned that their Bangladesh business turned break even this quarter. Going forward, in India, tariff hikes and reduced competition will led to an improvement in margins. Lower SG&A along with control in network opex will led to margin improvement from next quarter. However, the extent of participation in upcoming 2G auctions remains a key to assumption. Africa may also post an improvement in profitability but at a lower pace than India as the business and the brand is still at a nascent stage. We also believe that reduction in capex outlay from US$2.5 bn this year to US$2.2 bnin FY 14 will improve the cash flow and ease pressure on the bottomline. Also the company has reduced its debt this quarter as net debt/EBITDA now stands at 2.58x from 2.71x qoq. This will also have a slight positive impact on interest costs.

Outlook and valuation

In line with improvement in regulatory scenario and competitive environment in India, we continue our positive stance on Bharti. Africa business reported a disappointing quarter in Q3while we believe the broad mid-long term picture to be strong. In line with a weak Q3, and pressure on bottomline via higher depreciation, interest expenses and tax rates in Africa, we have cut our estimates for Bharti below the operating levels. Above operating levels our estimates remain broadly constant. We therefore cut the target price on Bharti from Rs380 to Rs371. We maintain BUY on the stock factoring in the regulatory outgo of Rs32 in case Bharti participates in the upcoming 2G auctions.

LKP Research