Company Update : Bharti Airtel Ltd By Motilal Oswal Financial Services Ltd
Broadly in line 4Q; India wireless growth impacted by two fewer days QoQ
Bharti’s 4QFY25 consolidated financials are not strictly comparable on QoQ and YoY basis, as Bharti consolidated Indus Towers (Indus) from mid-Nov’24.
Overall, Bharti reported an in-line quarter with ~1%/2% QoQ increase in India wireless revenue/EBITDA as the residual flow-through of tariff hikes was offset by two fewer days QoQ. Homes business continued to benefit from the acceleration in subscriber additions, while Enterprise margins improved significantly, driven by the exit of low-margin business. Capex increased sharply across key segments, while reported net debt inched up QoQ, due to the redemption of USD1b perpetual bonds. Bharti’s FCF generation remained robust at ~INR97b in 4QFY25 and ~INR390b in FY25, of which it used ~INR260b to prepay high-cost spectrum debt and announced a dividend of INR16/sh.
* Consolidated revenue at INR479b (+27% YoY, our est. INR476b) was up 6% QoQ, driven by robust growth in Africa and a boost from the full quarter of Indus consolidation.
* India revenue (including Indus) inched up 1% QoQ to INR367b (+15% YoY) and was in line with our estimate as growth was muted in the India wireless business (+1% QoQ).
* Consolidated EBITDA at INR270b (40% YoY, in line) increased 10% QoQ, driven by full-quarter consolidation of Indus Towers and robust ~13% QoQ growth in Enterprise business.
* India EBITDA (including Indus) at INR220b (+22% YoY, our est. INR219b) declined 8% QoQ, largely due to lower prior-period provision reversals for Indus (3Q was boosted by large collections of past overdues from Vi).
* Reported EBITDA margin expanded by ~190bp QoQ to 56.4% (+490bp YoY) and was ~10bp below our estimate, as better incremental margins in the India wireless segment and sharp margin expansion in Enterprise were offset by weaker DTH margins and lower provision reversals for Indus Towers.
* Reported PBT (before share of JVs) at INR97b (+26% QoQ, 2.2x YoY) was 5% below our estimate due to higher net finance costs (19% above).
* Reported attributable PAT at INR110b was significantly above our estimate of INR59b, driven primarily by tax reversals (tax benefit of INR59b for recognition of unrecognized DTA on tax losses).
* Adjusted for tax reversal and other exceptional items, PAT at INR52.2b (- 5% QoQ, +77% YoY) was 11% below our estimate of ~INR59b.
Sharp increase in capex, FCF generation (excl. spectrum prepayments) robust at INR97b in 4QFY25 (~INR390b for FY25)
* Consolidated capex rose ~57% QoQ to INR126b (+37% YoY) on account of a sharp pick-up in capex in India wireless, Homes and Enterprise business. India capex (excl. Indus) at INR103b was up ~53% QoQ (+21% YoY) and was ~45% above our estimate.
* Bharti’s consolidated free cash flow (after leases and interest payments, but excluding INR60b spectrum prepayments) was robust at INR97b, though lower vs. INR126b QoQ due to higher capex. For FY25, Bharti generated FCF of INR389b and used ~INR260b for prepaying spectrum dues.
* Bharti’s consolidated net debt (excl. leases) inched up ~INR48b QoQ to INR1.385t (vs. INR1.34t QoQ). Including the impact of leases, Bharti’s consolidated net debt increased significantly by ~INR72b QoQ to INR2.04t (vs. INR1.97t QoQ) due to the redemption of USD1b perpetual bonds (not part of reported debt earlier).
* Bharti’s consolidated net debt (including leases) to EBITDA (annualized) increased to 1.86x (vs. 1.7x QoQ). India SA net debt-to-EBITDA increased to 1.79x (vs. 1.58x QoQ).
* Excluding lease impact, Bharti’s net debt-to-EBITDAaL inched up to 1.42x (vs. 1.28x QoQ) for consolidated business and 1.53x (vs. 1.33x QoQ) for India SA.
India wireless: In-line results; ARPU flat QoQ as residual benefits of tariff hike offset by two fewer days QoQ
* Bharti’s India wireless ARPU at INR245 (+17% YoY, our est. INR247) remained flat QoQ (vs. +1.4% QoQ for RJio) as the residual benefit of tariff hikes was offset by two fewer days QoQ.
* Bharti reported 5m paying net adds (vs. 4.9m net adds QoQ, ~4.6m wireless net adds for RJio), better than our estimate of ~3.4m net adds.
* Subscriber mix continued to improve as Bharti added ~0.6m postpaid net adds (+2.5% QoQ, 12% YoY). Furthermore, Bharti’s 4G/5G net additions remained robust at 6.6m (vs. ~6.5 m 4G net adds QoQ).
* Bharti’s India wireless revenue was up 1.3% QoQ (vs. 2.4% QoQ for RJio, including FTTH) at INR266b (+21% YoY, our est. INR267b).
* India wireless EBITDA was up 1.9% QoQ (vs. 2.4% QoQ for RJio including FTTH) at INR158b (30% YoY, in line).
* Reported wireless EBITDA margin expanded ~40bp QoQ to 59.2% (+410bp YoY, vs. stable QoQ for RJio at 52.8%) and was 40bp ahead of our estimate.
* Incremental margin remained robust at ~85% (vs. 90% in 3QFY25 and ~53% for RJio) and was higher than our est. of ~60%.
* India wireless capex was up ~39% QoQ at INR60b (flat YoY) and was ~33% above our estimate.
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