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Recent developments in a number of African markets point toward improving
forward trends for Bharti, in our view. While SIM registration is expected to
weigh on net adds in the current quarter too, with some promotional activity
around it in Nigeria, we are encouraged to see early sings of tariff increases
and Bharti’s entry into Rwanda. We believe a turnaround in Bharti Africa is in
the offing. After about a year of focused operations in Africa, Bharti’s several
efficiency programs are poised to kick in. We believe continued momentum in
top-line growth can help margins improve in 1-2 quarters. Indian operations
too are on better footing with tariff increases and potential for regulatory
clarity. Reiterate OW rating and Mar-12 PT of Rs480.
New market – Rwanda: Bharti has secured 2G/3G licenses in Rwanda and
plans to invest $100m here over three years. We are encouraged by Bharti’s
expanding footprint in Africa and believe that this market with two other
active players can show good growth for Bharti. See page 3 for further
details on the Rwanda market.
Signs of tariff increases: In early September, MTN in Uganda raised tariffs
due to higher inflationary pressures. Separately, Safaricom’s CEO was
quoted as saying that the telco could raise tariffs given rising costs. We
believe there is room for Bharti too to follow suit.
MTN in Nigeria: We expect a near-term increase in competitive intensity
in Nigeria based on comments from MTN management. MTN may increase
promotional activity around the ongoing SIM-registration process. MTN
may increase investment in RAN capacity in Nigeria in H2 2011.
SIM registration: In several markets in Africa including Nigeria, Ghana
and Kenya, mandatory registration of SIMs is driving lower net add rates.
Bharti witnessed a modest net add development in Q1FY12 (to Jun-11) with
700K/month net adds and we expect this to have an impact in Q2 too.
Revenue breakdown: Nigeria contributed 33% of its Africa revenue in
FY11, a 2.4pp lower contribution vs. 36% as reported by Zain for 2009.
Markets with higher weights include Zambia, Ghana, Gabon and Niger.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Recent developments in a number of African markets point toward improving
forward trends for Bharti, in our view. While SIM registration is expected to
weigh on net adds in the current quarter too, with some promotional activity
around it in Nigeria, we are encouraged to see early sings of tariff increases
and Bharti’s entry into Rwanda. We believe a turnaround in Bharti Africa is in
the offing. After about a year of focused operations in Africa, Bharti’s several
efficiency programs are poised to kick in. We believe continued momentum in
top-line growth can help margins improve in 1-2 quarters. Indian operations
too are on better footing with tariff increases and potential for regulatory
clarity. Reiterate OW rating and Mar-12 PT of Rs480.
New market – Rwanda: Bharti has secured 2G/3G licenses in Rwanda and
plans to invest $100m here over three years. We are encouraged by Bharti’s
expanding footprint in Africa and believe that this market with two other
active players can show good growth for Bharti. See page 3 for further
details on the Rwanda market.
Signs of tariff increases: In early September, MTN in Uganda raised tariffs
due to higher inflationary pressures. Separately, Safaricom’s CEO was
quoted as saying that the telco could raise tariffs given rising costs. We
believe there is room for Bharti too to follow suit.
MTN in Nigeria: We expect a near-term increase in competitive intensity
in Nigeria based on comments from MTN management. MTN may increase
promotional activity around the ongoing SIM-registration process. MTN
may increase investment in RAN capacity in Nigeria in H2 2011.
SIM registration: In several markets in Africa including Nigeria, Ghana
and Kenya, mandatory registration of SIMs is driving lower net add rates.
Bharti witnessed a modest net add development in Q1FY12 (to Jun-11) with
700K/month net adds and we expect this to have an impact in Q2 too.
Revenue breakdown: Nigeria contributed 33% of its Africa revenue in
FY11, a 2.4pp lower contribution vs. 36% as reported by Zain for 2009.
Markets with higher weights include Zambia, Ghana, Gabon and Niger.
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