Bharti's Q2FY10 numbers disappointing: AnandRathi Sec

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Bharti's Q2FY10 numbers disappointing: AnandRathi Sec

In an interview with CNBC-TV18, Sanjay Chawla of Anand Rathi Securities, spoke on his analysis of the of Bharti’s numbers.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ News and Notices about Bharti Airtel See interviews with Bharti Airtel Management See what other Experts & Brokerages are saying about Bharti Airtel See previous Results of Bharti Airtel Bharti Airtel BSE | NSE 29/05/12 Are Mutual Funds betting on Bharti Airtel?

India's largest telecom operator by market share, Bharti Airtel, announced its second quarter FY10 results on Friday. The company's net profit declined 7.8% to Rs 2,321 crore as against Rs 2,517 crore on a quarter-on-quarter (QoQ) basis, as per US GAAP. Total revenues slipped 0.97% to Rs 9,845 crore versus Rs 9,941.6 crore, QoQ.

In an interview with CNBC-TV18, Sanjay Chawla of AnandRathi Securities, spoke on his analysis of the of Bharti 's numbers.

Below is a verbatim transcript of the exclusive interview with Sanjay Chawla on CNBC-TV18. Also watch the accompanying video.

Q: Were you disappointed with the numbers from the mobile segment, the way volumes and margins came off in the current quarter?

A: The mobile segment results are almost mirroring what Idea has reported. So in that sense we were not surprised given that Idea's numbers were also weak and the stock has already reacted, there was little room for disappointment. But having said that, on an absolute basis, the numbers are quite weak.

Q: While most seem to see a positive only in EBITDA margin performance on the key internals like minutes of usages (MoUs), average revenue per user (ARPUs), etc., are you expecting to see a sharp decline from hereon?

A: The ARPU drop was quite significant--9% quarter-on-quarter (QoQ) in Q2 which was similar to what Idea has reported. However, what lies ahead is more important than what has gone by and with the kind of tariff cuts that have been announced, we won't be surprised if revenues remain flat or even decline QoQ again in Q3. But the complexion could be slightly different in Q3. Most of the Q2 ARPU drop of 9% has been led by the MoU drop whereas the revenue per minute decline is only around 3.5%.

However, in Q3, we expect the revenue per minute impact to be more dominant compared to the MoU. MoU may still drop but because Q3 is seasonally strong and with more festivals also, we don't see MoU to be a more dominant factor.

Q: A lot has already happened in your sector, Bharti is at Rs 306, what kind of price do you see this stock supporting?

A: We are closer to the end now in terms of price damage but it is the time correction that is likely to be extended and that may well last for another three-six months because we believe that market wants to see two things, one is what is the impact of recent tariff cuts on the margins and earnings and that we will come to know only in the December quarter results that is in January. Secondly, market wants to see the evidence of pricing tariffs bottoming out, with Telenor launch around the corner, Docomo is still entering new circles and its number portability also about to come in. Moreover, there is also the issue of 3G overhang. We don't see that time correction is going to end until Q1 results are out. Therefore, until April next year we don't see stocks doing much, but having said that, we see very limited downside in terms of absolute price correction for Bharti stocks from current levels.

Q: What are these base valuation levels you are working with for stocks like Bharti?