Chennai: Higher subscriber growth with lower churn, better margins and average revenue per user (ARPU) owing to subscribers going for higher packages have made sectoral analysts favouring Bharti Airtel Ltd’s stock.
Research analysts of various firms have recommended a buy rating for the stock with a target price ranging between Rs 775 to Rs 1,040.
According to Morgan Stanley, the telecom major had a net 4G subscriber addition of 6.2 million quarter-on-quarter (QoQ) — the strongest in the last five quarters. The company reported total subscribers of 332 million.
Morgan Stanley said the India mobile services ARPU stood at Rs 193 and the margins also saw an improvement across segments barring the digital television services which were in negative.
Churn rate improved to three per cent in the third quarter of FY23 as against 3.3 per cent the previous quarter.
On its part, the HSBC in its report said it expects robust mobile revenue growth, and ARPU to rise, driven by: (1) sub migration from 2G to 4G, (2) sub migration to higher bucket data plans due to a surge in data usage, (3) gains in high-value post-paid subs, and (4) segmented tariff hikes.
“We think Bharti’s competitive positioning has strengthened with spectrum investment of $5.4 billion in 2022. This positions the company to significantly expand its network capacity and provide nationwide 5G as handset adoption scales,” HSBC report notes.
According to IIFL Securities Limited, Bharti Airtel’s recent extension of the entry-level pack price increase to 17 circles after encouraging results in two circles suggests that the key impediment to broad-based tariff hikes is competitive intensity rather than weak consumption environment.
With the government agreeing to pick up about 33.4 per cent stake in Vodafone Idea, and the boost to that company’s finances from a potential tariff hike, the rationale for a price increase becomes stronger, said IIFL Securities in its report.
“With elections approaching in 1H2024, we see a decent chance of 4G prepaid tariff hike in the next few months,” IIFL Securities added.
According to IIFL Securities, Bharti Airtel management has identified 40,000 high-potential rural clusters where it targets profitable market share gains. 5G mostly serves 4G data offloads; 5G handsets should rise to 20 per cent of installed base by March 2024.
On the negative side, Morgan Stanley said Bharti Airtel’s consolidated capital expenditure of Rs 93.1 billion was higher than expectations led by India mobile business.
“The India mobile services business capex was at Rs 63.8 billion (+65.9 per cent qoq) and came in much higher than our expectations,” Morgan Stanley said.
–IANS