Revenue growth, ARPU increase, make Bharti Airtel shares ‘high conviction buy’ pick; check target price

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Updated: Jun 29, 2020 2:59 PM

Bharti Airtel is placed well ahead of its peers and the telecom giant remains in a win-win situation, irrespective of the SC’s outcome on Vodafone Idea's fortunes

Bharti Airtel share price, Vodafone Idea, Reliance JioWith industry-leading revenue growth, ARPU increase and 4G subscribers addition, Airtel is a ‘high conviction buy’ pick of brokerage firm Motilal Oswal

Bharti Airtel share price gained over one per cent to trade at day’s high of Rs 566.40 apiece on BSE in afternoon deals on Monday. Sunil Mittal-led Bharti Airtel has informed stock exchanges that in a meeting scheduled on July 31, its composite acquisition with Hughes Communications India (HCIL) will be discussed. Besides, in the previous hearing, Supreme Court asked telecom operators such as Bharti Airtel and Vodafone Idea to pay upfront a reasonable amount of AGR dues, backed by securities and guarantees, to consider their plea for a staggered payment spread over 20 years. Despite having been battered by the commercial launch of Reliance Jio three years ago, Bharti Airtel has consistently maintained its revenue market share, says brokerage firm Motilal Oswal. Bharti Airtel shares were trading at day’s high of Rs 566.40 apiece on BSE, up over one per cent, in comparison to a 0.93 per cent decline in S&P BSE Sensex in afternoon deals on Monday. 

With industry-leading revenue growth, ARPU increase and 4G subscribers addition, Bharti Airtel is a ‘high conviction buy’ pick of brokerage firm Motilal Oswal, with up to 27 per cent upside. “The government has been pitching for a healthy telecom market, which accentuates the need for Vodafone Idea to stay afloat. However, VIL’s survival would require a sharp ARPU increase along with a moratorium of payments to service its regulatory/ debt obligations, which could also benefit Bharti Airtel,” said Siddhartha Khemka, Research Analyst at Motilal Oswal.

On the bank guarantees or personal guarantees sought by the court, Bharti Airtel said that the Department of Telecom (DoT) has their bank guarantee worth Rs 10,800 crore, which can be encashed if it defaults on payment. The brokerage firm believes that even in the worst-case scenario of no government support on AGR dues, Bharti Airtel’s financial position is strong enough to weather the storm and could lead to significant market share gains at the cost of Vodafone Idea. “We believe that Bharti Airtel could deliver a marked rise in earnings with a potential increase of nearly 45% in our FY22E EBITDA estimate to Rs 680bn,” the brokerage firm Motilal Oswal said in a research report.

Motilal Oswal believes Bharti Airtel is placed well ahead of its peers and the telecom giant remains in a win-win situation, irrespective of the SC’s outcome on VIL’s fortunes. The company is also well placed to drive additional ARPU growth and market share gains given the vulnerability of its peers. “Of monthly 10-12m industry MBB (mobile broadband) subscriber adds, Bharti Airtel has garnered a healthy 30% market share, excluding estimated 3-4m Jiophone adds,” said the brokerage firm adding that Bharti Airtel looks well-positioned to add MBB subscribers at a healthy pace.

As per the Department of Telecommunications (DoT), out of Bharti Airtel’s nearly Rs 43,000 crore total dues, the company has paid nearly Rs 18,000 crore. While the total dues of Vodafone Idea stand at Rs 58,254 crore, of which so far it has paid only Rs 6,854 crore. 

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