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<\/p>\nThere have been several positive signals in Bharti Airtel with revenue market share (RMS) growth, better visibility of profits from Africa, and enough free cash flow to pursue deleveraging.<\/p>\n
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Airtel’s 4G and 5G data subscriber net additions were 5.6 million in Q1FY24, and 24.5 million in the last 12 months.<\/p>\n
Airtel currently has 230 million data subscribers on 4G\/5G, which is about 70 per cent penetration of its base of 339 million subscribers.<\/p>\n
The trend is also towards average revenue per user (ARPU) growth, which is now at Rs 200.<\/p>\n
The ARPU rise has helped operating profit grow by 5.6 per cent (quarter-on-quarter) Q-o-Q in Q1FY24.<\/p>\n
The post-paid subscriber base is around 40 million of Bharti’s 230 million 4G\/5G subscribers and 339 million total subscribers.<\/p>\n
The post paid subscribers generate ARPU at around 200 per cent premium to blended ARPU.<\/p>\n
Bharti does charge tariffs about 20 per cent higher than its major competitor Jio, which could be a competitive disadvantage in a market that is still an effective duopoly since Vodafone Idea hasn’t the resources to rollout 5G yet.<\/p>\n
Bharti has also witnessed RMS gains, which is up 60 basis points to 36.7 per cent in Q1FY24 and there has been 5 per cent RMS gain in the last three years.<\/p>\n
Its latest gains have been led by B and C circles while it leads in metros and ‘A’ circles\/markets.<\/p>\n
Assuming Airtel can continue to hike tariffs and still gain another 2 per cent market share, it would touch Rs 257 ARPU by FY26.<\/p>\n
Without tariff hikes, it would need to add 50 million more subscribers (gain 4 per cent unit market share) to reach the same revenues by FY26.<\/p>\n
The company claims its 5G capex has peaked in Indian network rollout. Bharti Airtel is now deleveraging.<\/p>\n
The Q1FY24 net debt\/operating profit was down to 2.6 times and leverage could drop below 2 times by FY25.<\/p>\n
Investors could be hoping for dividend payouts going forward if leverage drops further and operating cash flow continues to rise.<\/p>\n
Bharti targets 5G coverage in top 5,000 cities by March 2024 and it is also still rolling out 4G in rural networks.<\/p>\n
The FY24 capex will remain elevated, but it should fall by FY25.<\/p>\n
Bharti carried 164 petabytes of daily data traffic in Q1FY24, and this is 60-65 per cent of 4G capacity utilisation.<\/p>\n
Data capacity by FY24-end would rise to 3.5 times of the Q1FY24 traffic levels as 5G capacity will augment this.<\/p>\n
The capex-to-sales ratio should reduce to 20 per cent in the medium-term from the current 29 per cent.<\/p>\n
Home broadband remains a key focus area with per-capita home broadband data usage at 247 gigabytes\/month (Jio 280 GB).<\/p>\n
Airtel Africa saw a decline in free cash flow to $230 million due to spectrum payouts but operating profit rose.<\/p>\n
The consolidated FCF of Rs 21,200 crore in FY23 was boosted by Rs 6,600 crore increase in capex creditors.<\/p>\n
Bank and market borrowings account for only 19 per cent of Bharti’s net debt.<\/p>\n
The company has a longstanding case pertaining to claims of Rs 15,100 crore of outstanding one-time spectrum charges by the DoT.<\/p>\n
So far Rs 8,500 crore has been provided for, and another Rs 6,600 crore is “contingent liability”.<\/p>\n
One competitive risk is the potential revival of Vodafone Idea and another is the possibility of new promotional offers by Reliance Jio.<\/p>\n
There are regulatory and political risks in Africa and possible risks due to local currency depreciation.<\/p>\n
Given the positive signals with regards to growth and deleveraging in India and Africa, the company could attract investment interest.<\/p>\n