What does Airtel's Q4 result indicate?

Bharti's ratings headroom is likely to improve with an equity infusion, planned asset sales and growing EBITDA from Africa.

Bharti Airtel's results for fiscal 2018-19 indicate a "rebound" in the Indian mobile sector amid easing competition, and industry revenue may rise by 5-10 per cent this year, Fitch Ratings said on Wednesday.

"We believe the Indian mobile sector's recovery is underway as the top-three telcos are likely to turn their focus towards profitability, while their revenue market shares are relatively equal at around 30-33 per cent each," Fitch Ratings said in a note.

Bharti's ratings headroom is likely to improve with an equity infusion, planned asset sales and growing Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) from Africa, it noted.

"We expect industry revenue to rise by 5-10 per cent in 2019 - the first growth in three years - underpinned by easing competition and growing data traffic with the proliferation of affordable 4G handsets.

“We expect blended average revenue per user (ARPU) to rise by 10-20 per cent to around $ 1.6-1.7 per month in 2019, underpinned by the incumbents' introduction of a minimum mobile tariff of Rs 35 ($ 0.50) per month and growing data use," the note said.

The top three telcos are likely to drive tariffs higher by bundling value-added services, such as music, movies and sports, amid growing data consumption.

On Bharti Airtel, it said that an equity injection of $ 3.5 billion, a public equity offer by its African operations, and a stake sale in the merged entity of Indus Tower and Bharti Infratel will significantly ease pressure on the balance sheet.

"We forecast Bharti's FY20 revenue and EBITDA to increase by the low single digits, driven by better ARPU for mobile and steady growth in the African and business-to-business (Enterprise) segments," Fitch said.

Earlier this week, telecom operator Bharti Airtel posted a surprise 29 per cent surge in March quarter net profit, aided by exceptional income gains.

The company, whose profitability has been battered by intense price competition posed by the richest Indian Mukesh Ambani's Reliance Jio, earned a net profit of Rs 107.2 crore in January-March quarter as compared to Rs 82.9 crore in the same period previous fiscal, its first rise in profit after several quarters.

Its revenue increased 6.2 per cent to Rs 20,602.2 crore for the three months ended March 31, 2019.

Airtel, which is in the midst of Rs 25,000 crore rights offer, neither issued the customary press statement detailing earnings statement and management commentary nor provided average revenue per user - a key metrics tracked by analysts.

A recent report by SBICap Securities said that Bharti had "done well" on ARPU as it seems to have improved about 20 per cent sequentially, while Jio's ARPU declined about 3 per cent.

"Subscriber traction is something that Bharti needs to pick up, as ARPU gains incrementally may be much lesser but may still continue, driven by upselling for low-end subscribers and 2G-to-4G upgrade," it said.

Photograph: Adnan Abidi/Reuters