1. Bharti Airtel shares lose on fall in Q3 net, CLSA maintains buy

Bharti Airtel shares lose on fall in Q3 net, CLSA maintains buy

CLSA has lowered Bharti Airtel’s revenue estimate by about 2% due to mobile data subscriber loss in India. However, the brokerage maintains “high conviction buy” on Bharti Airtel, with a target price of Rs 393.

By: | Published: January 25, 2017 10:40 AM
airtel, vodafone, airtel new year offers, vodafone new year offers, airte=el s jio, reliance jio offers, reliance jio internet, airtel vodafone jio, Bharti Airtel shares were trading at Rs 308.55, down 2.51% from the previous close, after falling to a low of Rs 305. (Image: Reuters)

Bharti Airtel’s shares pared some of the early losses but were still the top loser on the NSE, after the company reported a worse than expected fall in net profit in fiscal third quarter.

Shares were trading at Rs 308.55, down 2.51% from the previous close, after falling to a low of Rs 305.

Broader markets were firm, with the BSE Sensex up 0.34% at 27,469.44 points and the NSE Nifty up 0.35% at 8,505.85 points.

CLSA has lowered Bharti Airtel’s revenue estimate by about 2% due to mobile data subscriber loss in India. However, the brokerage maintains “high conviction buy” on Bharti Airtel, with a target price of Rs 393.

Earlier yesterday, Bharti Airtel, India’s largest telecommunication services operator, said that its consolidated net profit for the fiscal third quarter fell to Rs 504 crore, less than half of that in the same quarter a year ago. The fall was much sharper than estimated, hurt by a tariff war due to Reliance Jio’s entry leading to a sharp fall in money earned per customer, demonetisation and exceptional one-time costs.

Airtel’s consolidated revenue at Rs 23,336 crore in Oct-Dec fell 3% on-year but was flat on underlying basis, it said. Further, while both EBITDA and EBITDA margins rose, the EBIT fell over 10% on-year on account of higher amortisation costs.

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Consolidated EBITDA at Rs 8,570 crore grew 1.1% on-year with EBITDA margin expanding by 1.5% to 36.7%. The expansion in margin was driven by Africa margin expansion of 4.9% on-year on an underlying basis, Bharti Airtel said.

“The consolidated EBIT of Rs 3,675 crore represents (on-year) de-growth of 10.3% on account of higher spectrum amortisation costs in India,” Airtel said.

Also, spectrum related interest costs led to an increase in the net interest costs rising to Rs 1,810 crore in Oct-Dec from Rs 1,360 crore in the same quarter a year ago, it said. Higher forex and derivatives losses led to further erosion in the bottomline.

Reliance Jio’s entry into the telecom space has forced the incumbent players to drastically cut tariffs – as much as by 66% – in order to retain their customer base, and has put the entire sector under tremendous pressure of choosing between protecting margins and user base.

“Slowdown in mobile revenue growth (is) primarily due to free voice and data offering by a new operator,” Airtel said in a statement.

Reliance added over 19 million users in October, far exceeding the largest competing incumbent Bharti Airtel, which added 2.33 million in the same month.

Reliance Jio recently extended its inaugural free voice and data plan till March 31 drawing complaints and criticisms from its biggest rivals Airtel and Vodafone, who assert that its anti-competitive practices and freebies are hurting the industry. Vodafone went as far as to write down the value of its India business on hyper competition from the new entrant.

A national tribunal is set to hear a case regarding the company’s anti-competitive on February 1, following Airtel’s complaint.

 

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