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Positive catalyst here sooner than expected: Tariff increases in the Indian
mobile segment are here, with Bharti Airtel having raised tariffs by 20%.
We had been looking for tariff stability in 2H FY12 with the potential for
some rate increases in FY13. We are incrementally positive on the sector
now as we believe indications of increased tariffs from market leaders leave
room for others to raise rates too.
What's reflected already? Bharti and Idea’s stock prices have risen by 7%
and 13% over the last three trading sessions and we estimate the current
levels factor in 18 quarters of price stability. Our analysis of 10 emerging
markets across Asia, Latin America and Africa show that the maximum
period of price stability is eight quarters (five is more common) while price
increases have sustained for a maximum of five quarters (2-3 quarters is
more common).
Paying for penetration: Another aspect we study is that all these markets
(including India) have paid for penetration with ARPM declines. India, with
49% underlying penetration, is unlikely to be an exception. We believe that
Indian telcos – market leaders especially – will see price increases in the
near term; we forecast six quarters for Bharti and Idea, followed by declines
in the medium-to-long term.
Upgrading Idea to Neutral: We expect Idea to participate in rate increases
and have increased ARPM by 1.0/3.6 paisa for FY12/FY13 and EPS by
10%/22% to Rs2.8/4.7. However we are cognizant of Idea’s weaker market
position relative to Bharti, regulatory risks, and a slower turnaround in new
circles. We would be looking for a favorable resolution of regulatory issues
or a better entry point to turn more positive on Idea. Our Mar-12 PT is now
Rs80 (up from Rs62 earlier).
Bharti preferred, reiterate Overweight and raise PT to Rs485: We
welcome Bharti’s tariff increase, which we believe highlights its pricing
power. Bharti is our preferred name in the sector – it is less exposed to
regulatory risks, has better exposure to the data opportunity in the next 2-3
years, and an improvement in the African business is expected. We raise our
FY12/FY13 ARPM estimates by 0.7/2.1 paisa, and our EPS moves up by
2.7%/4.3% to Rs20.1/31.7. Our price target is now Rs485, up from Rs444.
We turned positive on Bharti at the end of March and highlighted tariff
increases as a further potential positive catalyst.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Positive catalyst here sooner than expected: Tariff increases in the Indian
mobile segment are here, with Bharti Airtel having raised tariffs by 20%.
We had been looking for tariff stability in 2H FY12 with the potential for
some rate increases in FY13. We are incrementally positive on the sector
now as we believe indications of increased tariffs from market leaders leave
room for others to raise rates too.
What's reflected already? Bharti and Idea’s stock prices have risen by 7%
and 13% over the last three trading sessions and we estimate the current
levels factor in 18 quarters of price stability. Our analysis of 10 emerging
markets across Asia, Latin America and Africa show that the maximum
period of price stability is eight quarters (five is more common) while price
increases have sustained for a maximum of five quarters (2-3 quarters is
more common).
Paying for penetration: Another aspect we study is that all these markets
(including India) have paid for penetration with ARPM declines. India, with
49% underlying penetration, is unlikely to be an exception. We believe that
Indian telcos – market leaders especially – will see price increases in the
near term; we forecast six quarters for Bharti and Idea, followed by declines
in the medium-to-long term.
Upgrading Idea to Neutral: We expect Idea to participate in rate increases
and have increased ARPM by 1.0/3.6 paisa for FY12/FY13 and EPS by
10%/22% to Rs2.8/4.7. However we are cognizant of Idea’s weaker market
position relative to Bharti, regulatory risks, and a slower turnaround in new
circles. We would be looking for a favorable resolution of regulatory issues
or a better entry point to turn more positive on Idea. Our Mar-12 PT is now
Rs80 (up from Rs62 earlier).
Bharti preferred, reiterate Overweight and raise PT to Rs485: We
welcome Bharti’s tariff increase, which we believe highlights its pricing
power. Bharti is our preferred name in the sector – it is less exposed to
regulatory risks, has better exposure to the data opportunity in the next 2-3
years, and an improvement in the African business is expected. We raise our
FY12/FY13 ARPM estimates by 0.7/2.1 paisa, and our EPS moves up by
2.7%/4.3% to Rs20.1/31.7. Our price target is now Rs485, up from Rs444.
We turned positive on Bharti at the end of March and highlighted tariff
increases as a further potential positive catalyst.
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