Bharti Airtel Likely to Continue Gaining Market Share, Stock may Climb 16%, says Nomura

Bharti Airtel’s stock price may rise in the near future as the company’s market share grows. Without considerable fund-raising, Vodafone Idea’s network investments and 5G rollout will likely remain restricted, according to Nomura analysts. As a result, Bharti Airtel and Reliance Jio are projected to maintain their market share gains. The migration of non-data subscribers to data subscribers is also expected to enhance Bharti Airtel’s ARPU. Despite the current market drop, Bharti Airtel’s stock has increased 2.01% in the last month and over 26% in the last year, with the company poised to rise over 16% in the next 12 months.

According to Nomura, Bharti Airtel added half a million wireless customers month over month (+1.3/ +2.4 mn for 3Q/2Q) to raise market share by 41 basis points quarter over quarter to 30.8 percent. However, due to rate hikes, Bharti Airtel’s net overall subscribers decreased in the December quarter. However, Nomura focused on the subscriber mix in a previous analysis, claiming that it had improved.

“We note that, despite a 0.6 million decline in reported wireless subs, Bharti Airtel added 0.3 million net post-paid subs (+10% yoy) and 3 million net 4G data subs. Around 61% of subs are now using 4G data, up from 54% on-year. During the same quarter, Bharti Airtel’s Average Revenue Per User (ARPU) increased to Rs 163, as against Rs 146 a year ago. Analysts at Nomura highlighted that Bharti Airtel ARPU increased 5.9% on a quarter basis, while that of Reliance Jio and Vodafone Idea improved by 3.3% each. “Among the three private telcos, Bharti’s revenue and subscriber market share inched up by 65bp and 45bp q-q, respectively, on our estimates,” the brokerage said.

While Nomura expects Bharti Airtel’s market share gains to continue and the stock to rise, some downside risks include: higher-than-expected intensity of competition, leading to delays in tariff hikes and/or escalation in 5G spectrum/network expenses; adverse regulatory outcome on One Time Spectrum Charges (OTSC) and any other disagreement, resulting in higher regulatory payouts to the government of India; higher-than-expected Vodafone Idea fund raise; higher-than-expected subs; higher-than-expected

Bharti Airtel stock has a “buy” rating from Nomura analysts, with a target price of Rs 855.