29 July 2014
1QFY15 Results Update | Sector:
Telecom
Bharti Airtel
BSE SENSEX
25,991
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
7,749
BHARTI IN
3,997.4
374/279
3/-10/-27
CMP: INR354
TP: INR465
Buy
M.Cap. (INR b) / (USD b) 1,416.5/23.6
Financials & Valuation (INR Billion)
Y/E Mar
Net Sales
EBITDA
Adj. Net
fi
Adj. EPS
( ) Gr.
Adj. EPS
(%)
BV/Sh (INR)
RoE (%)
RoCE (%)
D. payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA
( )
27.4
2.0
6.5
20.2
1.8
5.6
15.5
1.7
4.7
2015E 2016E 2017E
947.4 1,037.5 1,124.9
322.1
51.6
12.9
83.9
176.9
7.7
5.9
10
364.0
70.1
17.5
36.0
192.8
9.5
6.7
10
394.5
91.1
22.8
30.0
213.5
11.2
7.7
10
1QFY15 revenue/EBITDA above estimates; continued strong growth in PAT:
BHARTI’s 1QFY15 EBITDA grew 18% YoY and 5.7% QoQ to INR 77.2b (est
INR74.6b) driven by strong performance in India mobile business. Consolidated
revenue grew 13.3% YoY and 3.3% QoQ to INR 229.6b (vs est INR224.9b),
boosted by India mobile, Telemedia and DTH segments but dragged down by
Africa business. Proforma PAT increased 97% YoY and 13.8% QoQ to INR13.6b.
Reported PAT of INR11.1b included INR2.5b exceptional loss due to various
disputes. PAT performance was strong despite INR3b forex loss.
Continued robust recovery in India mobile:
India mobile revenue grew 9.9% YoY
and 5.5% QoQ to INR127.5b. EBITDA grew 25% YoY and 11.7% QoQ to INR47.1b
(vs est of INR44b). Mobile traffic grew 2.3% QoQ (vs est of 1.5%); mobile RPM
increased 3.5% QoQ to 46.5p (vs est of 45.6p). Data revenue contribution
increased to 12.4% (up 90bp QoQ) on 17% QoQ traffic growth.
Africa performance remains muted:
Africa EBIDTA declined 2.3% QoQ to
USD283m (vs est USD286m). Revenue grew 1.6% QoQ (primarily RPM led),
impacted by 1.4% revenue-weighted currency depreciation. Subscriber base
declined QoQ due to promotional bans in Nigeria and KYC changes in Uganda.
Net debt down INR28b QoQ to INR577b:
Net debt declined 4.6% QoQ to
INR577b on strong free cash generation. 1QFY15 capex stood at INR39.9b.
Change in segment reporting:
BHARTI has made changes to the segment
reporting structure. India & South Asia will include 1) Bangladesh and Srilanka
operations and 2) Acquisition debt/associated finance cost of Africa business.
Upgrading EBITDA by 4%; TP by 14%; maintain Buy:
We are upgrading our
EBITDA estimates by ~4%. We expect 14% consolidated EBITDA CAGR over FY14-
16E. The stock trades at proportionate EV/EBITDA of 6.5x FY15E and 5.6x FY16E.
Maintain Buy with a revised target price of INR465 (INR410 earlier) based on
6.5x FY14 EV/EBITDA for India business (ex towers), 5x EV/EBITDA for Africa, and
15% discount vs fair value for Bharti Infratel (recently upgraded).
Shobhit Khare
(Shobhit.Khare@MotilalOswal.com); +91 22 3982 5428
Investors are advised to refer through disclosures made at the end of the Research Report.

Bharti Airtel
India & South Asia EBITDA up 9% QoQ
India revenue grew 12% YoY and 5.7% QoQ to INR162b (v/s our estimate of
INR156.8b).
EBITDA grew 22% YoY and 9.1% QoQ to INR60.2b (v/s our estimate of INR57.2b).
EBITDA margin improved 300bp YoY and 120bp QoQ to 37.2% (v/s our estimate
of 36.5%), led by margin expansion in India mobile.
India Mobile: EBITDA up 12% QoQ driven by strong all round performance
Mobile revenue increased 9.9% YoY and 5.5% QoQ to INR127.5b (est of
INR124.7b).
Mobile EBITDA grew 25.1% YoY and 11.7% QoQ to INR47.1b (est of INR44b).
EBITDA margin improved ~450bp YoY and ~200bp QoQ to 36.9%.
RPM increased 5.7% YoY and 3.5% QoQ to 46.5p vs our est of 45.6p.
Mobile traffic grew 4.8% YoY and 2.3% QoQ to 271b minutes, above our
estimate of 269b minutes.
Data continued to grow strongly with traffic growth of 17% QoQ and data
revenue growth of 14% QoQ. Data contribution increased to 12.4% of revenue
in 1QFY15 from 11.5% in 4QFY14.
MOU per subscriber declined marginally QoQ to 435 minutes (vs est of 432
minutes).
Mobile ARPU increased 3.1% QoQ to INR202 (vs est of INR197).
Blended monthly churn increased marginally QoQ to 2.7%.
Africa: Performance remains muted
Africa revenue increased 1.6% QoQ to USD1,164m (v/s est of USD1,162m).
EBITDA declined 2.3% QoQ to USD283m implying EBITDA margin of 24.3% vs our
estimate of 24.6%.
Net loss increased 31% QoQ to ~USD137m (v/s our estimate of USD142m net
loss).
Total minutes increased 0.4% QoQ to 28.3b; RPM increased 1.8% QoQ.
Subscriber base declined marginally to 69.1m, impacted by regulatory issues in
Nigeria and Uganda.
Net debt at INR577b; strong momentum in 3G site additions
Bharti’s net debt declined 4.6% QoQ to INR577b led by strong free cash flow
during the quarter. Reported debt does not yet include INR129b spectrum
related payments. Net debt/ annualized EBITDA remains comfortable at 1.9x
1QFY15 consolidated capex was ~INR40b implying capex/sales of 17%.
While 2G site additions declined QoQ at ~1,100, 3G sites additions remained
strong at ~3,300.
29 July 2014
2

Bharti Airtel
Story in Charts
India mobile KPIs
Mobile ARPU (INR)
Mobile MOU (mins)
Mobile RPM (p)
50.0
46.5
48.0
46.0
42.8
43.2
44.6
43.8
42.7
42.6
42.6 42.4 44.0 44.0
44.8 44.9
44.0
42.0
40.0
Source: Company, MOSL
Bharti India: YoY mobile traffic growth (%)
16
14
10
9
8
10
8
10
8
Bharti India: Mobile traffic and RPM trend
1.87
1.54
7
6
5
5
1.17
YoY RPM (%)
Mobile RPM (INR)
5
7
5
3
-20 -18 -24 -21 -17 -17 -17 -17 -1 -3
0.93
0.77
0.64
0.53
0.44 0.44 0.42 0.44 0.48 0.50 0.52
Source: Company, MOSL
Source: Company, MOSL
Bharti India: Mobile data traffic
Data traffic (b MB)
QoQ growth (%)
Bharti India: Data revenue contribution and ARMB (p)
Data revenue per MB (p)
Data revenue (% of wireless)
25%
26%
21%
14%
23%
16%
20%
19%
6%
7%
7%
9%
10%
11%
12%
4%
5%
Source: Company, MOSL
Source: Company, MOSL
29 July 2014
3

 
Bharti India: Mobile churn rate per month (%)  
Bharti Airtel
Bharti vs Idea: QoQ India mobile traffic growth (%) 
9
Bharti ‐ QoQ growth
8
5
5
5
3
4
5
‐3
2
3
‐4
‐2
‐6
9
4
1 4
5
 
6.4
7.2
7.9
8.8 8.8 8.5
5.9
3.2 3.2 3.2
7
‐2
‐2
1
7
5
2.7 2.4 2.7
2
Source: Company, MOSL 
 
Source: Company, MOSL 
India mobile revenue and EBITDA margin 
Africa revenue and EBITDA margin 
EBITDA margin (%)
Africa mobile revenue (USD m)
EBITDA margin (%)
 
India mobile revenue (INR b)
36.9%
34.9%
34.2%
34.1%
34.0%
33.8%
33.7%
33.5%
32.4%
30.7%
30.6%
29.9%
29.2%
27.8%
27.1%
26.7%
26.7%
26.5%
26.2%
25.8%
25.8%
25.4%
25.3%
25.2%
26.9%
24.3%
Source: Company, MOSL 
 
Source: Company, MOSL 
Bharti: Mobile cell site base and quarterly additions 
Consolidated net debt and net debt/EBITDA 
Net Debt (INR b)
Net Debt/EBITDA (x)
 
Cellsites ('000) 
Sites added ('000) 
5.1
0.9 0.9
1.0 1.9
3.4
2.0 2.3
1.0
0.7
1.7
1.1
1.7
2.63 2.77 2.84 2.61 2.99 2.58 2.53 2.42 2.26 2.27
2.05 2.09 1.87
Source: Company, MOSL
Source: Company, MOSL
 
Bharti Airtel: SOTP 
  
India business (excl. towers) 
Tower business (15% discount to fair value) 
Africa business 
Less FY16 net debt 
Total Value 
Shares o/s (b) 
CMP 
Upside (%) 
FY16 EBITDA  (INR B)  Ownership 
259 
  
75 
  
  
4.00 
  
  
100% 
79% 
90% 
  
  
  
  
  
Proportionate  
EV/EBITDA 
EBITDA (INR b) 
259 
6.5 
  
  
68 
5.0 
  
  
  
  
  
  
  
  
  
  
Fair value 
(INR b) 
1,680 
382 
339 
549 
1,470 
  
  
  
Value/Sh 
420 
96 
85 
137 
465 
  
354 
31 
Source: Company, MOSL
29 July 2014
 
4

Bharti Airtel
Bharti Airtel - Consolidated Segment wise Summary as per IFRS (INR m)
1QFY14
4QFY14#
1QFY15#
YoY%
QoQ%
1QFY15E
124,706
10,362
16,794
13,583
10,611
74,067
-20,894
224,878
43,964
3,872
3,660
6,527
1,244
17,535
-1,292
74,616
35.3
37.4
21.8
48.1
23.7
33.2
40,462
34,154
1,406
9,431
26,128
12,844
49.2
13,284
721
12,563
v/s Est (%)
2.3
3.3
-4.1
-1.9
4.3
-5.9
2.1
7.0
1.9
-11.9
-7.0
0.0
-3.3
3.5
165bps
-50bps
-179bps
-249bps
66bps
44bps
-0.2
7.8
12.3
1.4
10.4
13.9
2bps
7.0
-14.4
8.3
Revenue
Mobile
116,013
120,835
127,525
9.9
5.5
Telemedia
9,484
10,242
10,705
12.9
4.5
Enterprise
14,036
16,305
16,111
14.8
-1.2
Passive Infrastructure
12,832
13,061
13,328
3.9
2.0
Others (incl South Asia)
9,439
10,738
11,065
17.2
3.0
Africa
59,475
70,623
69,685
17.2
-1.3
Eliminations
-18,639
-19,611
-18,803
0.9
-4.1
Consolidated Revenue
202,639
222,193
229,616
13.3
3.3
EBITDA
Mobile
37,633
42,147
47,061
25.1
11.7
Telemedia
3,764
3,816
3,947
4.8
3.4
Enterprise
2,765
3,661
3,223
16.6
-12.0
Passive Infrastructure
5,745
6,340
6,073
5.7
-4.2
Others (incl South Asia)
635
730
1,244
95.9
70.4
Africa
15,867
17,816
16,958
6.9
-4.8
Eliminations
-960
-1,474
-1,306
36.0
-11.4
Consolidated EBITDA
65,449
73,066
77,200
18.0
5.7
EBITDA margin (%)
Mobile
32.4
34.9
36.9
446bps
202bps
Telemedia
39.7
37.3
36.9
-282bps
-39bps
Enterprise
19.7
22.5
20.0
31bps
-245bps
Passive Infrastructure
44.8
48.5
45.6
79bps
-298bps
International
26.7
25.2
24.3
-234bps
-89bps
Consolidated EBITDA margin
32.3
32.9
33.6
132bps
74bps
Depreciation and amortization
38,470
39,444
40,365
4.9
2.3
Operating income
26,979
33,622
36,835
36.5
9.6
Share of JV/Associate
3,075
1,673
1,578
-48.7
-5.7
Net finance cost
11,676
9,911
9,565
-18.1
-3.5
Proforma Profit Before Taxes
18,378
25,384
28,848
57.0
13.6
Proforma Tax
9,685
13,306
14,629
51.1
9.9
Effective Tax Rate (%)
52.7
52.4
50.7
-199bps
-171bps
Proforma Profit After Tax
8,693
12,078
14,219
63.6
17.7
Proforma Minority Interest
1,804
128
617
-65.8
382.0
Proforma Net Profit
6,889
11,950
13,601
97.4
13.8
#4QFY14/1QFY15 numbers adjusted for exceptional expense of INR1569m/INR1820m and associated tax impact
Source: Company, MOSL
India Mobile: Operating Metrics
India - Wireless KPIs
Wireless traffic (b min)
RPM (p)
Subscribers (m)
ARPU (INR)
MOU (min)
Monthly churn (%)
Voice RPM (p)
Non-voice revenue contribution
Data revenue contribution
1QFY14
258
44.0
191
200
455
3.2
36.6
16.9
8.2
4QFY14
265
44.9
206
196
437
2.4
37.2
17.4
11.5
1QFY15
271
46.5
209
202
435
2.7
38.1
18.2
12.4
YoY%
4.8
5.7
9.7
1.1
-4.3
-51bps
4.1
131bps
422bps
QoQ%
2.3
3.5
1.9
3.1
-0.4
28bps
2.5
80bps
92bps
1QFY15E
269
45.6
209
197
432
v/s Est (%)
0.8
2.1
0.1
2.8
0.8
Source: Company, MOSL
29 July 2014
5

Bharti Airtel
Bharti Africa: Quarterly Performance (USDm)
Revenue
EBITDA
EBITDA margin (%)
Depreciation and amortization
EBIT
Net finance cost
Profit Before Taxes
Total Tax
Profit After Tax (before minorities)
Minority Interest
Net Profit
Bharti Africa: KPIs
Mobile Subs (m)
Mobile ARPU (USD/month)
Total Minutes of Use (b mins)
Minutes of Use/Sub/Month
Effective Mobile RPM (US Cents)
1QFY14
1,062
283
26.7
219
64
59
5
68
-63
-11
-52
4QFY14
1,145
290
25.3
226
64
122
-58
68
-127
-23
-105
1QFY15
1,164
283
24.3
236
47
124
-77
80
-157
-20
-137
YoY%
9.6
0.0
-233bps
8.0
-27.4
108.7
-1647.5
16.4
147.4
75.9
162.9
QoQ%
1.6
-2.3
-98bps
4.6
-26.9
1.3
32.1
17.5
23.3
-12.0
31.0
1QFY15E
1,162
286
24.6
230
55
139
-84
70
-155
-13
-142
v/s Est (%)
-1.5
1.5
75bps
-1.9
15.9
-12.1
-30.4
-2.9
-17.8
81.3
-26.6
64.2
5.5
26.0
134
4.1
69.4
5.5
28.2
136
4.0
69.1
5.6
28.3
136
4.1
7.6
2.3
8.8
1.6
0.7
-0.5
1.9
0.4
0.0
1.8
71.5
-2.9
5.5
0.1
28.9
-2.5
137
-0.4
4.0
0.5
Source: Company, MOSL
Summary of estimate change
FY15E
Revenue (INR b)
Old
New
Change (%)
EBITDA (INR b)
Old
New
Change (%)
EBITDA margin (%)
Old
New
Change (bp)
Depreciation (INR b)
Old
New
Change (%)
Net finance cost (INR b)
Old
New
Change (%)
Tax rate (%)
Old
New
Change (bp)
Net Profit (INR b)
Old
New
Change (%)
EPS (INR)
Old
New
Change (%)
12.9
12.9
0.3
16.0
17.5
9.8
20.3
22.8
12.6
51
52
0.3
64
70
9.8
81
91
12.6
49
53
332bps
47
47
-62bps
45
43
-161bps
40
44
9
41
46
10
34
35
4
169
169
0
188
190
1
201
202
1
33.4
34.0
62bps
34.5
35.1
61bps
34.7
35.1
40bps
310
322
3.8
351
364
3.8
380
395
3.8
930
947
1.9
1018
1037
1.9
1096
1125
2.6
FY16E
FY17E
Source: Company, MOSL
29 July 2014
6

Bharti Airtel
Key assumptions and value drivers
Mobile segment
Mobile - India
Subs (m)
YoY (%)
Average subs (m)
YoY (%)
Netadds per month (m)
YoY (%)
Total mobile traffic (b min)
YoY (%)
ARPU (INR/month)
YoY (%)
MOU
YoY (%)
Mobile RPM (INR)
YoY (%)
Mobile EBITDA margin (%)
Mobile Capex (INR b)
Mobile Capex/sales (%)
Mobile - Africa
Subs (m)
YoY (%)
Netadds per month (m)
ARPU (USD/month)
YoY (%)
Capex (USD b)
Capex/Sales (%)
EBITDA margin (%)
FY10
128
36
111
42
2.8
6
610
28
243
-25
459
-10
0.53
-17
38.7
34
10
FY11
162
27
145
31
2.9
3
792
30
201
-17
455
-1
0.44
-17
34.7
59
16
44
5
0.2
7.3
0.9
24
25
FY12
181
12
172
19
1.6
-45
889
12
188
-6
431
-5
0.44
-1
33.9
32
8
53
20
0.7
7.1
-2
1.5
37
27
FY13
188
4
185
8
0.6
-64
968
9
185
-1
436
1
0.42
-3
30.1
57
13
64
20
0.9
6.3
-11
0.7
16
26
FY14
206
9
197
7
1.4
150
1,030
6
194
5
436
0
0.44
5
33.8
42
9
69
9
0.5
5.6
-11
0.6
14
26
FY15E
218
6
212
8
1.1
-26
1,090
6
204
5
428
-2
0.48
7
37.0
62
12
73
5
0.3
5.6
0
0.7
15
25
FY16E
229
5
224
5
0.9
-20
1,149
5
214
5
428
0
0.50
5
38.8
62
11
FY17E
237
4
233
4
0.7
-16
1,198
4
221
3
428
0
0.52
3
38.1
61
10
81
91
12
12
0.7
0.8
5.5
5.4
-2
-2
0.8
0.8
15
15
25
26
Source: Company, MOSL
29 July 2014
7

Bharti Airtel
Business mix
Revenue (INR b)
Mobile
Telemedia
Enterprise
Passive Infrastructure
Others (incl South Asia)
Africa
Total revenue
Eliminations and others
Consolidated revenue
YoY%
EBITDA (INR b)
Mobile
Telemedia
Enterprise
Passive Infrastructure
Others (incl South Asia)
Africa
Total EBITDA
Eliminations and others
Consolidated EBITDA
YoY%
Capex (INR b)
Mobile
Telemedia
Enterprise
Others (incl South Asia)
Passive infrastructure
Africa
Consolidated capex
YoY%
Capex/Sales (%)
FY10
331
34
45
71
6
0
487
-68
418
13
128
15
13
25
-10
0
170
-2
168
11
34
10
12
16
12
0
83
-41
20
FY11
363
36
41
86
10
131
667
-72
595
42
126
16
10
32
-10
29
202
-3
200
19
59
8
4
14
23
36
143
71
24
FY12
403
37
45
95
16
198
794
-80
715
20
137
16
8
36
-9
53
240
-3
237
19
32
8
2
9
14
76
140
-2
20
FY13
431
36
53
50
32
240
842
-73
769
8
130
15
9
23
-2
63
236
-4
233
-2
57
3
1
11
11
39
122
-13
16
FY14
467
39
63
51
41
273
934
-77
857
11
158
15
14
23
2
71
282
-5
278
19
42
4
1
13
8
38
106
-13
12
FY15E
526
44
67
57
46
287
1026
-78
947
10
195
16
14
26
5
71
327
-5
322
16
62
3
1
21
10
42
139
31
15
FY16E
581
50
72
65
52
304
1124
-87
1037
10
225
18
16
30
6
75
370
-6
364
13
FY17E
626
54
77
73
57
333
1219
-94
1125
8
239
19
16
34
7
86
401
-7
395
8
62
61
3
4
1
1
13
13
11
12
46
50
136
141
-3
4
13
12
Source: Company, MOSL
29 July 2014
8

Bharti Airtel
Bharti Airtel: an investment profile
Company description
Bharti Airtel is an integrated telecom operator with
presence in wireless, fixed-line and broadband, long
distance, enterprise, and passive infrastructure services
across India, Sri Lanka, Bangladesh and Africa. Bharti is
the largest Indian wireless operator with revenue
market share of ~31% and population coverage of 86%.
Bharti is the third largest wireless company globally by
subscribers.
High forex risk given exposure to significant USD
denominated debt
Recent developments
Key investment arguments
Bharti Airtel/subsidiaries have entered into
agreements for the divestment of over 3,100 telecom
towers in four countries across Africa operations to
Helios Towers Africa/subsidiaries (HTA). Bharti’s
subsidiaries will have access to a dedicated portion of
the towers from HTA under long term lease
contracts.
Bharti continues to maintain its wireless leadership
in India with a wireless subscriber share of ~21%
and adjusted revenue share of ~31%.
Bharti is well positioned to capture rural growth by
leveraging its deep coverage and favorable
frequency allocation.
Bharti has the highest investment in data spectrum
among Indian telecom operators
Valuation & View
Key investment risks
We are upgrading our EBITDA estimates by ~4%. We
expect 14% consolidated EBITDA CAGR over FY14-
16E. The stock trades at proportionate EV/EBITDA of
6.5x FY15E and 5.6x FY16E. Maintain Buy with a
revised target price of INR465 (INR410 earlier) based
on 6.5x FY14 EV/EBITDA for India business (ex
towers), 5x EV/EBITDA for Africa, and 15% discount
vs fair value for Bharti Infratel (recently upgraded).
Overbidding in upcoming spectrum auctions
Potential market disruption from entry of a well-
funded operator like Reliance Industries into the
Indian telecom market
Comparative valuations
Bharti
P/E (x)
EV/EBITDA (x)
EV/Sales (x)
P/BV (x)
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
Airtel
27.4
20.2
6.5
5.6
2.1
1.9
2.0
1.8
Idea
16.7
18.2
6.4
6.7
2.2
2.3
2.3
2.1
RCOM
30.4
11.8
7.3
5.9
2.7
2.2
0.9
0.9
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
12.9
17.5
Consensus
Forecast
13.2
16.7
Variation
(%)
-2.3
5.0
FY15
FY16
Target price and recommendation
Current
Price (INR)
354
Target
Price (INR)
410
Upside
(%)
15.8
Reco
Buy
Shareholding pattern (%)
Jun-14
Promoter
DII
FII
Others
65.4
7.2
17.7
9.7
Mar-14
65.3
7.8
16.4
10.5
Jun-13
65.2
8.2
16.2
10.4
Stock performance (1-year)
29 July 2014
9

Bharti Airtel
Financials and valuation
29 July 2014
10

Bharti Airtel
NOTES
29 July 2014
11

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Bharti Airtel
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Analyst ownership of the stock
BHARTI AIRTEL LTD
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29 July 2014
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12