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* Consolidated revenue/EBITDA grew 1% QoQ due to soft 1% growth in each of the India Mobile/Africa businesses. As expected (recent report), capex rose 23% QoQ to INR114b, leading to moderation in FCF and deleveraging.

* In the near term, we believe earnings growth is expected to remain soft due to slow market share gain, limited tariff hikes and moderating 4G mix benefits. Moreover, higher capex for the 5G rollout and rural coverage could lead to moderate FCF generation. As a result, we believe the stock could remain range-bound in the near term. However, the company is well poised to benefit from sectoral tailwinds for the next two years (EBITDA CAGR of 12% over FY23-25E). Reiterate our BUY rating on the stock

India Mobile/Africa EBITDA growth slows to mere 1%/flat

* Consolidated revenue inched up 1% QoQ to INR360b (in line), with 1% growth in India Mobile revenue and a 1% decline Africa revenue.

* Consolidated EBITDA grew by a mere 1% QoQ to INR187b (in line), with 1% growth in India Mobile and flat Africa EBITDA. Home and Enterprise businesses saw 7%/3% QoQ growth. EBITDA margin grew 40bp to 51.9% on improvements in Home and Enterprise businesses.

* Consolidated PAT after minority was up 89% at INR30.1b, which led to a profit of INR8.9b in JV. Adjusted consolidated PAT after minority stood at INR26b v/s INR20b QoQ (est. INR20.4b).

* Revenue/EBITDA/PAT after minority reported strong YoY growth of 19%/24%/2x in FY23.

* India Mobile ARPU was flat QoQ at INR193 and the number of subscribers grew 1% QoQ to 335m (added 3m v/s 6m for RJio).

* OCF fell 3% QoQ to INR122b due to soft earnings growth and increased tax and interest. Higher capex pulled down FCF to merely INR7.9b v/s INR33.4b QoQ. Both India and Africa have seen a rise in capex. For the last four quarters, FCF has continued to decline from the peak of INR47b in 4QFY22 to INR7.9b in 4QFY23.

* The net debt too has risen significantly to INR2.1t, with the net debt-toEBITDA ratio of 2.8x. Excluding lease liability, it stands at INR1b.

Key highlights from the management commentary

Revenue grew 1% QoQ despite two fewer days in Feb’23 (after adjusting it, ARPU stood at INR195).

* Bharti focuses on the densification of top 150 urban cities, which account for 40%/75%/90% of overall/broadband/B2B markets. It is also expanding in rural markets, which have become prospective 4G markets.

* FY24 capex is expected to be at FY23 level, while it could come down in FY25 as the 4G rollout completes and 5G wireless capex peaks out.

* Bharti has re-launched its ‘war-on-waste’ program, with the focus on reducing network costs and sales costs, and stopping capacity investments in 4G where it is witnessing traffic offload from 5G.

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