May 26, 2012, 12.17 PM | Source: Moneycontrol.com
Emkay Global Financial Services is bullish on Bharti Airtel and has recommended accumulate rating on the stock with a target price of Rs 375 in its May 24, 2012 research report.
, Emkay Global Financial Services |
“Bharti Airtel has announced its acquisition of 49% stake in Qualcomm's broadband wireless entities for around Rs 9.2bn ($165mn) and would completely own the venture within the next two years. Bharti Airtel acquired 26% equity from Global Holding Corporation and Tulip Telecom Limited and the balance through fresh issue of shares. As per our calculation, enterprise value of the deal stands at Rs59.0bn (Qualcomm paid Rs49.1bn in June 2010 to acquire BWA spectrum). We believe deal is fairly valued given the current environment. No near term impact on financials as it would take another 4-6months for Bharti to launch services in newly acquired circles and balance sheet impact would be seen once Bharti would acquire remaining 51% stake.”
Deal gives strength to compete with Infotel: This would make Bharti a serious competitor to Reliance Industries -owned Infotel, which has pan-India license to offer 4G services. Recently, Bharti has a headstart over RIL, as it has launched operations in Kolkata and Bangalore. With this deal Bharti would have access to major metros and data hub of the country i.e Delhi and Mumbai. Voice services are currently restricted in BWA license, but technology neutrality for licenses proposed in the new telecom policy, would make it possible.
“We view this as a positive move in the long term. With this deal, Bharti would have access to two major metros (Mumbai and Delhi), which has significant potential for high speed data. The acquisition offers Bharti the ability to exploit the impact of inevitable explosion of data in India. This acquisition truly indicates Bharti’s vision for investment in wireless data market in the country. We maintain our positive view on the company and it remains our preferred bet in the sector. “
“Bharti Airtel is currently trading at 6.1x and 5.0x FY13 and FY14E EV/EBITDA. We believe regulator’s proposal for exorbitantly high spectrum prices is unlikely to get implemented and current valuation factors-in these regulatory uncertainties and also currency depreciation to a large extent. We maintain Accumulate rating on the stock with target price of Rs 375,” says Emkay Global Financial Services research report.
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