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Bharti Airtel: A Good Quarterly Performance - Views on News from Equitymaster
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Bharti Airtel: A Good Quarterly Performance
May 6, 2016

Bharti Airtel has declared results for the fourth quarter and full year FY16. The company has reported a8.4% YoY increase in total revenues and a 2.8% YoY increase in net profits during the quarter. Here is our analysis of the results.

Performance summary
  • Consolidated sales grew by 8.4% YoY during the 4QFY16.Data revenue continues to drive growth. For the full year FY16, revenues were up by 4.9% YoY.
  • Mobile subscriber base in India grew by 11.2% YoY during the quarter. Total count of mobile subscribers in India stood at a little over251.2 m at the end of March2016. Total subscriber base on the network (including South Asia and African operations) grew by 10.2% YoY during the quarter.
  • Operating margins improved to 36.6% during the quarter. The operating profit grew by 12.6% YoY.
  • Interest expenses weredown12.9% YoY while depreciation increased by 25.4% YoY.
  • The net profit increased by 2.8% YoY largely due to the good operational performance. However, the net margin fell to 5.2% in the quarter compared to 5.4 seen in 4QFY15. For the full year FY16, net profit was up by 5.8% YoY.
  • The company has declared a final dividend of Rs 1.36 per share.
  • The board has approved a Rs 14.34 billion buyback at a maximum buyback price of Rs 400 per share.

    Consolidated financial performance
    (Rs m) 4QFY15 4QFY16 Change FY15 FY16 Change
    Sales 230,398 249,831 8.4% 921,351 966,192 4.9%
    Expenditure 149,275 158,474 6.2% 607,468 625,259 2.9%
    Operating profit (EBITDA) 81,123 91,357 12.6% 313,883 340,933 8.6%
    Operating profit margin (%) 35.2% 36.6% 34.1% 35.3%
    Interest expense/(income) 19,703 17,159 -12.9% 50,133 69,889 39.4%
    Depreciation 38,401 48,163 25.4% 155,311 174,498 12.4%
    Share of loss/(gain) in associates 2,136 2,661 24.6% 7,223 9,654 33.7%
    Exceptional items -1,469 -3,000 104.2% -8,532 14,505
    Profit before tax 23,686 25,696 8.5% 107,130 120,705 12.7%
    Tax 10,811 10,762 -0.5% 54,047 59,368 9.8%
    Profit after tax/(loss) 12,875 14,934 16.0% 53,083 61,337 15.5%
    Minority interest 322 2,031 530.7% 1,248 6,495 420.4%
    Net profit 12,553 12,903 2.8% 51,835 54,842 5.8%
    Net profit margin (%) 5.4% 5.2% 5.6% 5.7%
    No. of shares 3,997.4
    Diluted Earnings per share (Rs)* 13.7
    P/E ratio (x)* 26.0

    * On a trailing 12 months basis; adjusted for exceptional items

  • What has driven performance in 4QFY16?

    • Bharti reported a revenue growth of 8.4% YoY during the quarter. Revenues from mobile services (India) increased by 9.2% YoY largely due to a continued strong growth in data services. Mobile data revenues now contribute 23.3%of revenues of the company (on a standalone basis). The tele-media services segment continues to record growth.Revenues were up7% YoY in this segment. Revenues from the B2B services were up by 6% YoY.The digital TV business (DTH) business continuedthe good performancerecording a growth of 24% YoY. The tower segment witnessed a growth of 5% YoY during the quarter.
    • Coming to the key parameters relating to the company's mobile service business in India, the voice average revenue per user (ARPU) decreased 9% YoY.The minutes of usage per customer (MoU) decreased by1% YoY. The voice realization per minute decreased by 8% YoY.
    • The robust growth in data usagecontinues. The data usage per customer (in MB)increased by 31% YoY. Data realisationper MB fell by15% YoY. Data ARPU increased by 12% YoY.
    • The international operations witnessedmutedgrowth. International revenues grewby4.6% YoY. The EBITDA margins for the international operations improved to 20.2% in 4QFY16.

      Segment wise performance
      Mobile Services-India 4QFY15 4QFY16 Change
      Revenue (Rs m) 131,874 144,043 9.2%
      % of total revenues 57.2% 57.7%
      Minutes billed (m) 277,869 307,988 10.8%
      Voice realization per min (Rs) 0.36 0.33 -8.2%
      Data realization per mb (Rs) 0.27 0.23 -14.7%
      EBITDA margin 39.2% 40.6%
      EBITDA per minute (Rs) 0.19 0.19 2.0%
      Telemedia Services
      Revenue (Rs m) 11,288 12,460 10.4%
      % of total revenues 4.9% 5.0%
      Minutes billed (m) 4,429 5,682 28.3%
      Revenue per minute (Rs) 2.55 2.19 -14.0%
      EBITDA margin 45.8% 46.3%
      EBITDA per minute (Rs) 1.17 1.02 -12.9%
      B2B
      Revenue (Rs m) 17,805 18,808 5.6%
      % of total revenues 7.7% 7.5%
      Minutes billed (m) 36,437 37,967 4.2%
      Revenue per minute (Rs) 0.49 0.50 1.4%
      EBITDA margin 17.3% 28.0%
      EBITDA per minute (Rs) 0.08 0.14 64.2%
      Passive Infra. Services
      Revenue (Rs m) 13,518 14,215 5.2%
      % of total revenues 5.9% 5.7%
      EBITDA margin 50.1% 50.2%
      DTH (Direct to Home)
      Revenue (Rs m) 6,348 7,840 23.5%
      % of total revenues 2.8% 3.1%
      EBITDA margin 32.7% 35.1%
      International (Africa & South Asia)
      Revenue (Rs m) 65,859 68,899 4.6%
      % of total revenues 28.6% 27.6%
      EBITDA margin 19.2% 20.2%
      Others (India)
      Revenue (Rs m) 715 785 9.8%
      % of total revenues 0.3% 0.3%
      EBITDA (Rs) 317 -478

      *As per IFRS numbers. Excluding inter-segment eliminations

    • Bharti's operating margins improved to36.6% during 4QFY16. This was because of the savings in access charges, admin costs, and marketingexpenses(as percentage of sales).

      Cost Breakdown
      (Rs m) 4QFY15 As % of sales 4QFY16 As % of sales
      Access charges 27,988 12.1% 26,948 10.8%
      Licence fee & Spectrum charges 21,735 9.4% 25,047 10.0%
      Network operations expense 48,276 21.0% 53,744 21.5%
      Employee expense 11,881 5.2% 12,404 5.0%
      Admin & other expense 16,392 7.1% 16,972 6.8%
      Sales & Marketing expense 23,003 10.0% 23,359 9.3%
      Total expenses 149,275 158,474
    • At the net level, the good operating performancecontributedto a 2.8% YoY increase in the bottomline.However, the net margin for the full year is almost the same as FY15.
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