Bharti Airtel rating ‘buy’: Revenues to grow from Q3, says company

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Updated: November 26, 2018 3:28:49 AM

Company is looking to expand data capacity multiple times through refarming of 900MHz and 2100MHz spectrum to 4G services and splitting of sectors

Allaying investor concerns, management expresses confidence in prospects

We attended analyst meet organised by Bharti Airtel where management addressed many investor concerns. It gave confidence on higher 4G data capacity through spectrum refarming and splitting of sectors. It also has enough backhaul capacity to support increased 4G data throughput at most of its urban cell sites. Partnership was a recurring theme: management said content partnership will serve the company by reducing churn and uplifting ARPU. It believes ARPU has bottomed out and expects revenue growth to come soon even if tariffs remain unchanged. Management also expects to benefit from the minimum recharge plan and higher 4G net adds on L-900. They were confident of growing non-mobile segment revenues while investors’ remain sceptical. It seems capex may not dip sharply in the near term though the company has promoters’ backing for more funds if required. Reiterate Buy.

India mobile
Management emphasised three points: (i) enough capacity, both last mile (spectrum and network) and backhaul (transmission); (ii) cost optimisation and (iii) partnerships across content, next-generation technologies, etc. It is looking to expand data capacity through refarming of 900MHz and 2100MHz spectrum to 4G services, and splitting of sectors. It has doubled fiberised towers in each of past two years with majority of its urban sites. Company highlighted it would further invest in coming years to fiberise towers and make itself 5G-ready.

Revenue growth should come soon
Bharti expects revenue growth to start from Q3 itself aided by: (i) bottoming out of ARPU with some downgrade likely in the post-paid category though it can be offset; (ii) minimum recharge plan, which should be revenue-accretive; and (iii) acceleration of 4G net add with expansion of L-900. Management believes further tariff cut is very unlikely.

Non-mobile can continue to grow
Market is concerned that RJio’s foray in home and enterprise segments can further hurt Bharti, but management was confident of growth: (i) it believes RJio can actually expand home broadband market; (ii) enterprise is less price sensitive. Bharti also benefits from longer term contracts and strong relationships; and (iii) DTH growth will be aided by digitisation.

Backing for more funds if required
Mgmt believes radio capex can dip sharply as FD gets rolled out on most of 2G cell sites by end-FY19. However, non-radio capex will remain high with the company continuing to expand fibre backhaul and strengthening core network. Mgmt stated capital is not a constraint as it has assets to monetise and promoters have assured it can raise funds from long-term shareholders if required.

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