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Healthy revenue growth: Bharti Airtel revenue from operations was in line with our expectations at Rs 37,440 Cr, up by 14.1% YoY/4% QoQ driven by healthy addition of ~10 Mn customer in overall business mainly in the India and South Asian markets. Amongst segments, its Mobiles services India reported a growth of 11.9% YoY/4.3% QoQ to Rs 20,392 Cr, followed by Mobile services Africa which was up by 16.6% YoY/2.6% QoQ to Rs 11,317 Cr while other segments too reported healthy growth.

Cost cutting initiatives aid margins expansion: EBITDA for the quarter came in at Rs 19,599 Cr, up by 18.6% YoY and 4.8% QoQ. Consequently, it reported highest ever EBITDA margin for consecutive quarter at 52.3% which saw an expansion of 196bps YoY/42bps QoQ. Despite the 5G rollouts the expansion of EBITDA and margin was aided by optimization of costs while healthy addition of customers and war on waste programs also resulted in better operating efficiency.

Upgrade to 4G/5G aid ARPU expansion: Its participation of data customers as a proportion of its Mobile services has grown by ~520bps YoY/100bps QoQ to 70.4% as a result of 2G to 4G/5G upgrades. Besides, it also added ~3.2 Mn users in its Indian business units coupled with reshuffling of entry level plans in the preceding quarters aided ARPUs expansion by 9.3% YoY/3.6% QoQ to Rs 200.

Strong opportunity on Postpaid: As of now its postpaid user base stands at ~6% of its total subscriber base. Management believes there remains a huge opportunity in the postpaid space as they attract higher ARPUs as compared to prepaid ARPUs. Its nuclear family plans have been very well accepted by customers resulting in 1.8x ARPUs against the prepaid ARPUs. Going ahead, it will be aiming at increasing the participation of postpaid customers and implementing new and better nuclear plans which would eventually aid in ARPUs expansion.

5G Outlook: The 5G penetration in the Indian markets is still at a nascent stage due to slower transition of customers from their current smartphones to 5G enabled smartphones. As per the company, of the overall smartphones shipment 48% account for 5G smartphones indicating that there is still ample time for the industry to witness full 5G transition and up-gradation. Consequently, it is in the process to complete its 5G rollouts by the end of FY24.

Concall & other key highlights: 1) With lower penetration of 5G smartphones and low adoption of new tariff plans, management has kept same pricings for its 4G and 5G tariffs. 2) The company is planning to expand its penetration in the rural areas ~60k villages, which will also prove to be a next leg of growth where it will compete with its nearest competitor. 3) Management indicated the capex for Indian business unit would be ~32,000 Cr towards 5G infrastructure while for Africa it would ~USD 700-800 Mn. 4) Management indicated exp

Outlook & Valuations: Bharti has industry leading ARPUs of Rs 200 with high sticky customer base with a wireless market share of ~32.4%. Going ahead, it will focus on implementing its 5G infrastructure across India while also target nearly 60k villages and postpaid additions which will prove to be the next growth leg for the company. Besides, its non-core segments Airtel Business, Home Services and Digital services all have been delivering stable growth. Financially, we have estimated its Revenue/ EBITDA/PAT to grow at 16.5%/18.7%/38.6% CAGR over FY23-25E and have maintained a Buy rating with a target price of Rs 1,010.

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