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Airtel rises 6% post Q1 results; here's what experts say

The telco’s consolidated revenue rose 5 per cent on year and 0.6 per cent on quarter.

ETMarkets.com|
Updated: Aug 02, 2019, 03.53 PM IST
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Bharti Airtel jumps 2% as operator sees stable tariffs ahead
In early trade Friday, the Airtel stock was up 3.3 per cent at Rs 334.70 on BSE, a day after the telco reported a consolidated net loss of Rs 2,866 crore in the April-June quarter.
Shares in Bharti Airtel surged 6 per cent in Friday's session after its India mobile services continued to show signs of a recovery in the first quarter of the current fiscal with average revenue per user (ARPU) moving up sequentially for the second straight three-month period.

In early trade Friday, the Airtel stock was up 3.3 per cent at Rs 334.70 on BSE, a day after the telco reported a consolidated net loss of Rs 2,866 crore in the April-June quarter, its first in 14 years, dragged by a one-time expense relating to 3G gear and a sharp increase in finance costs.

The Sunil Mittal-led telco’s net loss for the fiscal third quarter—compared to a Rs 97.3 crore net profit a year ago—came due to a Rs 1,445.4 crore exceptional hit, a 50 per cent on-year jump in net finance costs to Rs 3,181.5 crore and a 31.4 per cent jump in depreciation & amortisation costs to Rs 6,758.7 crore.

Bharti Airtel’s quarterly revenue from local mobile services was also higher at Rs 10,866.7 crore, up 2.2 per cent sequentially and 4 per cent on-year, while its overall India revenue rose 0.7 per cent sequentially and nearly 3 per cent on-year to Rs 15,344.6 crore, which analysts said signals the steady revival of telco’s local mobile operations. Mobile services contributed around 71 per cent of Airtel’s overall India quarterly revenue.

Thus, Reliance Jio Infocomm, which recently reported quarterly revenues of Rs 11,679 crore in the April-June period, has emerged the country’s largest mobile carrier by the parameter, pulling ahead of both Airtel and Vodafone Idea. Airtel though reported higher APRU than Jio's— Rs 129, up 5.1 per cent on quarter, to Rs 122—for the first time since the Mukesh Ambani-owned telco started reporting results. Vodafone Idea’s ARPU was further back at Rs 108.

“The first quarter has begun with healthy and equitable growth across all our lines of business and headline pricing has remained stable, albeit at low levels,” Gopal Vittal, CEO of Bharti Airtel (India, South Asia), said in a statement.

The telco’s consolidated revenue rose 5 per cent on year and 0.6 per cent on quarter, to Rs 20,737.9 crore, helped also by growth in India revenues. Bharti Airtel shares fell 4.10 per cent to Rs 323.95 at the close on BSE Thursday, a day when the exchange’s benchmark index, Sensex, fell 462.80 points or 1.23 per cent. The earnings were announced shortly after market hours.

“Bharti’s India business has done well, particularly the local wireless ARPUs, which have now improved two quarters back-to-back, driven by the Airtel Thanks programme and its minimum recharge plans,” Rajiv Sharma, co-research head at SBICap Securities, said.

Airtel largely held on to its customers, with its India customer base falling marginally to 281.13 million from 282.64 million in the previous quarter. Its monthly churn was a tad lower at 2.6 per cent from 2.8 per cent in the quarter ended March, FY19.

Data usage per customer rose 8 per cent sequentially to 11.9 GBs while voice minutes of usage increased 3.6 per cent on-quarter to 888 minutes. By comparison, Jio monthly average data usage per user rose to 11.4 GB from 10.9 GB while voice consumption per user fell to 821 minutes a month from 823 minutes in the previous quarter.

“The numbers are positive and it looks like even in this murky environment, Bharti will rebound stronger. There is a one-time exception which has led to the loss but Ebidta is up, so is volumes and ARPU, even better than Jio's, which means pricing is back for Bharti,” said Sanjeev Bhasin, EVP-markets & corporate affairs at India Infoline Ltd. “There may be a knee-jerk reaction to the stock tomorrow but it may end in a 3-5 per cent increase”.

Bharti Airtel took an exceptional hit (net of tax), primarily due to a Rs 142.7 crore charge towards accelerated depreciation of 3G network gear and operating costs on network refarming/upgradation, a Rs 1,586.3 crore incremental provision on account of derivative liabilities pertaining to customer indemnities given to investors of Airtel Africa Plc, including listing expenses, the company said.

Airtel’s consolidated earnings before interest, tax, depreciation & amortization (Ebitda) grew 24.2 per cent on year, but was helped by the adoption of a new accounting standard for its lease of assets to the tune of Rs1,512 crore. Without the new standard, Ebitda would have grown 2 per cent on year.

Quarterly Ebitda margin expanded to 41 per cent compared from 33 per cent in the previous quarter, also helped by the new standard, which lowers operating expenses. Excluding the new standard, margins would have been at 33.7 per cent in the just-ended quarter.

Essentially, Ind-AS 116 enables companies to recognise leases as assets in the balance sheet from April 1, 2019, and as such, the relevant lease rentals do not get reflected in the network opex but as an element of depreciation cost, in turn, pushing up the Ebitda.

Airtel’s total quarterly expenses came in at Rs 12,449.1 crore, down nearly 11 per cent sequentially and 5 per cent on-year.

Despite raising Rs 25,000 crore via a rights issue in May, the telco’s net debt was higher at Rs 1.16-lakh crore compared with Rs 1.12 lakh- crore at March-end, and, combined with the new accounting standard, pushed up depreciation and amortization and finance costs.
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