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Reliance Jio Will Continue To Threaten Bharti Airtel’s Profitability, Brokerages Caution
Competition will continue to be a significant threat on ARPU, Jefferies says.
11 May 2017, 03:25 PM IST
The country's largest telecom operator Bharti Airtel Ltd. reported a 71.7 percent drop in its net profit in the January-March quarter amid stiff competition from the latest entrant in the sector – Mukesh Ambani-owned Reliance Jio Infocomm Ltd. It was the company's biggest drop in net profit for over four years.
In its post-earnings conference call on Wednesday, the company had warned that average revenue per user, already at an all-time low in the January-March quarter, could decline further.
Brokerage houses reiterated that ARPU will continue to remain under pressure due to competition from Reliance Jio, hurting Bharti Airtel’s profitability.
Jefferies On Bharti Airtel
- Rating: Hold
- Target: 380
- Despite topline missing estimates, robust margins impressed.
- Reduce earnings per share estimates lower by 2 percent in FY18 and higher by 8 percent in FY19.
- Competition will continue to be a significant threat on both ARPU compression and subscriber churn.
Emkay On Bharti Airtel
- Rating: Reduce
- Target Price: Unchanged at Rs 306
- Reliance Jio will continue to be a threat to market share, expect aggressive competitive intensity.
- Deterioration in the balance sheet remains key a concern.
- Focus on cost optimisation and profitable minutes on the network to sustain benefit Africa business.
- Jio's VoLTE phone could be a game changer for Airtel to gain subscriber market share.
Motilal Oswal On Bharti Airtel
- Rating: Maintain Buy
- Target Price: Revise to 430 per share
- Telecom market to stabilise paving way for Airtel to reduce capital expenditure by 10 percent.
- Tower business housed under Bharti Infratel may see some moderation.
- Maintain 'buy' rating on the stock on the growth potential seen for the company in both India and Africa.
- Target price implies an upside of 17.8 percent from current market price
JM Financial On Bharti Airtel
- Rating: Buy
- Target: Rs 390
- Addition in the data subscriber segment in the fourth quarter is a positve surprise.
- Airtel Payments Bank could have led to decline in EBITDA margins.
- Africa operations turned positive due to company's sustained focus on costs and efficiency.
- Reliance Jio's plan of new 4G 'smart' feature phone with unlimited data is a key risk to the company.
The Bharti Airtel stock fell more than 7 percent as of 3:20 pm on the BSE.
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