April 29, 2016

Bharti Airtel posts strong performances lead by surprise margin


Bharti Airtel posts strong performances lead by surprise marginBharti Airtel’s quarter 4 (Q4FY1516) profit increases by 2.80% on consumption of voice and data services. Profit rose from 1,255 crore to Rs 1,290 crore counterbalancing competitive pressure on rates and higher interest cost. It’s revenue rose by 10.10% to Rs. 24,960 crore.

Company’s Net interest cost hopped to Rs. 1,524 crore from Rs 858 crore, due to debt borrowed for buying spectrum a year ago. The company’s consolidated net debt rose from $11.91 billion to $12.66 billion QoQ.

Strong voice growth; data disappoints

India mobile business reported 4.8% revenue growth on 6.0% voice volume growth and 1.5% realization drop and 9.6% data volume growth and 3.8% realization drop. Management attributed strong voice volume growth to better execution and disproportionate share of subscriber acquisition from operators whose licences expired. As operators have expanded their own 3G network, dependence on ICR has declined, leading to lower data volume as well as lower access charge. Africa business reported 0.5% QoQ revenue growth in USD on 3.8% spurt in voice volume, while margins improved 80bps QoQ.

Cost optimization drives margin surprise


Management has highlighted that it is conducting a cost optimization drive to rationalize cost, which, along with one-off benefit, resulted in 70bps QoQ decline in network cost for India business. Also, write-back of bad debt in the quarter led to 80bps gain in SG&A. We revise up our margin estimates for FY17 and FY18 80bps and 30bps, respectively, to factor in gains from lower access charges and network charges, leading to 11.5% and 3.8% earnings upgrade in FY17E and FY18E, respectively.

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