Reliance Jio’s newly launched postpaid family plans have made Bharti Airtel investors nervous that the move could disrupt the telecom industry. The shares of Bharti Airtel fell 1.24% to Rs 747 in the intraday trade on Thursday. Following the trend, Vodafone Idea shares hit a new 52-week low, falling 2.5% to Rs 6.25. HSBC Global Research said that there will be little disruption from the new plans in the industry and reiterated the BUY rating for Bharti Airtel stock.
“Bharti Airtel family plans are priced at a premium of 0.3% to 34.7% to Jio, on varying scenarios of the number of add-on connections and price adjustments for bundled content/ OTT (Exhibits 5-6). We estimate subscribers with family plans contributed around 2.6-5.1% of Bharti Airtel’s India mobile revenue (Exhibit 4). In a worst-case scenario, if Bharti Airtel needed to cut pricing by c15% to defend these subscribers, we estimate India’s mobile revenue could fall by 0.4-0.8% and consolidated EBITDA could decline by 0.2-0.4%,” HSBC said.
Jio’s move will impact its peers and indicates that the company’s strategic intent is to increase its subscriber market share as it builds its 5G network. “We think Jio’s move is likely to have a greater impact on Vi, which has high leverage, and its network investment gap has widened against peers, particularly on 5G. Having said that, we believe the launch of these new plans reduces the probability of tariff hikes in the 4G prepaid segment in FY24e. For our Bharti Airtel
Bharti Airtel: Should you buy, hold or sell?
Rating: Buy – Target Price – Rs 960
Kotak Institutional Equities
Rating: Add – Fair Value – Rs 875
Rating: Buy – Target price – Rs 970
“We think Bharti Airtel is well positioned for ROIC improvement, with margin expansion and improving invested capital turnover. We expect robust mobile revenue growth and ARPU to rise, driven by: (1) sub-migration from 2G to 4G; (2) sub-migration to higher bucket data plans due to a surge in data usage; (3) gains in high-value postpaid subs; and (4) segmented tariff hikes. We expect consolidated revenue and EBITDA CAGRs of c12% and c13%, respectively, over FY22-25e. Our target price is unchanged at Rs 970, and we reiterate our Buy rating on the stock,” analysts at HSBC said.