Growth in the ‘mobility’ subscriber base continued unabated, with a new peak being scaled yet again during the quarter, following a 20% qoq rise. The quarterly net addition to subscribers in Q4 was 3.25 million, taking Bharti’s base to 19.6 million subscribers.”
“The company also managed to rope in a greater number of new subscribers during the quarter, thereby expanding its market share. By capturing 22.9% of the new subscribers added during the quarter, Bharti was able to improve its share in the wireless market by 20bp, to 21.8%. Combined ARPUs edged 6% lower, to Rs 442 (Rs 470 in the previous quarter), chiefly from a 5% rise in the average MoU (minutes of usage) per user, to 431.”
Slight dip in ‘mobility’ margins
“The overall EBITDA margin climbed by 50bp qoq, from 36.6% to 37.1%; while EBITDA increased by 14.2%, to Rs 12.66 billion. Nevertheless, the EBITDA margin in the mobility segment slightly dipped, by 24bp, to 36.24%. However, the company has maintained that in the immediate future, maintaining margins in the mobility segment is not a priority, mainly due to the expanded coverage to smaller towns and cities.”
Growth in non-voice revenues sustained
“The share of non-voice revenue as percent of mobile revenue recovered strongly (by 100bp qoq, to 10.7%), from the dip in Q3, while the share of SMS revenue rose by 40bp, to 6.8%. In March 2006 Airtel launched the Easy Music service for mobile phones. This allows users to choose from 18,000 songs and can be used as a ring tone or a hello tune. This service is expected to be another positive contributor to the value added services provided by Airtel.”
Broadband and telephone services continue impressive growth
“Revenue from broadband and telephony jumped by 33% yoy, to Rs 4.1 billion, although the EBITDA margin for the segment dipped to 22.8% (previous year, 28.6%) due to the impact of extending coverage to new circles. The company focussed on subscribing customers to DSL services, which make up nearly 17% of the subscriber base. The ARPU for this segment fell - from Rs 1,136 in the previous quarter to Rs 1,063.”
Long-distance services maintain growth momentum
“Long-distance services showed strong growth momentum during Q4, posting an 18% qoq growth in revenue, to Rs 7.46 billion. The EBITDA margin also improved to 37.1%.”
Capex plans and outlook
“Bharti plans to incur capex of nearly USD 1.5–2 billion on equipment and infrastructure to improve its operations and gain market share in the next fiscal. Most of this is planned for the mobility segment, as the company aims to widen its mobile coverage from 3,778 towns at present, to 5,100 towns.”
“However, most of the funds are expected to be met through internal cash generation, with no plans to raise further equity. The overall capex during FY06 was Rs 24.21 billion, of which 73% was incurred in the mobility segment, while 17% was in broadband and telephony.”
“Ahead, we expect Bharti to maintain its growth momentum, due to the wider geographical reach, the launch of innovative offers and lower-denomination coupons. We maintain an Outperformer rating on the stock.”
