Bharti Airtel Q3 preview: Sustained gains in subscriber base to lend support; watch for update on spectrum and 5G

Telecom major Bharti Airtel will report its December quarter earnings on February 3 in which commentary on spectrum renewal and 5G are expected to be in focus.

The numbers are likely to be mixed with some hits on yearly basis and misses on a quarterly basis.

Brokerage firm Motilal Oswal Financial Services expects a 21.5 percent year-on-year (YoY) growth in the company's December quarter revenue. EBITDA may jump 30.2 percent YoY, said the brokerage.

Motilal expects a 2.5 percent subscriber growth in the company's home broadband segment while India wireless ARPU may improve 1.5 percent. Besides, there may be a 2 percent revenue growth in enterprise business.

Brokerage firm Kotak Institutional Equities pointed out that the company is likely to have benefitted from (1) sustained gain in subscriber market share (as reported by TRAI for October as well), and (2) higher 4G adoption underpinned by a recovery in smartphone sales.

"We build in a 1.7 percent QoQ (up 24.2 percent YoY) increase in implied ARPU to Rs164 per month," said the brokerage.

Net sales may show a 16.6 percent YoY gain. EBITDA can rise 22.6 percent YoY while EBITDA margin can grow 216 bps YoY, said Kotak.

"We assume (1) sequentially flattish quarter for Africa business, (2) a 0.5 percent QoQ growth in revenues for both the home broadband and enterprise segments, and (3) a 1.5 percent QoQ growth in the DTH business," Kotak said.

Brokerage firm Emkay Global is of the view that Bharti Airtel may continue its outperformance with a healthy 7 percent sequential wireless revenue growth on strong subscriber addition momentum and sustained improvement in subscriber mix with 10mn data subscriber adds.

However, the brokerage firm added that Bharti’s home broadband segment ARPU is expected to be under pressure (down 7 percent QoQ), with the full impact of lower-priced plans (launched in September) being witnessed in the quarter. For the enterprise segment, seasonality could lead to muted revenues.

Emkay expects a 15 percent YoY rise in net sales, 23.1 percent YoY rise in EBITDA and 295 bps YoY growth in EBITDA margin in Airtel's December quarter earnings.

Emkay's estimates show Airtel's reported EBITDA growth shall be muted due to deconsolidation of the tower business, with the same being accounted as an associate while operating leverage shall restrict any meaningful contraction in the margins.

Revenue for the home broadband segment shall dip 1.2 percent QoQ due to the full impact of lower-priced plans, while seasonality shall restrict growth for the enterprise segment, said Emkay.

Africa business is likely to post a 3.5 percent QoQ increase in revenues, on an already strong base quarter. Data volume shall continue on its positive trajectory with a 6 percent QoQ increase, Emkay added.