Airtel reported Q4 results that can be viewed as broadly inline to positive. While revenue missed consensus (Bloomberg) by 1.8 per cent, EBITDA margins were better and EBIDTA was inline versus consensus. EBITDA margin was strong at 52.2 per cent, up by 20 basis points Q-o-Q Â and by 140 basis points Y-o-Y. EPS beat expectations by four per cent. Â Overall, the beat on EBITDA margin outweighs the revenue miss.
Segment performance
Airtel’s India and its small South Asia business accounted for 70 per cent of revenue/EBITDA, while Africa business makes up the balance 30 per cent.
Within this, Airtel’s India mobile business is the key fulcrum accounting for 54 per cent of revenues and nearly 56 per cent of EBITDA.
Airtel’s India mobile business has continued to match up to close competitor Reliance Jio (RJio) in terms of growth. In Q4, Airtel reported Y-o-Y  revenue and EBITDA growth at 12 and 19 per cent, respectively, matching RJio revenue growth of 12 per cent and exceeding RJio EBITDA growth of 16.7 per cent.
ARPU was flattish Q-o-Q at ₹193. While some may view this as slightly disappointing, this too was not different from trend witnessed at RJio which  reported flattish ARPU at ₹178.8. Â
The other key segment within India operations – Airtel Business (13 per cent of consolidated revenue), which mainly consists of B2B connectivity, cloud and allied services, too delivered good performance with Y-o-Y revenue growth at 14 per cent.
Africa business with presence in 14 countries in the continent, grew revenues and EBITDA (in $terms) by 19 and 17 per cent Y-o-Y,  respectively. It continues to present a good growth opportunity with mobile data customer base (3G/4G) at 39 per cent of Airtel’s mobile customer base. The same in India is at 70 per cent now.
What should investors do
Airtel continues to be on a path of steady progress — consolidating its position in India mobile business, tapping incremental opportunities in the B2B and other segments, and tapping growth opportunities in Africa. Trading at one year forward EV/EBITDA of 8.3 times (five year average at 8.7), the risk-reward remains favourable for the stock. A strong position in Indian mobile market at the cusp of 5G revolution, and well levered to digital connectivity trends that are likely to grow at an exponential pace in the current decade driven by themes like IoT,  autonomous driving/connected cars, drones, etc are in its favour although these themes will take a long time to gain scale.
Overall, current and long-term fundamentals make the stock an interesting bet. We maintain our earlier accumulate rating on the stock.
Published on May 16, 2023
