Sharekhan says that Margins were yet again impressive in Q4FY2021, subscriber additions in India wireless business stayed strong, while home broadband business subscriber additions rose to a record high. Revenue was below our expectation owing to a slightly weaker ARPU. The reported revenue and ARPU will not be comparable given the termination of interconnection usage charges (IUC) on mobile calls from January 2021. On a like-to-like basis, consolidated revenues increased by 2% qoq and 17.6% yoy to Rs 25747 cr, below our estimates, led by 3.4% qoq growth in India business (adjusted for IUC). On a like-to-like basis, the India wireless business revenue grew by 4.2% qoq and 19.1% yoy despite a marginal weaker ARPU, led by strong subscriber additions (up 4.4% qoq).

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Bharti Airtel’s ARPU (adjusted for IUC) in the India wireless business declined by 0.8% qoq (up 7.3% yoy) to Rs 145 which is below Sharekhan’s estimates. EBITDA margin improved by 244 bps qoq to 47.9%, exceeding our estimates, led by a 380 bps qoq improvement in Operating Margins of the India wireless business. Excluding one-time gain of Rs 440 cr, the adjusted net profit came at Rs 319 cr and was 27% below our estimates. With resurgence in COVID-19 infections in India, Sharekhan expects revenue growth of the Indian wireless business to remain muted during Q1FY2022. 

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Further, Bharti Airtel’s management highlighted that it witnessed an increase in competitive intensity in terms of higher sales incentives and channel commissions to attract more customers by peers during Q4FY2021. Though competitive intensity came down with a sharp second wave of COVID-19 cases across the country, Sharekhan believes that the tariff hike would be further delayed. 

However, ARPU of India wireless business would improve going ahead because of:

(1) lower tariffs in India\
(2) 2G to 4G upgrades
(3) increasing postpaid subscribers
(4) strong addition of 4G customers

Further, the revised version of the One Airtel plan will be launched in the next 4-5 weeks, which would aid ARPU improvement as this would fetch an additional Rs. 500- 600 per account when a customer would move to this plan. Bharti Airtel has gained the revenue market share in DTH business from 22% in December 2018 to 27% share in December 2020, while the revenue market share in enterprise business improved to 31% from 23% over the same period. 

Bharti Airtel Key positives:

India wireless subscriber additions stayed strong at 13.4 million
Bharti Airtel saw revenue market share gains across its portfolio 

Bharti Airtel Key negatives:

DTH business revenue declined 2.8% qoq
ARPU in India wireless business remained below expectations, but scope for improvement going ahead

Bharti Airtel Key Risks:

Increasing competition could keep up the pressure on realisations. Any slowdown in data volume growth could affect revenue growth