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Bharti Airtel (Airtel) reported steady operating performance for the India business, though consol. numbers were impacted by devaluation of the Nigerian currency. India Wireless revenue increased 2.7% QoQ, with margin up by 14bps QoQ to 54.9%. Revenue growth was led by strong 4G subscriber adds (7.7mn vs 5.6mn in Q1) and postpaid customer adds of 1mn (vs. 0.8mn in Q1). ARPU is up 1.5% QoQ to Rs203. Airtel is likely to benefit from the: i) subscriber gain from Vi, with launch of 5G; ii) mix change, even without a tariff hike, as it can move users from 2G to 4G/5G; iii) historically higher pass-through of the increase in revenue to EBITDA. We cut FY25E/FY26E EBITDA 4%/1.5%, as we adjust for the Airtel Africa and Enterprise segment numbers. We raise our TP to Rs1,050/sh from Rs1,000/sh, as we roll it forward by a quarter; retain BUY.

Bharti Airtel: Financial Snapshot (Consolidated)

Q2: Robust 4G-data and postpaid customer addition; ARPU up 1.5%QoQ

Though Q2 consol. revenue (-1.1% QoQ) was impacted by Airtel Africa revenue reduction on currency devaluation (-9% QoQ), the India business delivered in-line performance. Key positives for Q2 were: i) strong 4G subscriber adds (7.7mn vs 5.6mn in Q1); ii) highest-ever postpaid net-adds of 1mn (vs. 0.8mn in Q1); iii) subscriber addition of 3.7mn (vs. 3.1mn in Q1); iv) Homes registering the highest-ever customer net additions in Q2 at 471K (413k in Q1); v) Mobile Broadband Base station additions in Q2 were 23.4k vs. 20.3k in Q1; and vi) marketing expenses/access charges declining 7% QoQ/9% QoQ. Key negatives in Q2: i) India enterprise revenue growth moderating to +1.1% QoQ (+6% QoQ in Q1); ii) Airtel Africa revenue down 9% QoQ; iii) DTH customer count declining by 169k QoQ in Q2.

Bharti Airtel wields levers to improve ARPU, even without a tariff hike

Bharti Airtel has levers to improve ARPU even without a tariff hike which include: i) prepaid feature phone to smartphone conversion that now implies a ~35% jump in ARPU; ii) prepaid to postpaid conversion leading to increase in ARPU; iii) data monetization, with impulse buying of data allowance; and iv) one price-plan for international roaming, with focus on prepaid. Such measures are likely to help India mobile ARPU increase to Rs216 by Q2FY25E. We expect a tariff hike only by mid-FY25E.

Outlook: Mix change, Home Broadband, Enterprise to aid growth

We see Airtel benefitting from the mix change, even without any tariff hike. Moreover, Airtel has prepaid its spectrum dues till FY26, besides having cash & cash equivalent of Rs43.7bn as of end-Q2FY24 and pending calls on rights issue of ~Rs156bn; this give us comfort on cash-flow. We also like the company’s high pass-through of revenue to EBITDA. Airtel’s Enterprise and Home Broadband segments grant the company added growth levers. We cut EBITDA by 4%/1.5% for FY25E/FY26E, as we adjust for Airtel Africa and Enterprise segment numbers. We raise our TP to Rs1,050/sh (9x Sep-25E EV/EBITDA) from Rs1,000/sh, as we roll it forward by a quarter; retain BUY.

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