Home / Markets / Mark To Market /  Airtel has good Q4; 5G, tariff hike in focus now

Bharti Airtel Ltd fared well in the March quarter (Q4FY22). It added net 3 million subscribers sequentially to the Indian mobile customer base. In the earnings call, the company’s management indicated that SIM consolidation and moderation in 4G net addition did weigh on subscriber additions.

The prices of smart phones have increased because of the chip shortage, softening the upgrade from 2G to 4G.

Still, Airtel has outperformed its peers, Reliance Jio and Vodafone Idea, which saw a sequential dip in subscribers of 10.8 million and 3.4 million, respectively.

Airtel’s mobile services India segment clocked a sequential revenue growth of 9.5% to 17,617 crore. In comparison, Jio and Vodafone Idea’s revenue grew at a relatively slower pace of 8% and 5.4%, respectively.

Airtel’s healthy revenue performance can be attributed to the rise in average revenue per user (Arpu) led by healthy flow through of tariff hikes and customer additions. Airtel’s Arpu rose to 178 from 163 in Q3. In Q4, Jio and Vodafone Idea’s Arpu stood at 168 and 124, respectively.

With a good show across most segments, Airtel’s consolidated revenue rose 5.5% sequentially to 31,500 crore. Ebitda (earnings before interest, tax, depreciation and amortization) margin expanded 170 basis points (bps) sequentially to 50.9%. One basis point is 0.01%.

Jefferies India has maintained its FY23-24 consolidated revenue estimates for Airtel but lowered its Ebitda estimates by 1-2% to factor in higher diesel prices and the miss in the Africa business. Diesel is used to run towers and that impacts costs.

Airtel’s management expects tariff increases this year. They added, tariffs are at low levels at present and there is enough capacity in the market to absorb them if they are increased. The company aims to reach Arpu of 200 through one round of tariff hikes and eventually hopes to get to 300. Growth in the postpaid segment is also likely to complement tariff hikes in helping drive Arpu growth.

The company guided capital expenditure (capex) in FY23 to roughly remain on the same levels as last year, which augurs well for free cash flow generation outlook.

Meanwhile, shares of the company are up nearly 2% so far in CY22. Analysts reckon tariff hikes will be a key trigger for the stock. The management indicated that it is ready for 5G. Investors should closely track the company’s strategy on 5G. “With improved free cashflow generation, cashflow relief from moratorium on government dues and ongoing rights issue, we think Bharti remains well-placed to compete with R-Jio on 5G rollouts," wrote Aditya Bansal, analyst at Nomura Financial Advisory and Securities (India) in a report on 18 May.

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