Telecom Sector - Price war stabilizes but regulatory uncertainty still looms: Emkay

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Telecom Sector

Price war stabilizes but regulatory uncertainty still looms

n     Stabilization in KPI’s and reduction in price war intensity, positive for the sector. Revenue market share maintained by incumbent despite aggressive launches by new entrants

n     Risk of regulatory uncertainty looms over the sector, however expected NTP2011 could bring upon the level playing field and clarity on M&A guidelines.

n     Over leveraged balance sheet in wake of high amount of fees paid towards 3G and BWA auction. But the incumbents are expected to generate +ve FCF in FY12E

n     Sector trades at the comfortable valuation of 6.9-8x FY12E EV/EBITDA. Bharti at 6.9x FY12E EBITDA trades cheaper compared to other players. Prefer Bharti over Idea and Rcom   

Company	Recommendation	CMP	Target Price
Bharti Airtel	Hod	320	345
Idea Cellular	Sell	60	60
RCom	Reduce	103	85