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Analyst Research Report Snapshot


Q1FY14 Results Preview | Telecom Sector




IndiaNivesh Securities Pvt Ltd


10 Jul 2013





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Telecom Sector | Stable Quarter – Management commentary remains a key... | Uptick in volumes and subscribers will lead to 2.6%-4.6% Q/Q revenue growth: The curtailment of freebies and robust data uptick will lead to higher wireless traffic growth. On sequential basis, Bharti-Asia/Idea wireless mobile traffics are likely to grow by 4.8%/5.9%, respectively. Idea is likely to maintain its leadership position in the gross addition with 2.50 mn subscriber (v/s 2.45 mn for Bharti). We expect flat ARPU/ARPM growth for Bharti-Asia/Idea on sequential basis in Q1FY14. Flat EBITDA margin on Q/Q basis: Sequentially, we expect EBITDA margin to largely remain flat for Bharti/Idea. On year-over-year basis, EBITDA margin is likely to expand by 145/152 bps for Bharti/Idea, respectively. Our estimates imply 2.4%/4.5% Q/Q and 13.6%/21.8% Y/Y growth in EBITDA for Bharti/Idea, implying strong operating performance. Regulatory environment remains tough: The regulatory environment still remains tough, given the lack of clarity on reserve price for spectrum and issues related to re-farming and license renewal. We believe there is a risk of prolonged litigation between the industry and the government on several issues. Key things to watch out: (1) tariff outlook and margin improvement, (2) data growth and capex outlook, and (3) Update on Bharti’s Africa operation. Additionally, management commentary on regulatory issues (re-farming, 900Mhz license renewal, and spectrum pricing). Bharti remains a top pick: After ~22% selloff in the stock price all bad news, primarily related to the regulatory side is very well factored. Further, revival in the operating performance after curtailment of freebies and declining competitive intensity could lead to the sizeable up move from this level. We maintain our BUY rating with the target price of Rs.368/share. We have a SELL rating on Idea.

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