CapEx strategy, cautious 5G rollout, rural customer attraction boost Airtel in Q3: Analyst, ET Telecom

NEW DELHI: Bharti Airtel’s capex strategy focuses on more prudent non-standalone 5G rollout and enhanced rural coverage, leading to market share growth and subscriber retention as the second-largest telco outperformed Reliance Jio in terms of revenue growth. Market researchers said the success was due to improved mix, deleveraging and free cash flow generation. Airtel’s average revenue per user (ARPU), a key performance indicator, increased to Rs 208 on the back of strong 4G/5G subscriber growth during the quarter, exceeding market expectations, the company said. , stable churn rate, and the number of postpaid user additions increased by 4.2% sequentially, they added.

Airtel shares rose 3.28 per cent to Rs 1,150 in early trade on the BSE, a day after announcing the results for the third quarter ended December 31, 2023.

“We believe improved subscriber mix in the travel high season quarter and possibly higher international revenue drove favorable ARPU for the quarter,” Morgan Stanley said in a research note seen by ET.

With no rate hikes or pricing actions during the quarter, UBS said the 2.5% ARPU growth was driven solely by long-term factors such as 2G to 4G migration and prepaid to postpaid migration. He said it was highly likely that the incident occurred.

In contrast, market trackers said Reliance Jio’s rapid low-value subscriber growth is weighing on ARPU. This reflects Airtel outperforming his Jio in revenue growth. Bharti Airtel’s India mobile revenue rose 4.2% quarter-to-quarter, faster than Jio’s 3.5%, according to Citi Research.

Goldman Sachs said in a research note that Bharti’s revenue market share increased quarter-over-quarter on the back of consistent double-digit percentage growth in wireless revenue despite no meaningful rate increases. It estimated that the increase was 40 basis points to 39.6%.

Goldman Sachs added that sales growth across Bharti’s residential broadband and enterprise segments also supported sales growth in the December quarter.

The company’s digital TV services business saw an increase in subscriber numbers after declining in the past three quarters.

However, Morgan Stanley said Airtel Business revenue growth slowed to 8.7% compared to 9.5% year-on-year growth in the previous quarter as international business remained moderate.

JPMorgan delevers as return on invested capital (ROIC) rises due to better-than-expected capex from Bharti and return to price defense and price recovery, even if overall capex remains surprisingly flat He added that this could be accelerated.

“With three quarters of healthy FCF generation, focus should quickly shift to capital returns to maintain valuations,” JPMorgan said.

Goldman Sachs said the $1.9 billion in free cash flow generated in the first nine months of fiscal 2024 was mostly used to prepay high-cost spectrum debt and reduce capital spending. It added that it expects further declines and improved EBITDA to improve the carrier’s FCF profile. .