IGI Logo

Slightly ahead of estimates on better performance by Airtel Africa and India Wireless

Bharti Airtel’s 1QFY26 consolidated financials are not strictly comparable on a YoY basis, as Indus Towers (Indus) was consolidated starting midNovember 2024.

Quick summary: Overall, Bharti reported a good 1QFY26, with a slightly better performance in Airtel Africa (5% beat). India Wireless was also slightly ahead of estimates with ~3% QoQ increase in both revenue and EBITDA. The growth was driven by higher ARPU and better incremental margins, which offset a slight moderation in subscriber net adds. Homes continue to benefit from acceleration in subscriber additions, while Enterprise margins expanded further, driven by the exit of low-margin businesses. Capex normalized after a sharp increase in 4QFY25, while reported net debt witnessed a sharp decline of ~INR130b, driven by robust ~INR143b FCF (after interest and leases) generation (vs. ~INR97b for 4QFY25).

• Consolidated revenue at INR495b (+29% YoY, our est. INR486b) rose 3% QoQ, driven by robust growth in Africa (+6% QoQ) and the Home Broadband business (+8% QoQ).
• India revenue (including Indus) grew 2% QoQ to INR376b (+16% YoY) and was slightly above our estimates, largely driven by India Wireless (+3% QoQ).
• Consolidated EBITDA at INR278b (21% YoY, 2% above) increased 3% QoQ, driven by robust performance in Home Broadband and Airtel Africa (both up 8% QoQ).
• India EBITDA (including Indus) at INR224b (+1.5% QoQ, 20% YoY) was 1% above our estimate, largely driven by better performance in India Wireless (+3% QoQ) and Airtel Business (5% above).
• Reported EBITDA margin moderated ~10bp QoQ to 56.3% (+130bp YoY), in line with our estimate.
• Reported PBT (before the share of JVs) at INR104b (+8% QoQ, +2.4x YoY) was broadly in line with our estimate.
• Reported attributable PAT at INR59.5b grew 43% YoY, but was ~3% below our estimate due to higher interest expenses (+11% YoY).
• Adjusted for exceptional items in the past quarters, PAT at INR59.5b grew 14% QoQ (+103% YoY).

Net debt declines sharply due to improvement in FCF generation; capex normalizes

• After sharp increase in capex in 4QFY25, Consolidated capex normalized to INR83b (-42% QoQ, -15% YoY). India capex (ex-Indus) at INR73b declined ~42% QoQ (-15% YoY) and was ~19% below our estimate.
• Bharti’s consolidated free cash flow (after leases and interest payments) improved further to INR143b (vs. ~INR97b QoQ), driven by favorable movement in working capital (payable up ~INR44b QoQ).
• Bharti’s consolidated net debt (ex-leases) declined ~INR130b QoQ to INR1.255t (vs. INR1.385t QoQ) due to robust FCF generation. Including the impact of leases, Bharti’s consolidated net debt declined by ~INR123b QoQ to INR1.92t (vs. INR2.04t QoQ).
• Bharti’s consolidated net debt (including leases) to EBITDA (annualized) declined to 1.7x (vs. 1.86x QoQ). India SA net debt to EBITDA moderated to 1.62x (vs. 1.79x QoQ).
• Excluding lease impact, Bharti’s net debt to EBITDAaL dipped to 1.26x (vs. 1.42x QoQ) for consolidated business and 1.35x (vs. 1.53x QoQ) for India SA.

India Wireless: Slightly above estimate on higher ARPU and better incremental margins; subscriber net adds moderate

• Bharti’s India wireless ARPU at INR250 (+19% YoY, our est. INR248) was up 2% QoQ (vs. +1.2% QoQ for RJio at INR209), driven by subscriber mix improvement and one extra day QoQ.
• However, Bharti subscriber net adds moderated to 1.2m paying net adds (vs. 5m net adds QoQ, ~7.3m wireless net adds for RJio) and were weaker than our estimate of ~3.5m.
• Subscriber mix continues to improve as Bharti added further ~0.7m postpaid net adds (+2.7% QoQ, 11% YoY). Furthermore, its 4G/5G net additions remained resilient at 3.9m (though moderation vs. ~6.6m 4G net adds QoQ).
• Bharti’s India wireless revenue rose 2.9% QoQ (vs. 2.9% QoQ for RJio, including FTTH) to INR274b (+22% YoY, our est. INR272b).
• India wireless EBITDA rose 3.3% QoQ (vs. 5.3% QoQ for RJio, including FTTH) to INR163b (30% YoY, our est. INR161b).
• Reported wireless EBITDA margin expanded further ~20bp QoQ to 59.4% (+380bp YoY, vs. +125bp QoQ for RJio to 54%) and was 10bp ahead of our estimate.
• Incremental margin remained resilient at ~67% (vs. ~85% in 4QFY25 and ~97% for RJio) and was slightly better than our est. of 63%.
• On a YoY basis, Bharti’s incremental margin stood at 77% (vs. ~63% for RJio), driven by better flow-through of tariff hikes.
• India Wireless capex declined by a sharp ~51% QoQ to INR30b (-39% YoY) and was ~36% below our estimate.

Homes: In-line results; acceleration in subscriber net additions offset by continued ARPU declines

• The company’s Homes BB net adds accelerated further to ~940k net adds (vs. ~810k QoQ, our estimate of ~900k net adds) to reach ~11m subs (+38% YoY), likely on the ramp-up of FWA services.
• Reported ARPU decline continued with a further ~1% QoQ dip to INR537/month (-6% YoY, our est. INR539).
• Homes’ revenue was up 8% QoQ to INR17.2b (+26% YoY, inline). Homes’ EBITDA at INR8.6b (+8% QoQ, 25% YoY) was also in line with our estimate.
• EBITDA margin expanded ~15bp QoQ to 50% (-25bp YoY) and was ~10bp below our estimate.
• Capex in Homes Business remained elevated and was up 2.1x YoY to INR14.6b (- 4% QoQ, 13% higher than our estimate), likely on the ramp-up of FWA offerings.

Enterprise: Revenue decline continues but EBITDA margin improves further; capex normalizes

• Airtel Business (Enterprise) revenue declined further ~5% QoQ to INR50.6b (-8% YoY, 3% below), driven by Bharti exiting lower-margin business.
• EBITDA at INR21.5b declined ~4% QoQ (+9% YoY) and was ~5% above our estimate as EBITDA margins expanded by ~50bp QoQ to 42.6% (vs. our estimate of 39.5% and 36.3% YoY), likely due to an improved product mix.
• After a high capex in 4QFY25, capex for the Airtel business normalized to INR7.3b (-71% QoQ, -11% YoY).

Other businesses: Strong growth in Africa; DTH impacted by net subscriber declines

• Airtel DTH’s revenue at INR7.6b (2% below) was flat QoQ (-2% YoY) as subscriber trends were weaker with 204k net declines (vs. 75k QoQ net adds in 4QFY25, our est. 200k net adds). ARPU was broadly stable QoQ at INR161 (+1% YoY, inline). DTH EBITDA at INR3.9b (+1% QoQ, -12% YoY) was ~1% below, as margins expanded ~55bp QoQ to 50.9% (-575bp YoY and ~50bp ahead of our estimate).
• Airtel Africa (AAF) continued to report strong double-digit YoY constant currency growth. AAF’s reported revenue (in rupee terms) rose ~6% QoQ (+25% YoY, 4% beat), while EBITDA rose ~8% QoQ (33% YoY, 5% above our estimate), driven by the flow-through of tariff hikes in Nigeria.

Other highlights: Data volume surge on IPL boost; tower additions moderate further

• Data volume for the India Wireless business rose ~8% QoQ (vs. 5% QoQ in 4QFY25, +12% QoQ for RJio including FTTH), while data usage per sub improved to 26.9GB/month (vs. 25.1GB QoQ, 37GB/month reported by RJio, including FTTH).
• Voice usage on the network in India Wireless declined 1% QoQ (vs. +2% QoQ in 4QFY25 and flat QoQ for RJio), with the minute of usage (MoU) per subscriber moderating to 1,143mins (vs. 1,163min QoQ and 1,007mins for RJio).
• Bharti’s tower additions moderated further to ~1.8k towers QoQ (vs. 3.3k in 4QFY25), bringing the total tower count to ~340k, while revenue per site inched up 2% QoQ to INR267k/month (+16% YoY).

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412