Motilal Oswal has come out with its report on telecom space. The research firm recommends buy rating on Bharti Airtel.
“In 1QFY13, we expect the average wireless traffic for the top-4 operators to grow ~4% QoQ. Wireless RPM decline is likely to continue due to relatively higher competitive activity amidst regulatory uncertainty. Operators have not been able to fully pass on the negative impact of hike in service tax and change in regulations f or tariff vouchers. We expect Idea to continue reporting the highest traffic growth at 6% QoQ, followed by Bharti (3.5% QoQ).”
“We expect consolidated EBITDA margin for Bharti to remain largely flat QoQ at 33.2%; margin for India and South Asia business is also likely to be stable. Idea is likely to report consolidated EBITDA margin of ~28%; flat QoQ on an adjusted basis. For RCom, we model consolidated EBITDA margin of 32% in 1QFY13. The regulatory environment continues to be uncertain. While EGoM decided to offer higher quantum of spectrum (10MHz+) in the upcoming auction mandated by the Supreme Court, the crucial decision on reserve price has been delayed. Potential industry consolidation/exit of new entrants could lead to improvement in the operating environment for the Indian wireless sector, given the discounted pricing being offered by challengers to buy market share.”
“Over FY12-14, we expect 14/25% EBITDA CAGR for Bharti/Idea, led by 10/17% traffic CAGR in the India wireless business. Reiterate Buy on Bharti (trades at an EV of 7x FY13E and 5.7x FY14E EBITDA) and Idea (trades at an EV of 6x FY13E and 4.6x FY14E EBITDA). Maintain Neutral on RCom,” says Motilal Oswal research report.
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