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Bharti Airtel (BHARTI) - Qtr. Update - Dtd. - February 01, 2013




Axis Capital Limited


02 Feb 2013





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Key takeaways from earnings call  India Wireless: Increase in voice realization from Q4 would primarily be driven by withdrawal of promotional tariffs. While there is little possibility of increase in headline tariffs in the short term, the difference between current realized rate of Rs 42-43 paise and headline tariff of Rs 60-90 paise will narrow in the long run. We maintain our estimate of increase in blended voice RPM at 3.5%/ 3% YoY in FY14/ FY15.  Africa: Focus remains on regaining market share and driving efficiencies through (a) launch of 3G services in 13 countries and uptake of Airtel money, (b) brand spends to drive customer acquisition, and (c) transfer of tower assets in all countries to an independent tower company by end FY14E.  Capex guidance lowered: FY13 capex guidance has been revised to USD 2.5 bn from USD 3.0 - 3.2 bn earlier. FY14 capex guidance introduced at USD 2.2 - 2.3 bn, which would enable the company to generate significant cash flows Estimates and valuation  India Wireless: Our revenue estimates in India wireless business do not undergo significant change. However, we marginally lower our FY14/15 EBITDA estimates by 2%/1% respectively to factor in higher network cost (rise in diesel/ electricity prices).  Africa: We increase FY14/15 revenue estimates by ~5% each to factor in strong subscriber additions and minutes growth. However, increase in our EBITDA estimates is lower at 4%/1% in FY14/15 due to investments in network/ brand spends to gain incremental market share  Consolidated: Our FY14/15 revenue estimates increase by 1% each and EBITDA estimates are lower by 1% each. We reduce our TP to Rs 417 (7.5x FY15E EV/EBITDA) vs. Rs 430 earlier to factor in lower EBITDA and higher net debt. Our TP implies 26% upside from CMP. Maintain BUY. Note our calculations of regulatory impact suggest a maximum outgo of up to Rs 94/sh for Bharti. 50% of the above has been incorporated into our TP (except for excess spectrum charges, where it is 100%). At CMP of Rs 331, the stock trades at 27x FY14E EPS of Rs 12 (Rs 15 earlier) and 18x FY15E EPS of Rs 18 (Rs 21 earlier). Regards, Priya Rohira (Executive Director – IT & Telecom) Institutional Equity Research Axis Capital Ltd. Tel.: + 91 22 4325 1104 Nivedan Reddy (Asst VP – Telecom) Institutional Equity Research Axis Capital Ltd. Tel.: + 91 22 4325 1128

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