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Bharti Airtel Q3 preview: Update on AGR issue, details of fund raising eyed

Bharti Airtel is likely to report single-digit revenue growth when it reports results for the quarter ended December 2019 (Q3FY20) on Tuesday, largely on the back of tariff hikes and growth in average revenue per user (ARPU). However, they are also penciling in loss of more than Rs 700 crore for the telecom operator. AGR issue outcome, the company's capital-raising plans and timeline, as well as the network expansion plans, will be the key things to watch out for in the management commentary.

ALSO READ: Burdened with AGR dues, telcos rue absence of relief measures in Budget

Airtel's overall subscriber base is expected to witness a modest addition of around 30 lakh during the quarter, analysts say. More significantly, data subscriber addition is seen at a healthy 1.3 crore, largely aided by conversion from own base. As such, ARPU is likely to witness around 4-7 per cent sequential growth to Rs 133-Rs 139.

In December 2019, both Bharti Airtel and Vodafone Idea raised tariffs by around 15-47 per cent across packs, which is likely to translate into FY21 revenue and Ebitda upgrade. Moreover, the benefits of the tariff hike is expected to flow through more from Q4FY20 onwards.

Analysts at ICICI Securities expect Airtel to report a loss of Rs 722.6 crore even as revenue could rise 7 per cent on a year-on-year (YoY) basis to Rs 21,960.7 crore. Sequentially, revenue is seen growing 3.9 per cent, further aided by stable non-wireless revenues traction. The company had posted Rs 20,519 crore as revenue in the year-ago quarter and Rs 86 crore as profit.

Kotak Securities pegs Airtel's Q3FY20 revenue at Rs 21,784.6 crore and expects a loss of Rs 780.8 crore. Edelweiss sees a 7.6 per cent YoY growth in Airtel's revenue at Rs 22,144.2 crore and a loss of Rs 797 crore. 

At the bourses, Airtel has outperformed the benchmarks by surging 29.8 per cent in the October-December quarter as compared to Sensex's 7.69 per cent gain during the period.

Operating performance

Most brokerages expect Airtel to report improved operating numbers for the quarter. Analysts at ICICI Securities expect Airtel's earnings before interest, tax, depreciation (Ebitda) to grow 1.7 per cent sequentially to Rs 8,983.1 crore while Ebitda margins is seen at 40.9 per cent, down 90 bps QoQ. Kotak Securities sees even higher Ebitda of Rs 9,290.3 crore, up 49 per cent YoY, and Ebitda margin at 42.6 per cent compared to 30.7 per cent in the year-ago quarter

Segment-wise expectation

ICICI Securities expects Indian wireless revenues to witness 4 per cent QoQ growth at 11,407 crore. The brokerage sees around 130 bps sequential decline in India Ebitda margins at 39.6 per cent on the normalisation of Selling, General and Administrative (SG&A) costs. Among other businesses, analysts at Kotak Securities see a weak QoQ performance in the enterprise and home broadband segments (partly due to seasonality), and sequential uptick for the India DTH business.

Africa business

Bharti Airtel’s Africa unit reported a net profit of $103 million (Rs 735 crore) in the quarter ended December 31, a 23 per cent fall from $133 million in the same period a year before. The decline in the third quarter (Q3) was mainly on account of higher tax payment, of $95 million against $13 million in the corresponding earlier period. Operating profit for the telecom entity rose 24 per cent to $399 million. Revenue for the quarter at $883 million was 12.8 per cent higher (and 14.2 per cent higher on a constant currency basis). READ ABOUT IT HERE

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