Bharti Airtel to suffer most from rupee fall: Angel Broking

47197 Investors following Idea Cellular. Share this News with them.

0

Like this story, share it with millions of investors on M3

Bharti Airtel to suffer most from rupee fall: Angel Broking

Angel Broking has come out with its report on telecom sector with a neutral view. According to the research firm the driving force for the overall sector is higher tariff rates as well as increasing use of value-added services, which will lead to higher ARPUs for all players, thereby aiding profitability.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Buy Persistent Systems; target Rs 400: PLilladher Buy BHEL; target Rs 242: IIFL Reboot your portfolio with 10 IT stocks: Dolat Cap Idea Cellular BSE | NSE 29/05/12 Are Mutual Funds betting on Idea Cellular? Other Stocks in this news Bharti Airtel | Bharat Sanchar Nigam |

Angel Broking has come out with its report on telecom sector with a neutral view. According to the research firm the driving force for the overall sector is higher tariff rates as well as increasing use of value-added services, which will lead to higher ARPUs for all players, thereby aiding profitability.

GSM's net subscriber addition data reported by Cellular Operators Association of India (COAI), which demonstrated a slight recovery in September and October 2011, grew by just 1.1% mom in November 2011. Net subscriber addition number was very low at 6.7mn in October 2011, down by 6.3% mom, taking the total GSM subscriber base to 632.1mn. GSM subscriber net addition data was weak across all telecom operators, except Idea and Uninor.

Operator-wise highlights
In November 2011, net subscriber additions were largely led by incumbents, with Idea (again maintaining its lead position) and Aircel reporting a 32.6% and 37.7% mom increase in subscriber addition run rate, respectively. Idea and Aircel added 2.2mn and 0.7mn subscribers, taking their total subscriber base to 104mn and 61mn, respectively. This led to an increase in Idea's subscriber market share to 16.5% from 16.3% in October 2011. Among other incumbents, Bharti Airtel (Bharti), Vodafone and BSNL reported almost stagnant mom net subscriber addition at 1.0mn, 0.9mn and 0.6mn, respectively.

Among new operators, Uninor again emerged as a pleasant surprise by adding 1.9mn subscribers (highest amongst all GSM operators except Idea). This led to a jump in its subscriber market share to 5.4% in November 2011 from 5.2% in October 2011. Other new operators continued to struggle to gain market share in net subscriber addition. Videocon again reported a net decline of 0.6mn subscribers in its subscriber base during the month. Net subscriber addition of S Tel and Loop Mobile declined by 51.3% and 9.0% mom, as these operators added merely 0.02mn and 0.01mn subscribers, respectively.

Circle-wise highlights
In November 2011, net addition run rate of all circles (except Metro circle) declined, the highest being for A circle, which reported addition of 2.0mn subscribers, down 17.1% mom from 2.4mn in October 2011. This led to a decrease in net subscriber addition market share of A circle to 29.2% from 33.1% in October 2011. Net addition run rate of Metro circle rebounded to 0.7mn in November 2011 from 0.2mn in October 2011, with Idea reporting the highest net addition of 0.3mn subscribers, followed by Vodafone and Bharti, which reported net subscriber addition of 0.08mn and 0.04mn, respectively. Subscriber addition run rate of B circle declined by 15.6% mom to 2.9mn in November 2011 as against 3.4mn in October 2011, while subscriber addition in C circle remained flat mom at 1.0mn.

The telecom sector is currently surrounded by a number of policy uncertainties related to spectrum and license fee payments. The Telecom Regulatory Authority of India (TRAI) has deemed that any spectrum held beyond 6.2MHz in a circle market is 'excess spectrum' and has levied a one-time fee on the excess spectrum held by any operator based on a market-based value of spectrum for each circle. Also, telecom licenses in India were issued with validity of 20 years, so licenses will start coming for renewals from 2014, which will again pose a huge financial liability for telecom companies. In FY2015 and FY2016, license renewals for Bharti and Idea are due in eight and nine circles, respectively.

Adverse forex movement: Players in the telecom sector (especially Bharti) continue to be haunted by sharp INR depreciation against USD due to huge forex debt in their books. Bharti has foreign currency denominated loans worth ~US$11.5bn in its books. Given the recent INR depreciation against USD, the company will suffer from higher interest outgo and higher amount of payments for debt retirement, thereby posing a risk to their earnings.

For Bharti and Idea, net subscriber additions were along expected lines, thus our estimates remain unchanged. The driving force for the overall sector is higher tariff rates as well as increasing use of value-added services, which will lead to higher ARPUs for all players, thereby aiding profitability. Bharti continues to be a better bet due to its low-cost integrated model (owned tower infrastructure), potential opportunity to scale up in Africa, established leadership in revenue and subscriber market share and relatively better KPIs. However, overall we remain Neutral on the telecom sector.

Bodies Corporate holding more than 50% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment