Bharti Airtel Limited performed well in the March quarter (Q4FY22). It added a net 3 million subscribers sequentially to the Indian mobile subscriber base. In the earnings call, the company’s management indicated that moderation in SIM integration and 4G net addition impacted the subscriber base.
The lack of a chip has led to an increase in the prices of smart phones, softening the upgrade from 2G to 4G.
Still, Airtel has outperformed its peers, Reliance Jio and Vodafone Idea, which saw a sequential decline in subscribers to 10.8 million and 3.4 million respectively.
Airtel’s India segment of mobile services registered a sequential revenue growth of 9.5% 17,617 crores. In comparison, Jio and Vodafone Idea’s revenue grew at a relatively slow pace, at 8% and 5.4%, respectively.
Airtel’s healthy revenue performance can be attributed to an increase in Average Revenue Per User (ARPU), which is driven by healthy inflows through tariff hikes and customer additions. Airtel’s Arpu climbs from 178 163 in Q3. In Q4, Jio and Vodafone Idea’s Arpu held this position 168 more 124, respectively.
With good performance across most segments, Airtel’s consolidated revenue up 5.5% sequentially 31,500 crores. Ebitda (earnings before interest, taxes, depreciation and amortization) margin rose 170 basis points (bps) sequentially to 50.9%. One basis point is 0.01%.
Jefferies India has retained its FY23-24 consolidated revenue estimates for Airtel, but lowered its Ebitda estimates by 1-2% due to higher diesel prices and reduced Africa business. Diesel is used to run the towers and this affects the cost.
Airtel’s management expects tariff hike this year. “At present, tariffs are at a low level and if they are raised, the market has enough capacity to absorb them,” he said. The company aims to reach Arpu 200 through a round of tariff hikes and is expected to eventually achieve 300. Growth in the postpaid segment is also likely to complement the tariff hike to help fuel Arpu’s growth.
In FY13, the company directed capital expenditure (capex) to remain at the same level as the previous year, which bodes well for the free cash flow generation outlook.
Meanwhile, the company’s shares are up about 2% so far in CY22. Analysts believe that the tariff hike will be a key trigger for the stock. Management indicated that it is ready for 5G. Investors should closely monitor the company’s strategy on 5G. Aditya Bansal, Analyst at Nomura Financial Advisory & Securities (India), wrote, “With improved free cashflow generation, cashflow relief from moratorium on government dues and the ongoing rights issue, we feel Bharti will compete with R-Jio on the 5G rollout.” In a good position to do so.” ) in a report on 18 May.