Bharti Airtel Results: Positive net profit after six consecutive loss making quarters

Bharti Airtel Ltd is one of the world’s leading providers of telecommunication services with presence in 18 countries representing India, Sri Lanka, 14 countries in Africa. It became the first telecom service provider to demonstrate its capability to roll out 5G wireless services in India. In Oct 2020, the company entered into the fast growing cloud communications market with the launch of Airtel IQ with a customer base composed of many big companies such as Swiggy, Justdial, Urban Company, Havells, Dr. Lal Path Labs and Rapido.

Airtel business is India’s largest player in the B2B connectivity space and serves over one million businesses with an integrated portfolio that includes connectivity, cloud, security and collaboration and data centre solutions. Presently, the company owns ~42% stake in Indus Towers (erstwhile Bharti Infratel) directly and through its wholly owned subsidiary Nettle Infrastructure Investments Ltd.

Indus Towers Limited has over 175,500 towers and 318,300 co-locations and a nationwide presence covering all 22 telecom circles. Its leading customers are Bharti Airtel, Vodafone Idea Ltd and Reliance Jio Infocomm Limited. In December 2020, the company, through Nettle Infrastructure bought ~5% stake in Indus Towers for ~2,900 crores.

Industry Analysis

The Covid pandemic has brought about a structural change in the telecommunication industry with people consuming a lot of data as they stayed at home. The impact is visible in the financial performance of Bharti Airtel. The telecom company has been continuously improving its financial performance since the outbreak of the pandemic and the trend is maintained in Airtel’s Q1 FY23 numbers as well.

Key Highlights of Bharti Airtel Q1FY23 Results

• Consolidated revenue from operations rose 22% to Rs 32,805 crore in Q1FY23, which can be attributed to the consistent performance throughout their portfolio. It had reported a revenue of ₹26,854 crore in
• Bharti Airtel’s mobile services revenue in India grew 27% YoY to Rs 18,220 crore for Q1FY23 from Rs 14,305.6 crore in
• Bharti Airtel recorded 465.81% jump in its consolidated net profit at Rs 1,606.9 crore in Q1FY23 whereas the reported net profit in Q1FY22 was Rs 284
• Consolidated EBITDA came in at Rs 16,604 crore. The EBITDA margin stood at 6%, up 150 bps year-on-year.
• The total capex spend for the quarter stood at Rs 6,398 crore. Airtel also said that its 4G customers grew by 20.8 million YoY and 4.5 million QoQ, which is 63% of overall customer base
• Airtel Payments Bank continues to penetrate the customer engagement leading to increase in monthly transacting users by 65%
• The firm said its 4G customers rose by 8 million on an annual basis and by 4.5 million on a sequential basis.
• Mobile data consumption rose by 6% YoY, consumption per mobile data customer at 19.5 GB per month, said Airtel.
• In the recently concluded 5G spectrum auctions,Bharti Airtel procured 19,867.8 MHz spectrum for Rs43,040 Crore in the recently concluded 5G

Consolidated revenue from operations rose 22% to Rs 32,805 crore in Q1FY23

Bharti Airtel results reported consolidated revenues for Q1FY23 stood at Rs 32,805 crore, a YoY increase of 22.2%. Both new and existing customers contributed to this growth, and it was seen across the Indian and the African markets.

The revenues of Indian business registered a YoY rise of 23.6%, driven by a 12.8% growth in the subscriber base. This growth was led by a healthy addition to the 4G customer base. While the pandemic subsiding may be a good signal, the company fights rival Reliance Jio for new customer acquisition, especially in the mobile data subscriber segment.

The Africa business grew 18.6%, driven by a 3.6% increase in the ARPU and an 8.9% growth in the subscriber base.In terms of operating profitability, the overall EBITDA margin expanded by 150 basis points (bps) over the year-ago period.The expansion was led by a significant operating leverage that the company enjoys. The operating margins of the India and the Africa businesses expanded by 183 bps and 80.9 bps, respectively.

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Consecutive losses in the Telecom sector

Even though in the results of Bharti Airtel, profits have decreased, the company seems to have fought back into the black after posting considerable losses for six quarters. With the implementation of new technologies and projects in the pipeline, the company is poised to

grow over the next few years as it recoups its losses. The company has recorded growth in its EBITDA margins, ARPU and market verticals. The India business ARPU came in at Rs 183, up 25.3% on a YoY basis. The ARPU improved sequentially as well, up 2.8%, led by price hikes and higher contribution from 4G customers.. ARPU of rivals Reliance Jio and Vodafone Idea for the same period was Rs 175.7 and Rs 128, respectively

5-G Roll Out

The Bharti Airtel’s CEOr and MD, Gopal Vittal, announced that the roll-out of 5G on a pan-India basis will cover every town and key rural areas by March 2024 and he added that they intend to launch 5G starting August 2022 and extending to a pan-Indian roll-out very soon. Detailed network roll-out plans for 5,000 towns in India are in place.

Airtel has signed network agreements with Ericsson, Nokia, and Samsung. He defended Airtel’s spectrum purchase strategy and said it met the company’s objective of providing the best in class 5G experience at lower costs. Bharti Airtel acquired 19,867 MHz, worth Rs 43,084 crore, in the recently concluded spectrum auction.Rival service provider Reliance Jio has acquired spectrum in the 700 MHz band and plans to develop a standalone network.

700 MHz offers wide coverage and a standalone network offers wider enterprise-level opportunities such as remote surgeries, robotics, and autonomous cars. Vittal, however, said there were a lot of misconceptions about the 700 MHz band.

Airtel will deploy a non-standalone network and has been acquiring mid-band spectrum in several circles over the past few years as a part of a well-thought-out strategy to support its 5G roll-out, he said.This will also have an impact on the share price of Bharti Airtel.

Management Commentary

“While our wireless revenue was impacted by the Covid lockdown induced slowdown in terms of device shipments and a financial squeeze at the lower end of the market, our overall performance reflected the resilience and strength of our portfolio,” said Managing Director and Chief Executive Officer of India and South Asia operations Gopal Vittal.

Bharti Airtel results reported that they added 5.1 million new customers in the first quarter of the new financial year. In terms of home business, the company posted a y-o-y growth of 13% and they added 285,000 new customers in the new quarter. The company also said that they are investing in new technologies to boost their operations and, consequently, the profits.

Bharti airtel share price: Technical Analysis

The share price of Bharti airtel is currently placed at a strong resistance level and when it is combined with the exponential moving average it shows a strong support 680-690 range. The 100 days EMA is higher than 50 Days EMA and it continues to trade in the zone.

Consolidation may continue till a high volume trade can break this level due to the current positive quarter results . The RSI indicator is now standing at 61 , anywhere above 75, it is said to be expensive.There is still scope for the price for an upward movement if the resistance is broken to test the next resistance level of 760.

Our view

This quarter has seen profits after six consecutive loss making quarters , with positive trend in customer base and increase in ARPU which is higher in Indian standards. Bharti airtel proves to be a company which will withstand the onslaught of its competitors. The customer transfer from VI to Bharti airtel can be attributed to a positive trend and hold within the mass segments. With a set of numbers showing improvements across many metrics, renewed investor interest in the stock is likely to drive the stock higher in the near term. Share price of Bharti Airtel shows an active projection of their operational efficiencies and future scope of the company.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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