Bharti Airtel Q1 preview: Losses likely to narrow despite fall in ARPU

Bharti Airtel is set to announce its June quarter results for FY21 (Q1FY21) on Wednesday and analysts expect the company to post a loss of as much as Rs 318.9 crore as compared to Rs 5,236.9 crore loss reported in Q4FY20. Revenue growth for the quarter, however, is likely to remain flat with India non-wireless revenues traction remaining robust.

Meanwhile, brokerages are also building in subscriber losses and average revenue per user (ARPU) for Airtel for the quarter due to Covid-19 led disruption.

For the sector, Edelweiss expects telecom companies to see the full impact of lockdown with lower usage for voice customers in Q1FY21. Data customers, on the other hand, are likely to an increased usage. “While Q1FY21 is likely to be fraught with near-term challenges due to the lockdown, we expect things to start improving from Q2FY21,” the brokerage said.

Last week, Airtel Africa reported net profit of $57 million for the June 2020 quarter, aided largely by higher data consumption and mobile wallet usage. However, net profit slumped 53.6 per cent in constant currency (CC) terms, compared to $132 million reported for the June 2019 quarter. READ MORE

At the bourses, Bharti Airtel has surged 32.9 per cent in the quarter under review. In comparison, the S&P BSE Sensex gained 18.48 per cent in the same period, ACE Equity data show.

Here’s what leading brokerages expect from Bhatti Airtel’s Q1FY21 numbers.

ICICI Securities

Analysts at ICICI Direct expect Airtel’s consolidated revenues to rise 0.5 per cent sequentially at Rs 23,835 crore while net loss is expected to contract to Rs 240 crore. A marginal subscriber loss of around 20 lakh is expected on account of Covid-19 led disruption, which had impacted recharge by low cost prepaid customers.

“Notwithstanding some tariff hike pass through, reported (average revenue per user) ARPU is likely to witness around 2 per cent QoQ decline at Rs 151 as the company had extended its prepaid validity for low cost users till May 3, 2020,” the brokerage said.

Moreover, Airtel’s Indian wireless revenues are expected to witness 2.2 per cent QoQ decline at Rs 12,665 crore while India non-wireless revenues traction may remain robust, especially broadband and enterprise. “We expect sequentially flattish India Ebitda margins at 42.7 per cent as higher network operating cost will be offset by lower admin and S&D expenses. Reported Ebitda margins are expected at 43 per cent, flattish QoQ. Ebitda may come in at around Rs 10,249.1 crore,” the brokerage said.

Commentary on ARPU trajectory and non-telecom business will be the key monitorables.

Emkay

The brokerage sees a flatish 0.5 per cent sequential growth in Bharti Airtel’s revenues to Rs 23,847.3 crore as compared to Rs 23,722.8 crore reported in Q4FY20. It may report a loss of Rs 318.9 crore as compared to loss of Rs 5,236.9 crore reported in Q4FY20.

“India wireless revenue and ARPU may fall 4 per cent and 5 per cent qoq, respectively, on account of lower recharges, lack of international roaming revenue and subscriber loss. Ebitda margins are likely to be stable (down 1 bps QoQ) on account of lower SG&A costs,” it said.

Analysts at Emkay project Airtel’s subscriber additions to moderate due to lower sales of cell phones in the quarter, while data subscribers is likely to rise marginally. “Data volume will swell 12 per cent qoq on account of increased usage during the lockdown, while minutes on the network is expected to stay flat qoq. Home broadband shall see increased traction driven by data demand,” it said.

Edelweiss Securities

Analysts at Edelweiss are building a 0.5 per cent QoQ decline in Bharti Airtel’s consolidated revenue for Q1FY21 at Rs 23,694.5 crore, with 2.6 per cent QoQ decline in India mobility business. Bharti Airtel’s loss, meanwhile, may narrow to Rs 106.2 crore.

“We are building a 50bps QoQ dip in consolidated Ebitda margin to 42.7 per cent. After strong ARPU increase in Q4FY20 on tariff hikes, revenue is likely to cool off as subscribers consolidate their usage in a single sim and voice-only customers rationalise usage. We are building in 1.3 per cent QoQ decline in ARPU to Rs 152 (from Rs 154) and subscriber decline on a sequential basis,” it said.

The brokerage sees a 60bps QoQ dip in Ebitda margin for India business to 42.1 per cent. Overall Ebitda is seen rising 3.6 per cent QoQ to Rs 10,122.4 crore.

Motilal Oswal Securities

The brokerage expects ARPU to remain flat while the Home Broadband business may see a 9-10 per cent subscriber growth. Moreover, it is estimating 3–5 per cent revenue impact on India wireless business due to validity extension and SIM consolidation. Subscriber churn of 10 per cent, along with around 75 per cent QoQ lower 4G off-take due to Covid-19. Overall, analysts at Motilal Oswal expect revenue to rise 12.9 per cent on a YoY basis to Rs 23,400 crore, up 12.9 per cent on a year-on-year (YoY) basis while loss may come in at around Rs 100 crore.” Ebitda is seen rising 21.9 per cent YoY to Rs 10,100 crore.