ICICI Securities - Telecom - Bharti Airtel's superior execution likely to continue...

Q4FY21 ARPU and revenues for telcos would be hit due to nil IUC that came into effect from 1st Jan'21. Bharti Airtel's (Bharti) EBITDA would benefit by Rs1bn from it while that for VIL would be hurt by Rs0.8mn. Also, Q4FY21 had two days less, which will impact QoQ growth by 2%. Bharti would continue to outperform with strong subs addition driving mobile revenue (L2L) growth of 3% QoQ vs 0.6% drop for VIL. Bharti would also show continued traction in 4G subs addition (12mn) and grab higher market share. Bharti's India EBITDA growth would be strong at 20% YoY despite deconsolidaton of Bharti Infratel. Indus Towers is likely to see steady tenancy adds on lower cancellations, but its QoQ EBITDA would be hit by one-off benefits in base. Tata Communications' EBITDA would be down 2.4% QoQ on normalisation of costs and higher repair / maintenance.

- One-offs in Q4FY21. 1) Interconnect charges moved to nil from 1st Jan'21 from the earlier 6ps/min. We estimate the consequent ARPU impact at Rs14 each for Bharti and VIL; 2) Bharti was net IUC payer of Rs1bn-1.2bn, while VIL was net IUC receiver of Rs0.8bn (thus Bharti's EBITDA should benefit from nil IUC while VIL's stands to get hurt); and 3) Q4FY21 had 90 days vs 92 in Q3, hence we expect 2% QoQ impact from the lower number of days. Bharti is likely to continue its strong subs growth (8mn) while VIL would lose subs (1.5mn), but lower than in previous quarters. Both companies' comparable ARPU may slightly rise QoQ on higher 4G subs addition.

- Bharti's consolidated EBITDA to be up 1.8% QoQ to Rs123bn. Bharti's India revenues are likely to grow (L2L) 2% QoQ (11.9% YoY) to Rs182bn, led by mobile segment (up 3.0% QoQ / 18% YoY) on the back of subs growth of 2.6% QoQ. India EBITDA is expected to be up 4.1% QoQ to Rs89bn. Bharti's Africa USD revenues and EBITDA are likely to fall 1% QoQ to US$1,044mn and 2% QoQ to US$492mn respectively, on seasonality. We expect consolidated revenues (L2L) to rise 1.0% QoQ to Rs255bn and EBITDA 1.8% to Rs123bn. We estimate net profit at Rs2.9bn.

- VIL's EBITDA to dip 2.4% QoQ to Rs42bn. We expect VIL's revenues (L2L) to dip 0.6% QoQ to Rs97bn. This would be due to continued loss of subs (down 1.5mn), which should start stabilising soon. ARPU (L2L) is likely to be stable QoQ on rise in 4G subs. EBITDA is expected to dip 2.4% QoQ to Rs42bn on negative impact from IUC. We estimate a net loss of Rs63bn for VIL due to nil tax rebate.

- Indus' tenancies to rise by 3,500. Rental per tenant may fall 4.5% QoQ to Rs42,819 as the base had benefit of higher penalty collections. We estimate rental revenues to dip 4.7% QoQ (+4.9% YoY) to Rs41bn. EBITDA is likely to shrink 12.5% QoQ (+8.9% YoY) to Rs31bn on normalisation of cost (base had one-off benefits due to merger). We expect net profit to drop 17.5% QoQ and rise 13.8% YoY to Rs11bn.

- TCom's EBITDA to fall 2.4% QoQ to Rs9.8bn (excl. real estate). GVS (global voice solution) revenues may drop 2.0% QoQ and EBITDA margin may be at 6%. We estimate GDS (global data solution) revenues to rise 3% QoQ (+2.1% YoY on high base). EBITDA margin is likely to shrink 200bps QoQ to 26% on normalisation of recurring costs, and higher repair/maintenance. We estimate net profit at Rs2.9bn.

Source : Equity Bulls

Keywords