Bharti Airtel - 1QFY2014 Result Review - Angel Broking

For 1QFY2014, Bharti Airtel's adjusted revenues as well as EBITDA came better than expectations while bottomline was below our expectations due to higher taxes. On reported basis, the numbers suggest lower than expected performance as Indus Towers' contribution came below EBITDA level (given change in accounting from line by line consolidation to equity method). On reported basis, consolidated revenues declined by 1.0% qoq to Rs. 20,264cr; adjusting for Indus Tower contribution, consolidated revenues actually grew by 2.5% qoq. Africa revenues declined by 5% qoq to US$1,062mn, due to political unrest in that geography and reduction in interconnection charges.

KPIs for India mobile business were encouraging as ARPM increased by 4% qoq to 44paise and while MOU remained largely flat at 455min leading to a 3.8% increase in ARPU to Rs. 200/month. Data ARPU increased 15% qoq to Rs. 63; data as % of revenues declined slightly to 17.3% in 1QFY2014 from 17.4% in 4QFY2013. Churn rate remained stable at 3.2%. Africa MOU increased by 8.5% to 134min while ARPM was down 14.4% qoq. Africa EBITDA margin stood at 26.7%, up ~110bp qoq. Overall margin came at 32.2%, up ~50bp qoq. Profitability was hit due to higher tax expense with tax rate coming in at 52.7%. PAT came in at Rs. 869cr, up 12% yoy.

Operational KPIs of core cellular India business surprised us implying that the larger telecom companies such as Bharti Airtel and Idea Cellular are benefiting at a faster pace from declining competitive intensity but there are concerns regarding the African operations which might weigh upon Bharti Airtel's performance. Bharti continues to be our preferred pick amongst telcos due to its low-cost integrated model (owned tower infrastructure), established leadership in revenue and subscriber market share and relatively better KPIs.

Source : Equity Bulls

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