Bharti Airtel set for growth with rising ARPU, market share expansion: Report

Bharti Airtel, India's second largest telecommunications service provider, reported a steady yet moderate growth in its third-quarter earnings for the current financial year.

The company's India mobile segment witnessed 4 per cent sequential increase in earnings before interest, taxes, depreciation, and amortisation (EBITDA), or operating profit, buoyed by a 2.5 per cent rise in average revenue per user (ARPU) and a 3 per cent uptick in subscribers.

Consolidated EBITDA for Bharti Airtel grew by 1.5 per cent sequentially, while capital expenditure (Capex) remained flat, signalling a potential peak in investment levels. The company's debt continued its downward trajectory, with a repayment of Rs 5,100 crore fuelled by healthy free cash flow generation.

Analysts at brokerage firm Motilal Oswal foresee a period of soft earnings growth for Bharti Airtel in the near term. While the company may benefit from a mix of 4G services, limited potential for tariff hikes and soft market share gains could pose challenges. However, over the next 2-3 years, Bharti Airtel is poised to capitalise on sector consolidation and tariff adjustments, driving robust free cash flow generation.

Revenue for Bharti Airtel's India Mobile segment grew by 3.3 per cent, supported by a 3.7 per cent increase in EBITDA. Margin improvement was observed, hitting 55.1 per cent. The company's strategic focus on the rollout of 5G services and rural coverage is expected to keep Capex elevated in the near term, with a subsequent moderation anticipated from the following year onwards.

Looking ahead, Bharti Airtel aims to reduce its debt-to-EBITDA ratio to 2 times, from the current 2.52 times, by leveraging its strong cash flow and refraining from calling up rights issue money. Monetisation opportunities remain robust, driven by the transition from feature phones to smartphones and the shift from prepaid to postpaid plans, alongside data monetisation strategies, Motilal Oswal said.

Despite short-term challenges, Bharti Airtel is optimistic about its long-term prospects. The company targets a 40-50 per cent increase in EBITDA over the next 2-3 years, accompanied by a significant reduction in net debt. Factors such as market share gains, improved ARPU, and expansion into non-wireless segments like home and enterprise services are expected to fuel growth, the Mumbai-based brokerage firm said.