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* All-round good performance

* Q1 was a steady quarter with a 5% qoq rise in EBITDA, outpacing our estimates by 4%, led by better-than-anticipated revenue performance across segments. India wireless margins expanded by 165bps qoq, partially aided by a 4% sequential fall in network opex.

* Sustained improvement in data subs base (60.1% vs. 53.3% in Q1FY21), the highest-ever home broadband subs adds and an increase in FCF generation to Rs47bn were the key positives. The rise in monthly churn for the 3rd consecutive quarter was a negative.

* The increase in net debt can be attributed to deferred spectrum obligations. Capex guidance for FY22 remains unchanged despite higher India spends in Q1. Potential pricing aggression with launch of JioPhone Next in Sept’21 will be a key event to watch out for.

*  While the recent tariff hike was a step in the right direction, the same in the mass pre-paid segment continues to be the crucial lever for balance-sheet deleveraging and re-rating. Maintain Buy with a revised SoTP-based TP of Rs730 (roll forward valuation to Sept’23E).

* EBITDA surpasses expectations; data subs base continues to trend upward: Consolidated revenues and EBITDA rose 4.3% and 5.3% qoq, beating our projections by 3% and 4%, respectively. In the wireless segment, India and Africa businesses delivered steady performance, with EBITDA increasing by 5% and 8% qoq, respectively. Margins for the India wireless segment saw a sequential expansion of 165bps, partially aided by a 4% dip in network opex, despite continued site expansion and fuel cost inflation. In the non-wireless segments, DTH was the sole business that saw an uptick in EBITDA, while the enterprise and home broadband segments saw sequential declines of 1% and 3%. RPAT of Rs2.8bn missed our expectations due to higher ETR and interest expenses. Data volumes jumped 17% qoq.

* Outlook: Bharti continues to showcase its strength - even in an otherwise muted quarter - with healthy 4G adds, revenue mix improvement, highest-ever home broadband subscriber adds and healthy FCF generation. Although the recent tariff hike for selected customers is a clear positive, the same in the mass pre-paid segment remains key. Our FY22 estimates already bake in ~15% tariff increase apart from the above-stated changes. Launch of JioPhone Next in Sept’21 will be closely watched out for in terms of pricing aggression strategy. Bharti has a clear advantage to further gain high-quality subscribers in both pre-paid and post-paid categories, considering VIL’s weak financial position. Despite high India capex in Q1, management reiterated its unchanged annual capex guidance of ~Rs241bn for FY22. We maintain our revenue and EBITDA estimates but cut PAT projection on account of higher ETR in Africa operations. 

* Key risks: 1) adverse regulatory regime; 2) delay in tariff hikes; 3) currency depreciation in the African market; 4) market share loss in the mobile business; and 5) sooner-than-anticipated 5G capex.

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