Bharti Airtel Q2 results update!

• Loss narrows: Bharti Airtel’s loss narrowed to ₹763 crore in Q2FY21 from a loss of ₹23,045 crore in the same period previous fiscal, aided by higher tariffs and a robust rise in data usage, as consumers continue to work-from-home due to the pandemic.
• Record quarterly revenue: Bharti Airtel has posted a robust 22% rise in quarterly revenues to ₹25,785 crore, its highest consolidated quarterly revenue so far. Analysts had earlier anticipated revenue of about ₹24,600 crore in Q2.  The company’s ARPU (Average Revenue Per User)- the amount Airtel earns per subscriber per month—rose to a three-year high in Q2FY21. The chart below shows Airtel’s ARPU over the last few quarters.

• Margins improve: The company has reported robust growth in its operating margins, aided by strong growth across segments, and 4G data consumption. EBITDA margin came in at 46%, improvement of 366 bps YoY, while the EBIT margin improved 768 bps to 17.1%. 
• AGR issue: Bharti Airtel faced a setback after the Supreme Court refused to allow telecom companies to make payment of AGR dues over 20 years. The court has instead allowed only a 10-year window for the telcos to repay their dues.  According to the court order, the 10-year timeline for payment of AGR dues will begin on April 1, 2021, and the companies need to pay 10% upfront by March 31, 2021. Bharti Airtel said that since it has already paid more than 10% of the dues outstanding. Bharti Airtel has paid about ₹18,004 crore so far, out of the ₹43,980 crore assessed by the DoT. According to estimates by ICIICI Direct, Bharti Airtel will have to cough up about ~₹4,650 crore annually for the next 10 years staring FY22.  This is not too much. Given the tariff hikes and growth in earnings, the amount of outflow per year for Bharti Airtel will fall to about 6% of FY22e Consolidated EBITDA, as per estimates by CLSA.
• Growth in business metrics
• 4G data customers at 152.7 Mn, up by 14.4 Mn for the quarter
• Data usage per subscriber at 16.0 GBs/month (16.3 GS/month in previous qtr)
• Digital Services now amongst the strongest in the country - 160 Mn digitally engaged customers
• Consolidated mobile data traffic at 7,403 PBs in the quarter with a healthy YoY growth of 58.8%. 
• MSCI rejig:Bharti Airtel shares rallied as much as 12% this morning, after reports that National Securities Depository (NSDL) has increased its foreign ownership limits (FOL) to 100% from 49%, earlier. With the increase in FOL limits, Bharti’s weight in MSCI India index was expected to double from the current 1.92%. This was expected to result in an inflow over ₹3,000 crore into the shares, as per estimates. However, NSDL later clarified that the limit will now remain at 49%, leading to a correction in Bharti Airtel shares.

The telecom sector has been benefited by the Covid-19 crisis given the surge in demand for telecom services as a result of digitization of workplaces and business. Bharti is expected to benefit the most from the revival in industry revenues due to a strong spectrum footprint, robust balance sheet, and strong execution. For the September quarter, Airtel has performed well in operational terms and is expected to continue to do so in the near future. 

Bharti Airtel remains comfortably placed, as will continue to gain market share from struggling competitor Vodafone Idea. Bharti Airtel is relatively better placed to tackle the competition from Reliance Jio. For Bharti Airtel, postpaid forms 5% of its subscribers and 16% of its India mobile revenues.