Airtel's Africa Ebitda To Contract By 20%; Overall Group Earning To Slowdown: S&P Global

Bharti Airtel Ltd.'s Africa Ebitda is expected to be reduced by about 20% in the current fiscal and register slow overall earnings growth, credit rating agency S&P Global said on Monday.

The credit rating agency, however, said Bharti Airtel's overall earnings growth will likely remain on an uptrend, and its average revenue per user will continue to rise gradually in the Indian mobile market.

'Currency-induced weakness in Bharti Airtel's African operations will weigh on earnings from that region and slow overall earnings growth. We expect that reported Ebitda from the African operations could contract by about 20% in fiscal 2025 (year ending March 31, 2025) in Indian rupee terms,' S&P Global said.

Bharti Airtel on Tuesday posted a 31% drop in consolidated profit to Rs 2,072 crore in the March 2024 quarter, mainly due to the devaluation of the Nigerian Naira.

Airtel suffered a forex loss of Rs 2,544.4 crore on account of currency devaluation. 'Africa contributed to a quarter of Bharti Airtel's reported Ebitda in fiscal 2024. The Nigerian naira -- Nigeria being the telco's largest contributor in Africa -- is now about 30% of what it was against the rupee a year ago,' the report said.

S&P expects the company's deleveraging to continue, owing to the healthy earnings growth in its operations in India, but be slower than it previously expected.

The consolidated net debt for the company, including the impact of leases, declined to Rs 2,04,646 crore as of March 31, 2024, from Rs 2,13,126.4 crore.

'Though slow, Bharti Airtel's overall earnings growth will likely remain on an uptrend. Overall adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) will still grow in the mid-single-digit range to Rs 83,000 - Rs 86,000 crore in fiscal 2025, in our estimation, in the absence of an outright mobile tariff hike in India. Our earnings growth projection predominantly reflects increasing mobile data demand and an expanding subscriber base in India,' the report said.

During the quarter ended March 31, 2024, Airtel's customer base in India grew 5% to 35.22 crore from 34.55 crore on a year-on-year basis.

Bharti Airtel's average revenue per user -- a key matrix of telecom operators' growth -- grew 8% to Rs 209 from Rs 193 a year ago.

On a sequential basis, the APRU was higher than Rs 208 in the December quarter.

'We expect average revenue per user to continue rising gradually in the Indian mobile market, and for Bharti Airtel to benefit from subscriber churn from third-placed Vodafone Idea Ltd. Dividends from Bharti Airtel's tower JV, Indus Towers Ltd., could also recover in fiscal 2025 after being weighed down by high capital expenditure (capex) in fiscal 2024,' S&P Global said.

Bharti Airtel's capital expenditure was Rs 10,516 crore at the group level, comprising Rs 8,491 crore for India during the March 2024 quarter.

S&P Global said that strengthening Ebitda (an indicator of cash flow), along with easing wireless capex in India, will boost Bharti Airtel's credit metrics in fiscal 2025, though to a lesser extent than it was previously anticipated.

'We project the company's ratio of funds from operations to debt at 28-32%, down from our previous expectation of about 35%. This compares with our estimate of 26% for fiscal 2024,' the report said.