Bharti Airtel Q2: Stable qtr in the offing; losses to contract, ARPU rise

 Bharti Airtel is set to announce its September quarter results of FY21 (Q2FY21) on Tuesday amid expectations that the telecom operator's losses should shrink and revenue rise on year-on-year (YoY) basis, helped by firm subscriber addition and ARPU rise in an otherwise seasonally weak quarter. Commentary on ARPU trajectory and non-wireless business will be key monitorables.

For the entire sector as well, ICICI Securities expects a stable quarter for telecom companies. The brokerage sees both subscriber and average revenue per user (ARPUs) remaining firm given return of migrants to cities, continued higher data usage and thereby pack upgrades and improved availability of recharges both digitally/physically as cities/towns have largely restarted post lockdowns.

Last week, Bharti Airtel's Africa operations, Airtel Africa, posted an 8.8 per cent YoY fall in net profit to $88 million in the quarter ended September as compared to net profit of $57 million in the previous quarter. Its revenue grew 19.6 per cent YoY in constant currency to $965 million.

At the bourses, Bharti Airtel dipped 24.8 per cent in the quarter under review. In comparison, the S&P BSE Sensex gained 9 per cent in the same period, ACE Equity data show.

Here's what leading brokerages expect from Airtel's Q2FY21 numbers:

Emkay

According to analysts at Emkay, Airtel's India wireless revenues shall rise sequentially, boosted by a 43 lakh increase in data subscribers vs stable data subscribers in the last quarter. The brokerage expects ARPU to rise 1 per cent QoQ, accompanied by return of some voice subscribers in the base.

Overall, Airtel's Q2FY21 revenue is likely to rise 17 per cent YoY (up 3.2 per cent QoQ) to Rs 24,716.1 crore from Rs 21,131.3 crore reported in Q2FY20 while net loss may contract to Rs 107.3 crore from Rs 23,045 crore reported in Q1FY21. Earnings before interest, tax, depreciation, and ammortisation (Ebitda) is seen rising 22 per cent YoY to Rs 10,773.7 crore from Rs 8,637.2 crore in the year-ago quarter.

"Data volume shall continue to accrue benefits of the lockdown and rise 7.5 per cent QoQ. The home broadband segment is likely to continue to see increased traction. Ebitda margins shall expand only 11bps sequentially to 43.6 per cent, due to Covid-19-related cost saving in SG&A coming back in the base," the brokerage said.

ICICI Securities

The brokerage expects subscriber addition of around 30 lakh for Airtel in the quarter under review, driven by reverse migration of labourers to cities. Notwithstanding seasonality, it sees Airtel's ARPU witnessing around 2 per cent QoQ growth at Rs 160, aided by higher data based usage upgrades.

Further, Indian wireless revenues are expected to witness 2.6 per cent QoQ growth at Rs 13,213 crore. The company's India non-wireless revenues traction, especially broadband and enterprise, is expected to remain robust. Consequently, among the headline numbers, consolidated revenues are expected to be up 2.5 per cent QoQ at Rs 24,526 crore (up 16.1 per cent YoY) while net loss may contract to Rs 167 crore.

On the operational front, the brokerage expects sequentially flattish India Ebitda margins at 44.3 per cent. Reported Ebitda at Rs 10,660 crore is expected to grow 2.4 per cent QoQ (up 20.6 per cent YoY) with margins expected at 43.5 per cent, flattish sequentially.

Kotak Institutional Equities

Meanwhile, Kotak Institutional Equities sees Bharti Airtel moving into the black in Q2FY21 with net profit of Rs 75.7 crore, helped by 1.2 per cent sequential rise in ARPU.

The brokerage expects 3.5 per cent sequential rise in Airtel's India wireless revenues and 4 per cent QoQ growth in Ebitda. “As offline recharge activity is likely to have improved (post the Covid-led disruption in the previous quarter), we expect reported subs to be higher by 2.9 million QoQ,” it said.

Bharti Airtel Q2 loss narrows down to Rs 763 cr; revenue up 22% YoY

 Bharti Airtel on Tuesday said its September quarter results showed consolidated revenues at Rs 25,785 crore -- up 22 per cent year-on-year (YoY), affirming the telecom company's "strong growth across revenue margins”.

The company’s India revenues stood at Rs 18,747 crore up 22 per cent YoY led by strong 4G customer momentum and up-trading, it said in a press release. Net loss (before exceptional items) for Q2’21 was at Rs 744 crore while net loss (after exceptional items) for the quarter under review came in at Rs 763 crore. The company had posted a loss of Rs 23,044.9 crore in the year-ago period.

The company’s consolidated EBITDA stood at Rs 11,848 crore and EBITDA margin at 46 per cent - an improvement of 366 bps.

Analysts at Emkay Global had estimated Airtel's Q2FY21 revenue to rise by 17 per cent YoY (up 3.2 per cent QoQ) to Rs 24,716.1 crore from Rs 21,131.3 crore reported in Q2FY20 while net loss was expected to contract to Rs 107.3 crore from Rs 23,045 crore reported in Q1FY21. Earnings before interest, tax, depreciation, and ammortisation (Ebitda) was seen rising 22 per cent YoY to Rs 10,773.7 crore from Rs 8,637.2 crore in the year-ago quarter

Bharti Airtel losses narrow to Rs 763 cr in Sept quarter; revenue zoom 22%

 Telecom operator Bharti Airtel on Tuesday reported substantial narrowing of losses for the second quarter ended September 2020 at Rs 763 crore.

The losses were significantly lower than Q2FY20, when it stood at Rs 23,045 crore, after the company had made provisions of Rs 28,450 crore in the immediate aftermath of the Supreme Court ruling on statutory dues.

The company posted revenues of Rs 25,785 crore for the September 2020 quarter, up 22 per cent over the corresponding period last year "with strong growth across the portfolio geographies and segments", a company statement said.

The net loss (before exceptional items) for Q2 FY21 was at Rs 744 crore, while loss (after exceptional items) stood at Rs 763 crore.

In a statement, Gopal Vittal, MD and CEO, India and South Asia, said: "Despite being a seasonally weak quarter, we delivered a strong performance with revenue growing at 22 per cent year-on-year".

The company stays committed to improving the profitability of business, he asserted.

On Adjusted Gross Revenue (AGR) dues, the Airtel statement said the Group has made a representation to the government that it has already paid more than 10 per cent of the total dues as demanded by the Telecom Department and will ensure ongoing compliance with the Supreme Court's orders.

Bharti Airtel hits seven-month low in a strong market; down 20% in 1 month

 Shares of Bharti Airtel were under pressure on Monday, hitting a seven-month low of Rs 394 on the BSE, in an otherwise weak market. The stock of the telecom services provider slipped 2 per cent in the intra-day trade and was trading at its lowest level since March 19, 2020.

In the past one month, the stock has slipped 20 per cent, as compared to 3.8 per cent rise in the S&P BSE Sensex. Notably, Bharti Airtel's share price has declined sharply, by around 30 per cent, since the Adjusted Gross Revenue (AGR) verdict on September 1, 2020.

Analyst at Dolat Capital believe this is on account of news flow of fund-raise by VIL, Jio postpaid plus plan launch, and most importantly lack of good news on tariff increase. This is in contrast to expectations of immediate announcement of price hike post the AGR case closure.

"Our calculation implies that from an average revenue per user (ARPU) growth, market is now implying a de-growth. However, we still maintain that 15-20 per cent ARPU CAGR is likely and essential for survival of industry," the brokerage firm said in stock update.

Contrary to stock reaction, business trajectory of Bharti Airtel remains healthy and positive especially in 4G smartphone subscriber additions viz. at par / ahead of Jio. MNP (mobile number portability) request from postpaid subscribers for transition to Jio postpaid is limited. "We appreciate Bharti's in-market execution and the clarity on thoughts and strategy to drive the market share and growth. A few months' delay in tariff increase doesn't alter the strong long-term industry potentials and consecutive positive bias of ours," it said in its report and reiterated 'BUY' on Bharti with target price of Rs 605 per share.

"Bharti Airtel's stock price has corrected due to investor concerns on mobile tariff hike delay. We continue to maintain that the current pricing is not sustainable and therefore expect price hike in the medium to long term. We expect Bharti Airtel to benefit in the medium to long term, given its strong execution and premium position in the sector. We maintain our positive stance on Bharti Airtel with an OUTPERFORM rating and a target price of Rs700," said a recent report by Credit Suisse.

Meanwhile, the board of directors of Bharti Airtel will meet on October 27, 2020 to consider the audited financial results for the second quarter ended September 30, 2020 (Q2FY21).

Coronavirus: Airtel allows free access to its e-book platform amid lockdown

Telecom operator Bharti Airtel on Thursday announced free access to its e-book platform Juggernaut Books to support people in staying home during the lockdown.

"As India stays at home to support the government's efforts to contain the spread of Covid-19, readers can now access thousands of top books and novels on Juggernaut Books (formerly known as Airtel Books) for free by simply downloading the app (Android/iOS) on their smartphones," Bharti Airtel said in a statement.

Airtel acquired a strategic stake in Juggernaut in 2017.

ALSO READ: Coronavirus impact: Telcos face a big challenge to keep India Inc connected

Juggernaut is also organising an innovative online literary festival as part of its efforts to promote reading.

"In these unprecedented times, Airtel and Juggernaut are trying to make sure that people have more options to stay engaged as they observe social distancing. And what's better than getting back to reading," Bharti Airtel chief product officer Adarsh Nair said.

Covid-19: Airtel urges uninterrupted internet in outreach to other telcos

Bharti Airtel on Monday asked Vodafone Idea, Reliance Jio Infocomm, Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd join hands and pave the way for intra-circle roaming (ICR) pacts to ensure uninterrupted mobile and wireless internet services amid the surge in data consumption. The spike is the outcome of the near lock down in the country in its battle against Covid-19, forcing people to work from home to contain spread of the coronavirus.

In a letter to all the companies, Airtel said the world was witnessing an unprecedented situation and all efforts were being made on the ground by the government to contain the spread of Covid-19.

ALSO READ: Covid-19 side effect: As people binge-watch at home, telcos feel the heat

“It is therefore of paramount importance that at this crucial juncture, we come together as an industry to serve the nation and prepare,” it said. "In line with the Standard Operating Procedure (SOP-17) for Telecommunication Services for responding to Disasters, as issued by Department of Telecommunications, we would like to put in place a protocol amongst the TSPs for implementation of various measures, including intra circle roaming."

"This will be particularly relevant, where a site is shut or where the TSP is not able to manage the up time, so that, we can collectively ensure that the services are not interrupted," the company added.

ALSO READ: Telecom duopoly will be bad for economy

Airtel also announced nominating Randeep Sekhon, Chief Technology Officer as its our single point of contact.

The Cellular Operators' Association of India (COAI) has asked the Union government to instruct the over-the-top players like Netflix, Amazon Prime Video and Zee 5 to take measures for easing the pressure on network infrastructure due to increased demand in online video streaming amid lockdown and quarantine measures to contain the spread of Covid 19.

ALSO READ: Coronavirus impact: Maruti to M&M, automakers put brakes on production

COAI has also approached streaming platforms cautioning them about surge in digital use straining network infrastructure of telecom operators, and urged companies to take urgent steps like temporarily switching to SD (Standard Definition) from HD (Hi Definition) streaming, removing high bandwidth-consuming advertisements and pop ups, and replacing them with public announcements on awareness regarding the virus.

In a letter to Telecom Department secretary, COAI has said, "...due to lockdown/ quarantine measures in various parts of the country, a sudden surge in demand for online video streaming is also expected to rise substantially."

COAI said that during this crucial time, it is absolutely essential for the streaming platforms to cooperate with telecom providers so as to manage the traffic distribution patterns that are likely to strain the network infrastructure "at a time when it is needed for various critical requirements."

Bharti Airtel pays up Rs 18,000 crore as AGR dues to telecom dept

Sunil Mittal-led Bharti Airtel on Saturday made a surprise announcement that may alter the ongoing narrative related to adjusted gross revenue (AGR) and the hefty bill of Rs 1.47 trillion slapped on the telecom industry.

In a regulatory filing with the stock exchanges, Bharti Airtel said it had paid its full and final AGR-linked dues of Rs 18,000 crore to the Department oaf Telecommunications (DoT) after its self-assessment exercise. The government calculation of Airtel’s AGR-linked dues, estimated at Rs 35,500 crore, is almost double of what the telco has handed over.

The company explained that it had carried out self-assessment from FY 2006-07 onwards up to December 31, 2019, and interest thereon up to February 29, 2020, in line with the AGR judgment.

This announcement came a day after a meeting of the Digital Communications Commission (DCC), the apex decision-making body for the telecom sector, remained inconclusive on providing relief to the financially stressed industry.

ALSO READ: Telcos need to wait more for relief on AGR as govt scrambles over data

Bharti Airtel had initially paid Rs 10,000 crore to the DoT on February 17 in compliance with the Supreme Court judgment. The company on Saturday paid an additional amount of Rs 3,004 crore towards the full and final amounts due. “In addition to the aforesaid amounts paid basis our self-assessment, we have also deposited an additional amount of Rs 5,000 crore, as an ad-hoc payment (subject to subsequent refund/adjustment) to cover differences, if any, arising from the reconciliation exercise with the DoT,” Airtel said in the BSE filing.

Earlier, Tata Teleservices had paid Rs 2,197 crore as its AGR dues to the DoT, saying it was the company’s full and final payment. The government had estimated around Rs 14,000 crore as Tata Teleservice’s AGR dues.

chart

While, these two companies have made their AGR payments after self-assessment, Vodafone Idea has made a payment of only Rs 3,500 crore so far against AGR dues estimated at more than Rs 50,000 crore.

Vodafone Idea, in a recent letter to the DoT, had made a string of demands to help it continue as a going concern. With both joint venture partners of Voda Idea making it clear that they wouldn’t put good money after bad, the telco may be headed for bankruptcy without any government intervention.

At the DCC meeting on Friday, no decision could be taken on providing relief to the telecom service providers due to discrepancy in the data for calculation of AGR, an official said.

The Supreme Court had on October 24, 2019, upheld the DoT definition of AGR, asking the telecom industry to pay up pending licence fee and spectrum charge dues along with penalties and interest within three months.

Subsequently, the court had dismissed a review petition by the telcos. When Bharti Airtel and Vodafone Idea filed a modification plea for extending the duration of payments, the court asked them to clear their dues before the next date of hearing, scheduled for March 17.

Bharti Airtel makes additional payment of Rs 8,004 crore towards AGR dues

Telecom operator Bharti Airtel on Saturday said that it has made additional payment of Rs 8,004 crore towards adjusted gross revenue dues to the Department of Telecom (DoT).

The payment of Rs 8,004 crore is in addition to Rs 10,000 crore the company paid on February 17, 2020 in compliance to the Supreme Court judgement, it said in a regulatory filing.

The company said it calculated the liabilities on self assessment basis till December 31, 2019 and the payment includes interest up to February 29, 2020.

The company has carried out self assessment from FY 2006-07 up to December 31, 2019 and interest thereon up to February 29, 2020 in line with the Adjusted Gross Revenue (AGR) judgement, Bharti Airtel said.

"Accordingly the company paid an additional amount of Rs 3,004 crore towards the full and final amounts due over and above ad-hoc amount of Rs 10,000 crore paid on February 17, 2020 on behalf of Bharti Group of companies," the filing said.

The payment included liabilities on Bharti Airtel, Bharti Hexacom and Telenor India.

"We have also deposited an additional amount of Rs 5,000 crore, as an ad-hoc payment (subject to the subsequent refund/adjustment to cover differences, if any arising from the reconciliation exercise with the DoT," Airtel said.

According to DoT estimates, Airtel owed nearly Rs 35,586 crore, including licence fee, spectrum usage charges with interest on unpaid amount, penalty and interest on penalty till July 2019.

"Based on the aforesaid payment we have now complied with AGR judgement and the directions in the order of the Hon'ble Supreme Court dated October 24, 2019," the company said.

AGR: Bharti Airtel has capacity to withstand $5 bn payout, says Moody's

Moody's Investors Service said on Wednesday said Bharti Airtel has the financial capacity to withstand a payout of $5 billion in statutory dues.

The Supreme Court earlier this month directed telecom firms to comply with its October 24, 2019 judgment upholding the Department of Telecommunication's (DoT) definition of adjusted gross revenues (AGR).

Bharti recorded a Rs 35,300 crore ($5 billion) liability for past-due AGR fees associated with this litigation, but is still completing its self-assessment to determine the final amount, Moody's said.

It said a Rs 35,300 crore cash payment will not cause a significant deterioration in the credit quality of Bharti Airtel while in the alternate scenario of a smaller cash payment of Rs 25,200 crore reflecting the principal and interest amount only, would position the company more comfortably within its current rating.

Full payment is to be made by March 17.

"Recent capital-raising activities provide additional liquidity to fund the AGR payment," it said.

The AGR payment is a cash obligation of the Indian operations.

As on December 31, 2019, the firm had consolidated cash and short term investments of $4.2 billion, with around $2.3 billion held at the Indian operations.

"Following recent capital-raising, we estimated (Bharti's) cash is over $5.0 billion, which can be used to fund the final AGR payment," it said.

Moody's further said that fundamentals in the Indian telco industry are improving, but uncertainty around the sustainability of the improvement and future cash requirements (including 4G/5G spectrum auction) remains.

Moody's said India accounts for around 75 per cent of Bharti Airtel's debt and 60 per cent of EBITDA.

"Debt levels and cash costs are high for this segment and need to be serviced from India's own organic cash flow," it said.

"Cash and EBITDA generated at less than wholly-owned subsidiaries is not directly available to service debt at India. As a result, a significant expansion of India's cash flow is required to achieve meaningful debt reduction on a consolidated basis," it added.

Bharti Airtel makes payment of Rs 10,000 crore to DoT towards AGR dues

After Supreme Court rap and the government's stringent deadline, After Supreme Court rap and the government's stringent deadline, Bharti Airtel on Monday said it has paid Rs 10,000 crore to the telecom department towards statutory dues.

The company said it will make payment of the balance amount after self assessment exercise.

"The...total amount of Rs 10,000 crore has been paid on behalf of Bharti Airtel, Bharti Hexacom, and Telenor.

"We are in the process of completing the self assessment exercise expeditiously and will duly make the balance payment upon completion of the same, before the next date of hearing in the SC," Bharti Airtel said.

The company said it will also submit supporting details at the time of making balance payment.

The telecom department on February 14 began issuing orders asking firms such as Bharti Airtel and Vodafone Idea to clear past dues immediately.

The DoT, which faced the ire of the Supreme Court for putting on hold recovery of dues from telecom companies, had started issuing circle or zone-wise demand notices to the firms.

Airtel had previously responded to DoT order by offering to pay Rs 10,000 crore by February 20 and the remaining before March 17. Airtel owes nearly Rs 35,586 crore, including licence fee and spectrum usage charge, to the government. on Monday said it has paid Rs 10,000 crore to the telecom department towards statutory dues.

The company said it will make payment of the balance amount after self assessment exercise.

"The...total amount of Rs 10,000 crore has been paid on behalf of Bharti Airtel, Bharti Hexacom, and Telenor.

"We are in the process of completing the self assessment exercise expeditiously and will duly make the balance payment upon completion of the same, before the next date of hearing in the SC," Bharti Airtel said.

The company said it will also submit supporting details at the time of making balance payment.

The telecom department on February 14 began issuing orders asking firms such as Bharti Airtel and Vodafone Idea to clear past dues immediately.

The DoT, which faced the ire of the Supreme Court for putting on hold recovery of dues from telecom companies, had started issuing circle or zone-wise demand notices to the firms.

Airtel had previously responded to DoT order by offering to pay Rs 10,000 crore by February 20 and the remaining before March 17. Airtel owes nearly Rs 35,586 crore, including licence fee and spectrum usage charge, to the government.

Bharti Airtel subsidiary to raise additional $250 mn via perpetual bonds

Bharti Airtel on Wednesday said its wholly-owned subsidiary Network i2i plans to raise funds worth up to $250 million (approximately Rs 1,780 crore) through perpetual bonds.

This amount will be in addition to existing securities of $750 million (around Rs 5,343 crore) that the company has raised recently.

Network i2i Ltd, a Mauritius-based wholly-owned subsidiary of the company through joint book runners and joint lead managers has approached investors for the proposed additional issuance, the company said in a regulatory filing.

The company said the "proposed issuance of dollar denominated fixed rate, unsecured, guaranteed perpetual securities by subsidiary company" pegged the issue size at $250 million, in addition to existing securities of $750 million.

The company had earlier said that the proceeds from the issue will be utilised for pruning debt of Bharti Airtel.

Shares of Bharti Airtel were trading at Rs 540.35 apiece, up 1.10 per cent from the previous close on BSE.

Airtel says working with DGFT to get name removed from 'Denied Entry List'

Bharti Airtel on Wednesday said it is working to get the company's name removed from 'Denied Entry List', but added that DGFT's latest action does not limit its ability to undertake future imports or exports.

The comment by the telecom operator came after the Commerce Ministry put Bharti Airtel in denied entry list (DEL) for non-fulfilment of export obligation under an export promotion scheme.

The Directorate General of Foreign Trade (DGFT), which is under the Commerce Ministry, has put the company under the list, commonly known as blacklist, for non-fulfilment of export obligation in respect of certain EPCG authorisation issued to it.

In a regulatory filing on Wednesday, Airtel said, "The company is working towards an expeditious closure of this matter with the office of the DGFT and for getting the company's name removed from the DEL".

"It must also be noted that the said action does not limit the ability of the company to undertake future imports or exports," Airtel added.

Bharti Airtel said it has not applied for any such license since April 2018 as there was no operational need for the same.

"The company has fulfilled all its export obligations under the past licenses and has applied for closure of these licenses along with necessary documents to the authorities in this regard," it added.

Under the Export Promotion Capital Goods (EPCG), an export promotion scheme, import of capital goods is allowed at zero customs duty. Capital goods imported at zero duty must fulfil EPCG export obligation equivalent to six times of duty saved, as per the scheme.

Bharti Airtel climbs 5% on hopes of market share gain, hits 26-month high

Bharti Airtel's stock price surged 5 per cent to hit 26-month high of Rs 499 on the BSE on Friday amid expectations that the telecom company is poised for strong market share gain.

The stock of the country’s largest integrated telecommunications company was trading at its highest level since November 2017. It is 6 per cent away from its all-time high level of Rs 527, touched on October 2007.

The Supreme Court Thursday rejected the review petitions filed by telecom companies to grant relief on adjusted gross revenue (AGR), which have to be paid before the deadline of 24th January 2020.

Last week, Bharti Airtel successfully raised $3 billion -- $ 2 billion via qualified institutional placement (QIP) and $1 billion through foreign currency convertible bonds (FCCBs).

The company said the net proceeds of the fund will primarily be used to augment the company's long-term resources and strengthen the balance sheet, servicing and for repayment of short term and long term debts capital expenditures, statutory dues and long term working capital requirements.

“Assuming no relief, a Voda-Idea shutdown scenario looks highly likely, and just a matter of time, in our view. Hypothetically, if we assume that Bharti adds 40 per cent of Voda-Idea’s subscriber base, our analysis suggests that Bharti may need to at least invest $5 billion in spectrum to accommodate new subscribers,” analysts at SBICAP Securities said in sector update.

Separately, the recent fund raising by Bharti suggests that it may be suitably placed to pay the regulatory dues, but if it has to benefit from a consolidated market structure, another round of fund raising may be required for the spectrum capex as highlighted above, it said.

Brokerage firm Motilal Oswal Securities believes that the final outcome may not be linear and that there could be a payment extension or moratorium to say the least. Irrespective of the outcome, Bharti is well prepared and, along with Reliance Jio (RJio), appears poised for strong market share gains.

Meanwhile, CRISIL expects the average revenue per user (ARPU) of Bharti Airtel to increase to Rs 140-145 in fiscal 2021 from Rs 128 for the quarter ended September 30, 2019. The rating agency, therefore, expects Bharti Airtel to continue with its prudent approach, and maintain net debt to EBITDA1 (leverage) ratio at below 3 times for fiscal 2021.

At 11:36 am, Bharti Airtel was trading 4 per cent higher at Rs 493 on the BSE, as compared to 0.06 per cent rise in the S&P BSE Sensex. A combined 24.1 million equity shares have changed hands on the counter on the NSE and BSE so far.

Airtel mops up $2 billion at issue price of Rs 445 per share as part of QIP

• Bharti Airtel on Wednesday announced allotment of 323.5 million equity shares to eligible institutional buyers at an issue price of Rs 445 per share as part of US$ 2 billion (around Rs 14,000 crore) qualified institutional placement (QIP) that closed on Tuesday.

The issue price was at a discount of 1.57 per cent to the stated floor price of Rs 452.09 per equity share. Airtel announced the closure of this issue period for the qualified institutional placement (QIP) and fixed the issue price at “Rs 445 per equity share, which is at a discount of 1.57 per cent to the floor price of Rs 452.09 per equity share”.

The firm is raising funds to make payments towards its adjusted gross revenue (AGR) liability.

The net proceeds of the funds raised will primarily be used to augment the company’s long-term resources and strengthen balance sheet, servicing and/or repayment of short-term and long-term debts, capital expenditures, statutory dues, long-term working capital requirements, and general corporate purposes as permitted under applicable laws, the company said.

“Despite a volatile market environment and challenging global macroeconomic conditions, the offering witnessed a strong response from global and domestic investors. This underlines Airtel’s growth oriented financial performance and future growth potential of our business and the sector,” Harjeet Kohli, group director, Bharti Enterprises, said. Bharti Airtel has to pay about Rs 35,586 crore in additional statutory dues, as a result of a Supreme Court ruling in October on AGR liabilities of telecom companies.

Earlier this month, the firm’s shareholders approved proposals to raise $2 billion in equity and another $1 billion in debt.

AirtelFundraising exercises

Airtel announced the closure of this issue period for the QIP and fixed the issue price at “Rs 445 per equity share, which is at a discount of 1.57 per cent to the floor price of Rs 452.09 per equity share”.

The equity shares are being allotted to eligible qualified institutional buyers, the company said in a regulatory filing. The special committee of directors for the fundraising exercise also cleared the terms of foreign currency convertible bonds (FCCBs), including the issue price.

“FCCBs due in 2025, convertible into fully paid-up equity shares of face value of Rs 5 each of the company at a price of Rs 534 per conversion to equity share to the initial purchasers subject to receipt of funds, satisfaction of other conditions precedent and settlement as per applicable laws and procedures and relevant agreements," the filing said.

Axis Capital, Citigroup Global Markets India, and JP Morgan India acted as global coordinators and bookrunning lead managers, and, Goldman Sachs (India) Securities, BNP Paribas, DSP Merrill Lynch, HDFC Bank and HSBC Securities and Capital Markets (India) were the bookrunning lead managers for the QIP issue and Goldman Sachs (Asia) L.L.C., Barclays Bank PLC.

The FCCB offering re-opened the Indian market after a 3-year absence of such issuances, the company said.

Airtel raises minimum recharge for prepaid users from Rs 23 to Rs 45

Telecom operator Bharti Airtel on Sunday hiked its mandatory minimum recharge for pre-paid customers to Rs 45 from Rs 23.

"...it will be mandatory to recharge with a voucher of Rs 45 or above, every 28 days to avail services," the company said in a public notice.

The new minimum recharge plan will come into effect from Sunday. The announcement pertained to prepaid subscribers of Bharti Airtel and Bharti Hexacom in all service areas, it added.

"In case of non recharge with a voucher of Rs 45 or above at the end of tariff validity period, Airtel reserves the right to provide the plan benefits in a curtailed manner at its own discretion during the grace period of up to 15 days.

"In case of non recharge with voucher of Rs 45 of above, all services will be suspended post the grace period," the company said.

Amid a turbulence in the debt laden sector, Bharti Airtel chairman Sunil Bharti Mittal had recently said a combination of rock-bottom tariffs and high consumption is killing the telecom industry and sector regulator Trai needs to urgently intervene to strike a balance between the needs for protecting investments and consumer interest.

"We are unnecessarily killing this industry in a manner and way that is not conducive for our industry, and that's why we need Trai intervention," Mittal had said.

The comments of the Airtel chief had come just days after the Telecom Regulatory Authority of India (Trai) initiated talks to prescribe floor price for call and data, and also deferred by one year the scrapping of the charge paid by mobile phone users for calls made to rival networks.

The two moves came as a big boost to old operators like Airtel and Vodafone Idea that are staring at a liability of thousands of crores in unpaid past statutory dues following a Supreme Court ruling.

Through their association, the operators had been pitching to policy makers for fixing a floor rate for calls and data.

The telecom call and data rates are at present under forbearance or not regulated.

But, Trai has now released a consultation paper to fix minimum or floor rates for mobile phone calls and data -- a move that will effectively end the regime of free calling and dirt cheap data.

The outcome is likely to lead to further hike in mobile call and data cost as the industry wants average revenue per user to reach Rs 300 per month from about Rs 125 at present over a period of two years -- better revenue realisation per user will offer a much-needed breather to the stressed telecom industry where debt levels have soared to Rs 7.8 lakh crore.

Bharti Airtel had posted a staggering Rs 23,045 crore net loss for the second quarter ended September 30, due to provisioning of Rs 28,450 crore in the aftermath of the SC ruling on statutory dues.

According to a government data, statutory liabilities in the case of Bharti Airtel add up to nearly Rs 35,586 crore, of which Rs 21,682 crore is licence fee and another Rs 13,904.01 crore is the SUC (spectrum usage charges) dues (excluding the dues of Telenor and Tata Teleservices).

Airtel fixes security flaw in mobile app after data breach scare

A serious security flaw was detected in the mobile application of Bharti Airtel late Friday, prompting nervous subscribers to reach out to the telecom operator. The flaw, which was feared to have exposed data of over 300 million users to potential hackers, kept the social media abuzz all of Saturday. However, the company termed the snag part of a routine trial and testing of new applications on its network, adding it had been fixed.

The flaw existed in the application programming interface (API) of the Airtel smartphone app, where sensitive information of Airtel users can be found. The glitch was discovered by independent security researcher Ehraz Ahmed, and later notified to the operator. The problem exposed user information like first and last name, gender, email, date of birth, address, subscription details, device compatibility for 4G, 3G, network information, activation date, user type (prepaid/postpaid), and even the IMEI number.

An Airtel spokesperson said, “There was a technical issue in one of our testing APIs, which was addressed as soon as it was brought to our notice. Airtel’s digital platforms are highly secure. Customer privacy is of paramount importance to us and we deploy the best of solutions to ensure the security of our digital platforms.”

The Union Cabinet last week cleared the Personal Data Protection Bill.

Bharti Airtel to gain at the expense of Vodafone Idea, say Brokerages

Telecom czar Sunil Bharti Mittal-led Bharti Airtel may consolidate its position at the expense of Vodafone Idea Ltd as it has better balance sheet strength to deal with the eventuality of having to pay past statutory dues in case the Supreme Court rejects their review petitions, brokerages said.

Airtel and Vodafone Idea have filed separate petitions in the Supreme Court seeking review of the October 24 order of the apex court that held them liable to pay statutory dues for past 14 years after including non-telecom revenue in their annual adjusted gross revenues (AGR). The dues totalling Rs 1.47 lakh crore for the industry are to be paid within three months of the order.

"The liabilities are large at $4.8 billion for Airtel and $5 billion for Vodafone Idea, and if the Supreme Court were to dismiss the review petition causing the entire liabilities to devolve, it would be a negative development for Airtel but even more serious for Vodafone Idea which may find it difficult to fund these liabilities before January 24, 2020," Morgan Stanley said in a report.

This, it said, "could potentially lead to further market share consolidation in the industry thereby strengthening Airtel's positioning in the industry." The two firms have been lobbying together with the government for relief on payment of the statutory liabilities.

Bharti Airtel's board has already approved raising $3 billion through a combination of equity ($2 billion) and debt ($1 billion).

"In our view, this fundraise is primarily to take care of the worst-case outcome wherein the entire AGR dues become payable," it said. "However, if part of the AGR liabilities were to be waived and/or were paid over a period of time, then the company could use the proceeds for repayment of existing debt. In either case, we see Airtel's balance sheet strength as a differentiating factor in the industry." Goldman Sachs said it hosted Mittal, founder and Chairman of Bharti Enterprises - the holding company of Bharti Airtel, on December 5.

"Mittal shared his thoughts on various aspects of the telecom business, including his outlook on industry structure and tariffs, the potential outcome of AGR liability, and his views on Bharti Airtel's balance sheet and the company's non-wireless subsidiaries, among other things," it said.

The meeting, it said, "reinforces our constructive view on Bharti Airtel, with potential upside risk to estimates from higher-than-expected tariff hike and market share gains from Vodafone Idea," it added.

Bharti Airtel expects industry revenues to start growing again due to recent tariff hikes, and expects industry revenues to surpass $50 billion (timeline unspecified) as opposed $30 billion at present, per company.

"In the event of any market share re-allocation in the industry, Bharti Airtel believes it is well-positioned to capture 50 per cent or more of the incremental market share; per company, incremental revenues can come at a very high EBITDA margin," Goldman Sachs said.

The company saw a low possibility of a new player entering the India telecom market.

Morgan Stanley said the recent tariff hike announcements by all three operators is a step in the right direction towards self-repair. "While the transmission of these hikes into average revenue per user (ARPU) increases will take some time (as the new tariffs are applicable only on the next recharge and there is a possibility of downgrading to lower value packs), we believe FY21 ARPUs will nonetheless likely see substantial improvement," it said.

It saw a possible ARPU path towards Rs 180-200 over the next few years which is not insurmountable as per user earnings were at Rs 200 in FY15.

"Such large increases will be required for Vodafone Idea along with other government relief measures to bring down its leverage position to more sustainable levels," it said.

Before Reliance Jio entered the industry in 2016, Bharti's ARPU was around Rs 200 per month, and the company believes it can get to similar levels over the next few quarters, with levels of close to Rs 300 per month over time, Goldman Sachs said.

"Return on capital in India telecom remains low, and per the company, ARPUs need to go up for this metric to improve; Bharti believes this is true even for competition. Bharti Airtel believes it can get to 35 per cent or more revenue market share over time, from about 32 per cent at present," it said.

According to the brokerage, Bharti Airtel believes that while its current debt levels are elevated, it remains under control.

Two-player market buzz propels Airtel m-cap to record high of Rs 2.22 trn

As the talk of a two-player market in mobile telephony gets stronger in the market, Bharti Airtel has become one of the most-loved large-cap stocks on the bourses, with a record high market capitalisation and stock valuation

This is despite record losses posted by the company in the recent quarter and its pending adjusted gross revenue (AGR) dues worth about Rs 31,000 crore.

Bharti Airtel stock price is up nearly 45 per cent in the past 12 months while its market capitalisation is up nearly 67 per cent during the period. At its current stocks price, the company has a market capitalisation of about Rs 2.22 trillion up from Rs 1.33 trillion a year ago. This makes it one of the top performing large-cap stocks on the bourses. The benchmark BSE Sensex index is up 16 per cent during the period. (See the adjoining chart)

The differential rise in share price and market cap is due right issue worth Rs 25,000 crore by Bharti Airtel in April this year which resulted in 28 per cent increase in number of shares in the hands shareholders.

“Risk of a Vodafone Idea (VIL) exit in the near term rose materially post the AGR judgement by the Supreme Court. VIL simply does not have this money. Despite nearly Rs 40 per share hit due to past dues, our Bharti Airtel price target rises to Rs 600 as the benefit of a 2-player market offset,” write analysts at New Street Research led by Chris Hoare.

According to the brokerage Bharti Airtel is in a win-win situation. If sufficient action is taken to offset the Supreme Court or if the ruling is reversed, this is prima facie positive for the stock. If this doesn’t happen, VIL exits and the upside more than offsets the impact of the SC ruling from Bharti’s perspective.

Two-player market buzz propels Airtel m-cap to record high of Rs 2.22 trn

The optimism is clearly visible in its stock valuation. The stock is now trading at 3.2x its underlying book value per share, highest in a decade. The company's peak valuation was in 2007 when it was trading at nearly eight times its book value at the end of March 2007. Analysts say that the commonly used price to earnings (P/E) multiple doesn't make sense due to abnormally depressed valuation in the sector right now.

Bharti Airtel reported net loss of around Rs 25,000 crore on trailing 12 month ending September this year against net profit of Rs 409 crore during 12 months ending March this year. The company’s net worth was however down only 2 per cent during the first half of current fiscal providing it with the staying power unlike Vodafone Idea.

Analysts see further upside in Bharti Airtel stock price as operators raises tariff to absorb some part of the AGR dues.

Mobile operators have announced a tariff hike effective from the December this year and analysts expect Bharti Airtel to gain most from it given that the company is already making cash profits unlike Vodafone Idea. “Factoring in an improving tariff environment, we remain positive on Bharti Airtel with a revised target of Rs 515, implying 22 per cent upside from current levels,” write Deepti Chaturvedi and Akshat Agarwal of CLSA in their recent report on the telecom sector.

Vodafone Idea on the other hand will need a much more aggressive tariff hike to raise enough resources to pay for AGR dues and meet its cash outflows. “VIL would need 65 to 97 per cent rise average revenue per use per month (ARPU) by FY2023E to meet its cash outflow needs under various scenarios of relief on AGR liabilities, per our math. This places Bharti and Jio in a fairly sweet spot, in our view – both gain from either a sharp uptick in industry revenues or a significant consolidation event," says Rohit Chordia and Aniket Sethi of Kotak Institutional Equities in their latest report on the telecom sector.

VIL currently has the lowest ARPU in the industry at Rs 50. Most analysts expect at best 35 per cent hike in ARPU over the next three-years through to FY22, and say this may not be sufficient for Vodafone Idea to pay all its impending dues.

Bharti Airtel stock falls over 4%; loses over Rs 10,000 crore in m-cap

Bharti Airtel shares fell over 4 per cent on Tuesday after Icra downgraded the company's long-term rating due to higher provisioning in its latest quarterly results following the Supreme Court judgement on AGR and spectrum charges.

In the morning session, shares of the company opened at Rs 444.35 and fell 4.71 per cent to intra-day low of Rs 430. The stock settled 4.34 per cent down at Rs 431.70 on the BSE.

On the NSE, the scrip slumped 4.03 per cent to Rs 433.20. During the day, it lost 4.76 per cent to hit a low of 429.90. On the BSE, 10.57 lakh shares were traded and the NSE saw a trade of two crore shares of the company.

The company's market capitalisation declined by around Rs 10,000 crore to Rs 2.21 lakh crore.

"There has been a revision in the long-term ratings of the Company from [ICRA]AA to [ICRA]AA- by ICRA Ltd," Bharti Airtel said in a regulatory filing on Tuesday.

Icra on Monday downgraded the company's long-term rating to AA-, while reaffirming the short-term rating at A1+.

"The revision in the long-term rating factors in the recognition of higher than anticipated provision pertaining to the Supreme Court judgement on dues payable towards licence fees on adjusted gross revenues (AGR) as well as spectrum usage charge in the latest quarterly results," the ratings agency said.

Airtel to hike mobile services rates in December to make business viable

Telecom operator Bharti Airtel on Monday said it will start raising rates for services in December to make business viable.

The telecom sector is highly capital intensive with fast changing technology cycles that require continuing investments and therefore, extremely important that the industry remains viable to support the vision of Digital India, it said.

"Accordingly, Airtel will appropriately increase price offerings in the month beginning December," it said in a statement.

Bharti Airtel, which has been hit hard by the Supreme Court ruling on statutory dues, last week posted highest ever loss of Rs 23,045 crore in the three months ended September.

The company also said that it understands that telecom regulator Trai is likely to initiate a consultation for bringing rationality in pricing in the Indian mobile sector, which has been operating at prices that have been eroding its viability.