3qfy15 results update | sector: bharti...

4 February 2015

3QFY15 Results Update | Sector: Telecom

Bharti Airtel

Shobhit Khare ([email protected]); +91 22 3982 5428

BSE SENSEX S&P CNX CMP: INR368 TP: INR440 (+19%) Buy 28,883 8,724

Bloomberg BHARTI IN

Equity Shares (m) 3,997.4 M.Cap. (INR b) / (USD b)

1,470.4/23.8

52-Week Range (INR) 420/282

1, 6, 12 Rel. Per (%) -3/-15/-27

Avg Val INRm/Vol ‘000 1,744/4,969

Free float (%) 34.6

Financials & Valuation (INR Billion)

Y/E Mar 2015E 2016E 2017E

Net Sales 931 1,022 1,111

EBITDA 313.7 341.3 372.3

Net Profit 58.4 51.6 60.4

EPS (INR) 14.6 12.9 15.1

EPS Gr. (%) 108.2 -11.7 17.1

BV/Sh.(INR) 168.6 180.6 194.3

RoE (%) 8.9 7.4 8.1

RoCE (%) 6.5 6.2 6.7

D.Payout(%) 10.0 10.0 10.0

Valuations

P/E (x) 25.2 28.5 24.3

P/BV (x) 2.2 2.0 1.9

EV/EBITDA(x) 7.0 6.4 5.5

Div. Yield (%) 0.4 0.4 0.4

Estimate change

TP change

Rating change

India mobile broadly in-line; Non-mobile, Africa drag 3QFY15 EBITDA marginally below estimates: BHARTI’s 3QFY15 consolidated

EBITDA grew 10% YoY and 1% QoQ to INR 77.9b (our estimate: INR79.4b). EBITDA growth was muted despite strong India mobile performance (+6% QoQ) led by sharp declines in Africa and enterprise business. Revenue grew 5.8% YoY and 1.6% QoQ to INR 232.2b (our estimate: INR234.9b). Proforma PAT increased 1.8x YoY and 12.2% QoQ to INR17.3b (our estimate: INR15.1b). Reported PAT of INR14.4b included INR2.9b exceptional net loss on forex impact related to Nigeria operations, restructuring, and tax disputes etc.

India mobile - Continued strong EBITDA growth; flat voice RPM: India mobile revenue grew 13% YoY and ~4% QoQ to INR131.6b. EBITDA grew 23% YoY and ~6% QoQ to INR48.8b (our estimate: INR48.4b). Mobile traffic grew ~5% YoY for fourth consecutive quarter while voice RPM increased ~1% YoY (flat QoQ). Data revenue grew 17% QoQ (16.2% contribution; 14% traffic growth).

Africa performance impacted by currency: Africa EBIDTA declined 10.5% QoQ to USD241m (our estimate: USD255m). Revenue declined ~3% QoQ, impacted by ~5% revenue-weighted currency depreciation. Subscriber additions remained strong, well supported by highest quarterly capex in three years.

Net debt increase led by spectrum payment liability: Net debt increased by ~INR46b QoQ to INR668b on recognition of ~INR68b deferred spectrum payment liability. Consolidated capex stood at INR44b (19% capex/sales). 9MFY15 capex is up 67% YoY to ~USD2b vs FY15 guidance of USD2.2-2.4b.

Downgrading EBITDA 5-6%: We are downgrading EBITDA by 5-6% led by currency headwinds and increased investments in Africa. We expect 9% consolidated EBITDA CAGR over FY15-17E. BHARTI trades at prop. EV/EBITDA of 6.4x FY16E. Maintain Buy with a revised target price of INR440 (INR465 earlier) based on 5.5x 1-yr fwd EV/EBITDA for India (ex towers), 4x EV/EBITDA for Africa, and 15% discount vs TP for Bharti Infratel. We would be revising our estimates to incorporate likely higher spectrum outlay in upcoming auction.

Investors are advised to refer through disclosures made at the end of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

http://www.motilaloswal.com/Institutional-Equities�

4 February 2015 2

Bharti Airtel

India & South Asia EBITDA up 3.5% QoQ India & South Asia revenue grew 2.7% QoQ to INR166.1b (v/s our estimate of

INR167.9b). EBITDA grew 3.5% QoQ to INR62.9b (v/s our estimate of INR63.6b). EBITDA margin improved 30bp QoQ to 37.9% (v/s our estimate of 37.8%), led by

margin expansion in mobile and passive infrastructure segments.

India Mobile: EBITDA up 6% QoQ Mobile revenue increased ~13% YoY and ~4% QoQ to INR131.6b (est of

INR131.3b). Mobile EBITDA grew ~23% YoY and ~6% QoQ to INR48.8b (est of INR48.4b). EBITDA margin improved ~300bp YoY and ~60bp QoQ to 37.1%. Blended RPM increased 8.5% YoY and 3% QoQ to 48.6p. However voice RPM

increased only 1.2% YoY and remained flat QoQ at 37.7p. Mobile traffic grew ~5% YoY and ~1.4% QoQ to 267b minutes, below our

estimate of 269b minutes. Data continued to grow strongly with traffic growth of 14% QoQ and data

revenue growth of 17% QoQ. Data contribution increased to 16.2% of revenue in 3QFY15 from 14.5% in 2QFY15.

MOU per subscriber declined 4% YoY and 0.6% QoQ to 416 minutes (vs est of 421 minutes).

Mobile ARPU increased 2.4% QoQ to INR202 (vs est of INR203). Blended monthly churn declined QoQ to 2.7%.

Africa: Headwinds persist Africa revenue declined ~3% QoQ to USD1,103m (v/s est of USD1,117m). EBITDA declined 10.5% QoQ to USD241m implying EBITDA margin of 21.9% vs

our estimate of 22.9%. Net loss increased 10% QoQ to USD136m. Lower depreciation (led by deal for

passive infrastructure assets now classified as ‘held for sale’) and tax was more than offset by sharp EBITDA decline and higher finance cost.

Total minutes increased 4.8% QoQ to 30.4b but RPM declined 8.8% QoQ. Subscriber base increased 4.5% QoQ to 74.6m.

Net debt at INR668b; continued strong momentum in 3G site additions Net debt increased by ~INR46b QoQ to INR668b due to recognition of ~INR68b

deferred spectrum payment liability. 3QFY15 consolidated capex was ~INR44b - capex/sales of 19%.

While 2G site additions improved QoQ to ~1,600, 3G sites additions accelerated to ~3,800.

4 February 2015 3

Bharti Airtel

Story in Charts Exhibit 1: India mobile KPIs broadly in-line with estimates

190

183

187

189

185

177

185

193

200

192

195 19

6

202

198

202

445

423

419

431

433

417

435 45

5

455

437

434

437

435

418

416

47.2

48.6

40.0

42.0

44.0

46.0

48.0

50.0

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Mobile ARPU (INR) Mobile MOU (mins) Mobile RPM (p)

Source: Company, MOSL

Exhibit 2: Bharti India: YoY mobile traffic growth (%)

1614

10 9 8 810 10

8 76

5 5 5 5

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15


Exhibit 3: Bharti India: Mobile RPM trend (incl data)

-20 -18 -24-21 -17 -17 -17 -17 -1 -3

5 8 5

5

1.87

1.54 1.17

0.930.77

0.640.53 0.44 0.44 0.42 0.44 0.48 0.51 0.53

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

FY17

E

YoY RPM (%) Mobile RPM (INR)


Exhibit 4: Bharti India: Mobile data traffic

13 16 20 24 27 34 39 47 56 68 77

26%

25%21%

14%

23%

16%20% 19%

22%

14%

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Data traffic (b MB) QoQ growth (%)


Exhibit 5: Bharti India: Data revenue contribution and ARMB

35 32 29 29 31 30 30 28 28 27 27

4% 5% 6%

7% 7% 9% 10% 11% 12% 14% 16%

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Data revenue per MB (p) Data revenue (% of wireless)


4 February 2015 4

Bharti Airtel

Exhibit 6: Bharti India: Mobile churn rate per month (%)

6.47.2

7.98.8 8.8 8.5

5.9

3.2 3.2 3.22.7 2.4 2.7 3.1

2.7

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15


Exhibit 7: Bharti vs Idea: QoQ India mobile traffic growth (%)

5

-21

54 -2 3

52 -3

14

2

-3

1

7

-2

79

5

-4

58

3

-6

4

95

-2

5

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Bharti - QoQ growth Idea - QoQ growth


Exhibit 8: India mobile revenue and EBITDA margin

98.4

97.8

101.

8

105.

1

104.

6

108.

9

107.

0

110.

2

116.

0

113.

5

116.

4

120.

8

127.

5

126.

3

131.

6

34.2%33.7%33.8%34.0%

29.9%30.7%29.2%

30.6%32.4%

33.5%34.1%34.9%36.9%36.5%37.1%

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

India mobile revenue (INR b) EBITDA margin (%)


Exhibit 9: Africa revenue and EBITDA margin

979

1030

1057

1071

1066

1097

1133

1120

1062

1119

1165

1145

1164

1140

1103

25.2%26.2%26.7%

27.8%

25.8%

27.1%26.5%

25.4%26.7%26.9%25.8%25.3%

24.3%23.6%

21.9%

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Africa mobile revenue (USD m) EBITDA margin (%)


Exhibit 10: Bharti: Mobile cell site base and quarterly additions

117

118 11

9

121

126

129

131

134

135

135

137 13

9

140

141

143

0.9 0.9 1.0 1.95.1

3.42.0 2.3

1.00.7

1.7

1.7

1.11.4

1.6

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Cellsites ('000) Sites added ('000)


Exhibit 11: Consolidated net debt and net debt/EBITDA

601 64

5 678

651 65

6

612

585

586

593

620

582 611

576 62

4 670

2.632.772.842.612.992.582.532.422.262.272.052.091.872.022.15

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Net Debt (INR b) Net Debt/EBITDA (x)


4 February 2015 5

Bharti Airtel

Exhibit 12: Bharti Airtel: SOTP based on FY17

EBITDA (INR B) Ownership Proportionate EBITDA (INR b)

EV/EBITDA Fair value

(INR b) Value/Sh

India business (excl. towers) 271 100% 271 5.5 1,490 373

Tower business (15% discount to fair value)

75%

540 135

Africa business 68 90% 62 4.0 246 62

Less net debt

519 129

Total Value

1,758 440

Shares o/s (b) 4.00

CMP

368

Upside (%)

19


Exhibit 13: Bharti Airtel - Consolidated Segment wise Summary as per IFRS (INR m) 3QFY14 2QFY15# 3QFY15# YoY% QoQ% 3QFY15E v/s Est (%)

Revenue

Mobile 116,446 126,342 131,635 13.0 4.2 131,261 0.3

Telemedia 9,869 11,160 11,171 13.2 0.1 11,367 -1.7

Enterprise 16,195 17,037 16,177 -0.1 -5.0 17,446 -7.3

Passive Infrastructure 12,592 13,744 13,692 8.7 -0.4 14,307 -4.3

Others (incl South Asia) 10,557 10,881 10,712 1.5 -1.6 11,555 -7.3

Africa 72,298 68,956 68,276 -5.6 -1.0 69,276 -1.4

Eliminations -18,572 -19,668 -19,492 5.0 -0.9 -20,323

Consolidated Revenue 219,385 228,452 232,171 5.8 1.6 234,890 -1.2

EBITDA

Mobile 39,748 46,115 48,790 22.7 5.8 48,409 0.8

Telemedia 3,574 4,481 4,381 22.6 -2.2 4,622 -5.2

Enterprise 4,139 4,080 3,542 -14.4 -13.2 4,178 -15.2

Passive Infrastructure 5,344 6,305 6,525 22.1 3.5 6,609 -1.3

Others (incl South Asia) 679 1,069 1,003 47.7 -6.2 1,090 -8.0

Africa 18,647 16,310 14,953 -19.8 -8.3 15,840 -5.6

Eliminations -1,197 -1,307 -1,337 11.7 2.3 -1,358

Consolidated EBITDA 70,934 77,053 77,857 9.8 1.0 79,390 -1.9

EBITDA margin (%)

Mobile 34.1 36.5 37.1 293bps 56bps 36.9 18bps

Telemedia 36.2 40.2 39.2 300bps -93bps 40.7 -144bps

Enterprise 25.6 23.9 21.9 -366bps -205bps 23.9 -205bps

Passive Infrastructure 42.4 45.9 47.7 522bps 178bps 46.2 146bps

Africa 25.8 23.7 21.9 -389bps -175bps 22.9 -96bps

Consolidated EBITDA margin 32.3 33.7 33.5 120bps -19bps 33.8 -26bps

Depreciation and amortization 39,188 38,530 38,015 -3.0 -1.3 39,774 -4.4

Operating income 31,745 38,523 39,842 25.5 3.4 39,616 0.6

Other income and share of JV/Associate 1,738 503 1,727 -0.6 243.3 486 255.5

Net finance cost 10,682 9,058 10,450 -2.2 15.4 9,685 7.9

Proforma Profit Before Taxes 22,802 29,968 31,119 36.5 3.8 30,416 2.3

Proforma Tax 16,569 14,827 13,145 -20.7 -11.3 15,743 -16.5

Effective Tax Rate (%) 72.7 49.5 42.2 -3042bps -724bps 51.8 -10bps

Proforma Profit After Tax 6,233 15,141 17,974 188.4 18.7 14,673 22.5

Proforma Minority Interest 131 -272 684 421.3 -351.5 -381 -279.5

Proforma Net Profit 6,102 15,413 17,290 183.4 12.2 15,054 14.9

#2QFY15/3QFY15 numbers adjusted for exceptional expense of INR1.58b/INR2.93b on net basis Source: Company, MOSL

4 February 2015 6

Bharti Airtel

Exhibit 14: India Mobile: Operating Metrics

3QFY14 2QFY15 3QFY15 YoY% QoQ% 3QFY15E v/s Est (%)

Wireless traffic (b min) 255 264 267 4.9 1.4 269 -0.7 RPM (p) 44.8 47.2 48.6 8.5 3.0 48.2 1.0 Subscribers (m) 199 212 217 9.4 2.6 215 1.1 ARPU (INR) 195 198 202 3.9 2.4 203 -0.2 MOU (min) 434 418 416 -4.2 -0.6 421 -1.2 Monthly churn (%) 2.7 3.1 2.7 -3bps -41bps Voice RPM (p) 37.2 37.7 37.7 1.2 0.0 Non-voice revenue contribution 17.0 20.2 22.6 556bps 232bps Data revenue contribution 10.6 14.5 16.2 564bps 177bps


Exhibit 15: Bharti Africa: Quarterly Performance (USDm) 3QFY14 2QFY15 3QFY15 YoY% QoQ% 3QFY15E v/s Est (%)

Revenue 1,165 1,140 1,103 -5.3 -3.2 1,117 -1.3

EBITDA 300 270 241 -19.7 -10.5 255 -5.6

EBITDA margin (%) 25.8 23.6 21.9 -392bps -178bps 22.9 -100bps

Depreciation and amortization 224 207 190 -15.0 -8.2 208 -8.8

EBIT 77 63 51 -33.2 -18.0 47 8.8

Net finance cost 177 132 167 -5.9 26.2 117 42.1

Profit Before Taxes -100 -69 -115 15.1 66.1 -70 64.4

Total Tax 70 87 41 -41.3 -53.1 91 -54.9

Profit After Tax (before minorities) -170 -157 -156 -8.1 -0.3 -161 -2.9

Minority Interest -16 -33 -20 26.9 -38.4 -33 -38.4

Net Profit -154 -124 -136 -11.7 9.9 -128 6.3

Bharti Africa: KPIs

Mobile Subs (m) 68.3 71.4 74.6 9.2 4.5 73.2 2.0

Mobile ARPU (USD/month) 5.8 5.4 5.1 -12.4 -6.2 5.2 -1.3

Total Minutes of Use (b mins) 28.3 29.0 30.4 7.4 4.8 28.3 7.2

Minutes of Use/Sub/Month 141 138 140 -0.7 1.6 131 7.2

Effective Mobile RPM (US Cents) 4.1 4.0 3.6 -11.8 -8.8 3.9 -7.9


4 February 2015 7

Bharti Airtel

Exhibit 16: Key assumptions and value drivers Mobile segment FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E

Mobile - India

Subs (m) 128 162 181 188 206 221 232 240

YoY (%) 36 27 12 4 9 8 5 4

Average subs (m) 111 145 172 185 197 213 227 236

YoY (%) 42 31 19 8 7 8 6 4

Netadds per month (m) 2.8 2.9 1.6 0.6 1.4 1.3 0.9 0.7

YoY (%) 6 3 -45 -64 150 -8 -35 -16

Total mobile traffic (b min) 610 792 889 968 1,030 1,077 1,126 1,173

YoY (%) 28 30 12 9 6 5 5 4

ARPU (INR/month) 243 201 188 185 194 202 209 220

YoY (%) -25 -17 -6 -1 5 4 4 5

MOU 459 455 431 436 436 421 414 414

YoY (%) -10 -1 -5 1 0 -4 -1 0

Mobile RPM (INR) 0.53 0.44 0.44 0.42 0.44 0.48 0.51 0.53

YoY (%) -17 -17 -1 -3 5 8 5 5

Mobile EBITDA margin (%) 38.7 34.7 33.9 30.1 33.8 37.1 37.1 36.8

Mobile Capex (INR b) 34 59 32 57 42 77 73 73

Mobile Capex/sales (%) 10 16 8 13 9 15 13 12

Mobile - Africa

Subs (m) 44 53 64 69 77 86 96

YoY (%) 5 20 20 9 10 13 11

Netadds per month (m) 0.2 0.7 0.9 0.5 0.6 0.8 0.8

ARPU (USD/month) 7.3 7.1 6.3 5.6 5.1 4.8 4.6

YoY (%) -2 -11 -11 -9 -6 -4

Capex (USD b) 0.9 1.5 0.7 0.6 0.9 0.9 1.0

Capex/Sales (%) 24 37 16 14 21 20 20

EBITDA margin (%) 25 27 26 26 23 21 21


4 February 2015 8

Bharti Airtel

Exhibit 17: Business mix Revenue (INR b) FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Mobile 331 363 403 431 467 524 576 629 Telemedia 34 36 37 36 39 45 52 57 Enterprise 45 41 45 53 63 66 72 76 Passive Infrastructure 71 86 95 50 51 55 61 68 Others (incl South Asia) 6 10 16 32 41 44 50 55 Africa 0 131 198 240 273 275 297 318 Total revenue 487 667 794 842 934 1,009 1,107 1,204 Eliminations and others -68 -72 -80 -73 -77 -78 -86 -94 Consolidated revenue 418 595 715 769 857 931 1,022 1,111 YoY% 13 42 20 8 11 9 10 9 EBITDA (INR b)

Mobile 128 126 137 130 158 194 214 232 Telemedia 15 16 16 15 15 17 21 24 Enterprise 13 10 8 9 14 15 16 17 Passive Infrastructure 25 32 36 23 23 26 28 33 Others (incl South Asia) -10 -10 -9 -2 2 4 5 6 Africa 0 29 53 63 71 63 63 68 Total EBITDA 170 202 240 236 282 319 347 379 Eliminations and others -2 -3 -3 -4 -5 -5 -6 -6 Consolidated EBITDA 168 200 237 233 278 314 341 372 YoY% 11 19 19 -2 19 13 9 9 Capex (INR b)

Mobile 34 59 32 57 42 77 73 73 Telemedia 10 8 8 3 4 4 5 6 Enterprise 12 4 2 1 1 1 1 1 Others (incl South Asia) 16 14 9 11 13 12 15 15 Passive infrastructure 12 23 14 11 8 10 11 10 Africa 0 36 76 39 38 57 59 64 Consolidated capex 83 143 140 122 106 161 164 168 YoY% -41 71 -2 -13 -13 52 2 3 Capex/Sales (%) 20 24 20 16 12 17 16 15


4 February 2015 9

Bharti Airtel

Exhibit 18: Summary of estimate change FY15E FY16E FY17E

Revenue (INRb)

Old 935 1038 1122

New 931 1022 1111

Change (%) -0.4 -1.6 -1.0

EBITDA (INRb)

Old 317 363 393

New 314 341 372

Change (%) -0.9 -6.1 -5.2

EBITDA margin (%)

Old 33.9 35.0 35.0

New 33.7 33.4 33.5

Change (bp) -18bps -160bps -147bps

Depreciation (INRb)

Old 160 186 199

New 158 187 202

Change (%) -2 0 1

Net finance cost (INRb)

Old 38 43 35

New 38 44 44

Change (%) 1 4 25

Tax rate (%)

Old 53 48 45

New 48 52 52

Change (bp) -496bps 447bps 655bps

Net Profit (INRb)

Old 55 70 87

New 58 52 60

Change (%) 5.4 -26.8 -30.8

EPS (INR)

Old 13.9 17.6 21.9

New 14.6 12.9 15.1

Change (%) 5.4 -26.8 -30.8


4 February 2015 10

Bharti Airtel

Corporate profile: Bharti Airtel

Exhibit 20: Shareholding pattern (%) Dec-14 Sep-14 Dec-13

Promoter 65.4 65.4 65.2

DII 7.4 7.2 8.6

FII 17.5 17.9 15.9

Others 9.7 9.5 10.2

Note: FII Includes depository receipts

Exhibit 21: Top holders Holder Name % Holding

Three Pillars Pte Ltd 5.0 Life Insurance Corporation Of India under various

4.8

ICICI Prudential Life Insurance Company Ltd 1.3

Goldman Sachs (Singapore) Pte 1.2

Dodae and Cox International Stock Fund 1.1

Skagen Kon-Tiki Verdipapirfond 1.0

Exhibit 22: Top management

Name Designation

Sunil Bharti Mittal Chairman

Gopal Vittal Managing Director & CEO

Exhibit 23: Directors Name Name

Sunil Bharti Mittal Obiageli Katryn Ezekwesili*

Gopal Vittal Vegulaparanan Kasi Viswanathan*

Rajan Bharti Mittal Bernardus Johannes Maria Verwaayen*

Ajay Lal* Manoj Kohli

Manish Kejriwal* Tan Yong Choo

Dinesh Kumar Mittal* Chua Sock Koong

Craig Edward Ehrlich* Sheikh Faisal Thani Al-Thani

*Independent

Exhibit 24: Auditors

Name Type

S R Batliboi & Associates LLP Statutory Chandrasekaran Associates Secretarial Audit KPMG Internal R J Goel & Co Cost Auditor

Exhibit 25: MOSL forecast v/s consensus EPS

(INR) MOSL

forecast Consensus

forecast Variation

(%)

FY15 54.2 54.1 0.2 FY16 64.2 63.0 1.8 FY17 79.0 74.4 6.2

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 fourth largest wireless company globally by subscribers.

Exhibit 19: Sensex rebased

4 February 2015 11

Bharti Airtel

Financials and valuations

Income Statement (INR Million) Y/E March 2010 2011 2012 2013 2014 2015E 2016E 2017E Revenues 418,472 594,672 714,507 769,045 857,460 931,022 1,021,800 1,110,502 Change (%) 13.2 42.1 20.2 7.6 11.5 8.6 9.8 8.7 Total Expenses 250,839 395,007 477,385 536,466 579,690 617,283 680,505 738,161 EBITDA 167,633 199,664 237,122 232,579 277,770 313,739 341,295 372,341 % of Gross Sales 40.1 33.6 33.2 30.2 32.4 33.7 33.4 33.5 Depn. & Amortization 62,832 102,066 133,680 148,148 156,496 157,563 186,674 201,769 EBIT 104,800 97,598 103,442 84,431 121,274 156,175 154,621 170,572 Net finance cost 178 21,813 38,185 40,085 48,379 38,399 44,385 44,133 Other Income 468 998 -73 3,506 5,750 -1,926 4,465 5,435 PBT 105,090 76,783 65,184 47,852 78,644 115,850 114,702 131,875 Tax 13,453 17,790 22,602 25,183 48,450 55,939 59,724 68,057 Rate (%) 12.8 23.2 34.7 52.6 61.6 48.3 52.1 51.6 Minority Interest 1,870 -1,475 -13 -88 2,467 1,530 3,400 3,400 Adjusted PAT 89,767 60,468 42,595 22,757 27,727 58,381 51,578 60,418 Change (%) 6 -29.6 -46.6 21.8 110.6 -11.7 17.1 E: Inquire Estimates Balance Sheet (INR Million) Y/E March 2010 2011 2012 2013 2014 2015E 2016E 2017E Share Capital 18,988 18,988 18,988 18,988 19,987 19,987 19,987 19,987 Add. Paid up Capital 56,499 56,499 56,499 56,499 123,456 123,456 123,456 123,456 Reserves 346,453 412,181 430,626 427,729 454,117 486,327 530,617 582,132 Net Worth 421,940 487,668 506,113 503,216 597,560 629,770 674,060 725,575 Loans 101,898 616,708 690,232 667,363 758,958 776,183 780,625 730,707 Minority Interest 25,285 28,563 27,695 40,886 42,102 44,244 47,643 51,042 Other Liabilities 45,018 28,078 31,920 36,166 47,247 39,231 41,429 43,489 Deferred Tax Liability 7,980 18,572 18,861 22,300 26,894 22,812 23,455 24,103 Capital Employed 602,121 1,179,589 1,274,821 1,269,932 1,472,761 1,512,240 1,567,213 1,574,916 Gross Block 761,040 1,599,377 1,776,560 1,923,675 2,085,053 2,375,140 2,651,947 2,933,095 Less : Depreciation 218,521 310,634 440,740 637,011 678,908 903,408 1,111,973 1,448,634 Net Block 542,519 1,288,743 1,335,820 1,286,663 1,406,145 1,471,732 1,539,973 1,484,460

Other Non-Current Assets 30,736 64,244 86,711 108,685 165,429 210,540 216,171 221,919 Curr. Assets 137,685 112,077 148,084 196,906 260,198 260,354 272,588 364,654 Inventories 484 2,139 1,308 1,109 1,422 1,296 1,406 1,527 Debtors 35,711 54,929 63,735 67,824 62,441 74,183 80,644 87,647 Cash & Bank Balance 25,323 9,575 20,300 16,078 49,808 25,693 26,693 105,692 Short-term investments 52,362 6,968 18,934 65,546 98,606 103,478 104,478 106,179 Other Current Assets 23,805 38,466 43,807 46,349 47,921 55,704 59,367 63,610 Curr. Liab. & Prov. 108,819 285,475 295,795 322,321 359,011 430,386 461,520 496,117 Creditors 107,702 249,737 243,461 273,147 299,258 370,132 401,021 435,339 Other Current Liabilities 1,117 35,738 52,334 49,174 59,753 60,254 60,499 60,778 Net Curr. Assets 28,866 -173,398 -147,710 -125,416 -98,813 -170,033 -188,932 -131,463 Appl. of Funds 602,121 1,179,589 1,274,821 1,269,932 1,472,761 1,512,240 1,567,213 1,574,916 E: MOSL Estimates

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Bharti Airtel

Financials and valuations

Ratios Y/E March 2010 2011 2012 2013 2014 2015E 2016E 2017E Basic (INR) EPS 23.7 15.9 11.2 6.0 7.0 14.6 12.9 15.1 Cash EPS 40.2 42.8 46.5 45.0 46.6 54.0 59.6 65.6 Book Value 117.9 136.1 140.7 143.4 161.8 168.6 180.6 194.3 DPS 1.0 1.0 1.1 0.6 0.7 1.5 1.3 1.5 Payout %(Incl.Div.Taxes) 4.2 6.3 10.0 10.0 10.0 10.0 10.0 10.0 Valuation (x) P/E 15.6 23.1 32.8 61.3 52.5 25.2 28.5 24.3 Cash P/E 8.6 7.9 8.2 7.9 6.8 6.2 5.6 EV/EBITDA 8.5 10.0 8.8 8.7 8.0 7.0 6.4 5.5 EV/Sales 3.4 2.9 2.6 2.4 2.3 2.1 1.8 Price/Book Value 2.7 2.6 2.6 2.3 2.2 2.0 1.9 Dividend Yield (%) 0.3 0.3 0.2 0.2 0.4 0.4 0.4 Profitability Ratios (%) RoE 23.6 12.6 8.1 4.2 4.7 8.9 7.4 8.1 RoCE 18.9 8.7 6.2 4.3 5.0 6.5 6.2 6.7 Turnover Ratios Debtors (Days) 31 34 33 32 27 29 29 29 Asset Turnover (x) 1.01 0.78 0.65 0.71 0.79 0.82 0.88 0.97 Leverage Ratio Net Debt/Equity (x) 0.1 1.2 1.2 1.1 1.0 1.0 0.9 0.7

Cash Flow Statement (INR Million) Y/E March 2010 2011 2012 2013 2014 2015E 2016E 2017E Op.Profit/(Loss) bef Tax 167,633 199,664 237,122 232,579 277,770 313,739 341,295 372,341 Other Income 468 998 -73 3,506 5,750 -1,926 4,465 5,435 Interest Paid -178 -21,813 -38,185 -40,085 -48,379 -38,399 -44,385 -44,133 Direct Taxes Paid -29,761 -37,970 -25,730 -31,431 -43,887 -54,631 -59,724 -68,057 (Inc)/Dec in Wkg. Cap. 26,518 120,819 -18,280 21,448 37,889 -23,335 14,130 17,331

CF from Op.Activity 164,680 261,699 154,854 186,018 229,142 195,448 255,782 282,918

(inc)/Dec in FA + CWIP -155,852 -848,290 -180,757 -98,991 -275,978 -223,151 -254,915 -146,256 (Pur)/Sale of Investments -14,282 45,451 -11,990 -58,141 -78,209 2,897 -1,000 -1,701 CF from Inv.Activity -170,134 -802,839 -192,748 -157,132 -354,187 -220,253 -255,915 -147,957 Issue of Shares 27,617 9,624 -19,791 -21,242 71,204 -11,308 1,850 0 Inc/(Dec) in Debt -16,903 514,810 73,524 -22,869 91,595 17,225 4,442 -49,919 Other Financing Activities 8,917 961 -5,113 11,005 -4,024 -5,226 -5,159 -6,043 CF from Fin.Activity 19,632 525,395 48,620 -33,106 158,776 691 1,133 -55,961 Inc/(Dec) in Cash 14,178 -15,748 10,725 -4,222 33,730 -24,114 1,000 78,999 Add: Opening Balance 11,145 25,323 9,575 20,300 16,078 49,808 25,693 26,693 Closing Balance 25,323 9,575 20,300 16,078 49,808 25,694 26,694 105,692

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Bharti Airtel

N O T E S

4 February 2015 14

Bharti Airtel

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Disclosure of Interest Statement BHARTI AIRTEL LTD Analyst ownership of the stock No Served as an officer, director or employee No

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