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Robust operating show again…

Bharti Airtel reported yet another strong operating performance with beat on KPIs such as ARPU, subscriber addition and margins. Consolidated topline came in at | 26,518 crore, up 5.8% QoQ on a like to like basis, driven by Indian wireless revenues, which were up 6.8% QoQ (32.4% YoY) at | 14,779 crore, with ARPU growth of 2.4% QoQ at | 166 and strong net sub addition of ~14.2 million. Africa revenues were up 6.7% QoQ at | 7644 crore. Consolidated EBITDA came in at | 12,053 crore, up 8.9% QoQ on comparable basis with margin of 45.5% (up 128 bps QoQ). Overall Indian margin was up 78 bps QoQ at 45.2% with Indian wireless margins at 42.6%, up 110 bps QoQ, largely a function of operating leverage.

India wireless business – strong performance yet again

Key highlight was net subscriber addition of ~14.2 million coupled with ARPU growth of 2.4% QoQ at | 166. It also witnessed a strong 4G Net adds of ~12.9 mn. The company also added ~7 lakh post-paid subscribers driven by omni-channel capabilities. While it rooted for tariff hike need for decent RoCE generation, management reiterated that they would drive ARPU growth ahead through natural upgrade to 4G and acceleration to post-paid but tariff hike will be function of competitive intensity. We expect monthly ARPU to reach | 192 in FY23 vs. current levels of | 166, as we do not build in any one-time hike in our estimates.

Non-wireless segment shining too

Broadband was noteworthy in the non-wireless segment with the company adding ~2.15 lakh broadband subs (highest ever). Notably, the company has accelerated LCO partnerships in non-wired cities, taking up the LCO partnership model live in 120+ cities (~48 cities in Q2). It sees strong traction riding on traction online education, streaming services and work from home needs. It also continues to ramp up its enterprise offerings through new collaborations and services. Revenue growth of ~9% YoY, in the enterprise segment, was robust.

Valuation & Outlook

Bharti Airtel continues to report resilient numbers especially on Indian wireless business front. The strong subscriber addition and ARPU traction which percolated into superior EBITDA (incremental margins of ~60%) are key positive. The commentary of no major step up capex intensity in 5G (apart from spectrum spends), also provides clarity on cash generation. The non-wireless business traction along with Africa performance, continue to witness strong traction. We see the favourable industry structure of three players (two being strong), a good enough kicker for eventual hike in tariff as well as superior digital play in medium to long term. We maintain our BUY rating on the stock with a revised DCF based target price of | 730/share (earlier | 700/share).

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