Why Bharti Airtel is rallying hard

1 month ago 4

Bharti Airtel is backed by a good set of numbers, particularly an increase in ARPU despite no tariff hike but on execution on the 4G side, says Rajiv Sharma, Head of Institutional Equity Research, SBICAP Securities.

Airtel has got the nod for increasing foreign investment upto 100%. What does this mean for Bharti Airtel since the stock price is rallying hard on the back of the news?
Earlier in the NACL website they had highlighted that the foreign holding in Bharti could be only 49% instead of 74% and that had resulted in a decrease in weight in the MSCI India for Bharti from 3.5% to 1.8% and similarly the weight got halved in MSCI EM also. Now with NACL showing it at 100%, the next time when MSCI comes up with notifications, it will update this and Bharti’s weight will increase and that is why we are seeing a good runup in share prices. It is also backed by a good set of numbers, particularly an increase in ARPU despite no tariff hike but on execution on the 4G side.

What is the outlook when it comes to telecom companies’ ARPUs?
I would say that the numbers have beat analyst and street estimates on the ARPU side and 4G subscriber growth this quarter. We are expecting around Rs 170 plus ARPU for this fiscal and about Rs 190 in the next fiscal. This is assuming that some tariff hikes coming in the next fiscal would be a key catalyst for Bharti Airtel and how Vodafone-Idea fares with their funding plans. It has been a couple of months and we have not seen much news on that. So that will be a deciding factor and the consolidation of the market and improvement in ARPUs will depend on that.

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