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India Equity Research Reports, IPO and Stock News
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Key Takeaways
Recent tariff hikes to get reflected in four quarters
Recent tariff hikes have largely been driven by increasing costs and required
investments in 3G and rural networks.
The hikes will flow through over four quarters.
Tariffs would be reviewed to assess the impact on market share and volumes.
The recent hikes in some 2G data plans are mainly to benchmark them with the
recently introduced 3G data plans.
Upcoming policy to provide level playing field
License renewal and excess spectrum are the two major regulatory issues.
While NTP 2011 is keenly awaited for long-term regulatory visibility, it is also expected
to provide a level playing field for all operators.
Revenue market share: Has managed well despite hyper competition
Bharti has lost ~2% revenue market share over the last two years.
This is mainly a function of large players like Vodafone and Idea entering new
markets.
Huge opportunity in 3G
Overall voice penetration currently stands at ~50% and could increase, largely driven
by increasing rural penetration (currently at ~30%).
Potential 3G user penetration is a large sub-set of voice penetration. The potential
for data usage is very large, given that there are no fixed lines and broadband
penetration is less than 2%. However, this would require an application ecosystem,
rollouts and 3G-enabled handsets at affordable prices.
Non-3G handsets are likely to be driven out of the market over the next two years.
Africa: Cost reduction a key focus area
Primary focus for Bharti in Africa is to reduce cost per minute.
Regulatory and competitive environment is favorable in Africa.
Bharti is keen to invest and expand its business in Africa at a fast pace but has faced
some logistics challenges, which will keep FY12 capex at USD1.2b.
Valuation and view
The stock trades at proportionate EV/EBITDA of 7.7x FY12E and 5.9x FY13E. Buy with a
target price of INR530.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Recent tariff hikes to get reflected in four quarters
Recent tariff hikes have largely been driven by increasing costs and required
investments in 3G and rural networks.
The hikes will flow through over four quarters.
Tariffs would be reviewed to assess the impact on market share and volumes.
The recent hikes in some 2G data plans are mainly to benchmark them with the
recently introduced 3G data plans.
Upcoming policy to provide level playing field
License renewal and excess spectrum are the two major regulatory issues.
While NTP 2011 is keenly awaited for long-term regulatory visibility, it is also expected
to provide a level playing field for all operators.
Revenue market share: Has managed well despite hyper competition
Bharti has lost ~2% revenue market share over the last two years.
This is mainly a function of large players like Vodafone and Idea entering new
markets.
Huge opportunity in 3G
Overall voice penetration currently stands at ~50% and could increase, largely driven
by increasing rural penetration (currently at ~30%).
Potential 3G user penetration is a large sub-set of voice penetration. The potential
for data usage is very large, given that there are no fixed lines and broadband
penetration is less than 2%. However, this would require an application ecosystem,
rollouts and 3G-enabled handsets at affordable prices.
Non-3G handsets are likely to be driven out of the market over the next two years.
Africa: Cost reduction a key focus area
Primary focus for Bharti in Africa is to reduce cost per minute.
Regulatory and competitive environment is favorable in Africa.
Bharti is keen to invest and expand its business in Africa at a fast pace but has faced
some logistics challenges, which will keep FY12 capex at USD1.2b.
Valuation and view
The stock trades at proportionate EV/EBITDA of 7.7x FY12E and 5.9x FY13E. Buy with a
target price of INR530.
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