Hold Bharti Airtel; target of Rs 300: Nirmal Bang

“Bharti Airtel (BAL) has acquired a 49% stake in Qualcomm Asia Pacific’s India broadband wireless access (BWA) operations for US$165mn (Rs9.2bn) and will assume full ownership by the end of 2014. In our view, a positive factor is that BAL acquired spectrum at an equity valuation of Rs937mn/MHz (as compared with the per-MHz price of Rs2.46bn paid by Qualcomm at the time of the BWA auction in June 2010). The enterprise value (EV) stands at Rs67.9bn. The acquisition gives BAL a broader broadband network across India. With its 3G footprint in 13 circles, the telecom major will have combined 3G-BWA coverage in 18 circles (BWA coverage in eight circles, three overlapping) and importantly, significant spectrum holdings in these 18 circles (average 12.5MHz/circle). While this development is important from a long-term perspective in terms of securing spectrum and expanding its broadband coverage given the nascent data opportunity in the Indian market, it is unlikely to have any immediate impact on BAL’s financials. Owing mainly to the recent fall in the stock price, we upgrade our rating on BAL to Hold from Sell and retain our target price of Rs300.”

“BAL has acquired a 49% stake in Qualcomm Asia Pacific’s India BWA entities that hold licences in the circles of Delhi, Mumbai, Haryana and Kerala for US$165mn (Rs9.2bn). The telecom major has acquired the 26% stake held equally by Global Holding Corporation and Tulip Telecom and the balance 23% through subscription to fresh equity. BAL, as mentioned above, has made an initial investment of US$165mn (Rs9.2bn) and will assume full ownership by the end of 2014. BAL has been able to acquire critical 20MHz spectrum in these circles at a 61.9% discount to the price paid by Qualcomm. The latter paid Rs49.1bn at the time of the highly competitive BWA spectrum auction in June 2010, while BAL has been able to acquire a 49% stake for US$165mn (Rs9.2bn at current FX rates), implying an equity value of Rs18.7bn. On a per-MHz basis, BAL is effectively paying Rs937mn/MHz (Rs2.46bn/MHz paid by Qualcomm). The EV for BAL stands at Rs67.9bn. Owing to the fall in the stock, we upgrade our rating on BAL to Hold from Sell and retain our TP of Rs300,” says Nirmal Bang research report.   

Non-Institutions holding more than 90% in Indian cos

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