• Bharti Airtel’s 2Q21 EBITDA of Rs118.5bn was 9% ahead of consensus estimates.
• SingTel (SGX:Z74) might record 2Q21F post-tax loss of S$45-50m from Bharti Airtel on our estimate vs. S$80m loss in 1Q21.
• Maintain BUY on SingTel with an unchanged Target Price.

Bharti Airtel’s 2Q21 EBITDA of Rs118.5bn Was 9% Ahead of Consensus Estimates

• In 2Q21, Bharti Airtel reported EBITDA of Rs118.5bn (+32% y-o-y, +11% q-o-q), clearly beating consensus expectations of Rs108.7bn. EBITDA margin improved from 44.4% in 1Q21 to 46.0% in 2Q21.

2Q21 revenues at Rs257.9bn was 4% ahead of consensus.

• Bharti Airtel reported stellar 2Q21 revenues of Rs257.9 bn (+22% y-o-y, + 7.7% q-o-q) vs. consensus expectations of Rs246.7bn. Mobile service revenue from India is on the path to recovery led by strong customer uptake of 4G services.
• Indian mobile services customer base reached 293.7m during the quarter, up 5.0% q-o-q. 4G data customers in India reached 152.7m, up by 14.4m q-o-q, and data usage per subscriber was at 16 GBs/month. Average revenue per user (ARPU) further supported revenues with an increase of Rs5.0 to Rs162 during the quarter. As a result, revenue from the segment was up by 26% y-o-y (+7.4% q-o-q) reaching Rs138.3bn in 2Q21.

2Q21 core loss narrowed to Rs7.6bn.

• A rise in finance and tax expenses prevented the company from reporting profits. Nonetheless, the company raised its core profit before tax to Rs5.7bn in 2Q21 from Rs3.7bn in 1Q20.

SingTel Might Record 2Q21F Post-tax Loss of S$45-50m From Bharti Airtel

• Based on this result, SingTel might record 2Q21F post-tax loss of S$45-50m from Bharti Airtel vs S$80m loss in 1Q21 in our estimates.
• In Bharti Telecom’s (BTL) standalone books, the net loss is primarily made up of interest charges on its borrowings. In 1Q21, the Bharti Telecom loss contribution to SingTel was at S$14m. In May 2020, Bharti Telecom carried out a deleveraging exercise in order to break the shackles of debt by divesting 2.75% in Bharti Airtel, at a price of Rs 558 per share, through a negotiated deal which raised an estimated Rs 76bn (US$1bn/S$1.4bn), bringing down the effective stake of Bharti Telecom in Bharti Airtel to 36% (from 38.8%).
• In lieu of this, SingTel’s effective ownership in Bharti Airtel also came down from 33.3% to 31.9% since SingTel owns 50.6% in Bharti Telecom.
• Due to the deleveraging exercise, Bharti Telecom will not be recording losses in their books where SingTel might end up bearing S$10-15m. Hence, from 2Q21 onwards, we think there won’t be any loss contribution from Bharti Telecom to SingTel, instead and SingTel might end up saving S$10-15m going forward each quarter.
• Therefore, considering the 2Q21 results reported by Bharti Airtel paired with the deleveraging exercise carried out by Bharti Telecom, we estimate that Bharti Airtel’s post-tax loss contribution to SingTel will be around S$45-50mn in 2Q21.

Source: DBS Research - 28 Oct 2020