Bharti Airtel is one of the world’s leading telecommunication serviceproviders in many countries,including Asia and Africa. The company provides direct-to-home TV services and a fibre internet connection to industries and households.As of April 2022, the company owns 35.3 crore customers in India, with Bharti Airtel share price of 34.8%, making it the second-largest telecom company in the country behind Reliance Industries’ Jio.
However, the company enjoys leading average revenue per user, a key metric to gauge the business of telecom companies.The telecom industry has gone through many challenges in the last few years, including the entry of Reliance Jio,which created a storm leading to consolidation, and high statutory debt that weakened the books of established players and brought the industry to the brink of becoming a duopoly.
Lately, though, thanks to a series of tariff hikes and government relaxation, players in the industry have found a breathing space. ICICIdirect said a favourable industry structure of three players, with two being strong, government relief, tariff hike, and fundraising, put Airtel in the sweet spot to maintain its relative strength among peers with a formidable digital ecosystem offering.
It thus maintains a BUY rating on the counter with the sum of the parts target price of Rs. 860. As of June 2022, Airtel share price has seen some selling recently. After hitting a high of Rs. 781.80 in November 2021, the stock has tumbled to Rs. 650. Many believe this is an opportunity to accumulate the stock at relatively lower valuations. ICICIdirect said key triggers for the stock price to move higher would be:
- Tariff hike flow will boost Airtel’s India ARPU and earnings before interest, taxes, depreciation, and amortizationby 20-30% from pre-hike levels.
- Relative market share gain from Vodafone India (Vi), given its stressed balance sheet
- Growth opportunities from 5G drive long-term potential
The company management has indicated that despite hikes, tariffs remain abysmally low, and another hike is likely in the current year when the recent wave of SIM consolidation eases. The company expects ARPU to reach Rs. 200 in the calendar year 2022 itself from Rs. 178 as of March quarter. ICICIdirect has a slightly different view and expects monthly ARPU to reach Rs.200 in the fiscal year 2024, driven by tariff hike pass through, 4G addition, and higher wallet share of premium subscribers.
There are several opportunities for telecom companies with thedeployment of 5G as the government has started the procedure to sell airwaves for it. Airtel has already been running trials for the deployment, which may give it a first-mover advantage in grabbing the Airtel share.
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https://www.icicidirect.com/research/equity/bharti-airtel-ltd/8041
