Bharti Airtel has been continuously adding overall wireless subscribers for many months, and the telco has also seen decent earnings growth for the last 12 quarters. Bharti Airtel has made entry-level tariffs of Rs 155 in all circles. However, considering the low probability of further price hikes and high capex involved over the next 2-3 years for 5G rollouts, Network Expansion, and rural densification, MOFSL expects a period of soft earnings.
Also Read: Bharti Airtel Leads 4G Subscriber Net Additions in Nov: MOFSL
5G Rollouts and Rural Expansion
According to the report, Bharti Airtel has guided for India Mobile capex of INR 750 Billion for the next three years, and the telco aims to roll out 5G across urban areas by March 2024. However, MOFSL, in its report, expects that the capex will exceed the target as historically happened during the 4G rollout, and the same will be the case with 5G as a new technology upgrade cycle.
As the 5G eco-system develops, it is expected that the requirement of deployment of additional spectrum bands, Standalone 5G and VO5G calling may require heavy investments.
The report noted that Bharti's cumulative Operating Cash Flow/Free Cash Flow of INR 1.4 trillion/Rs 700 billion for the next two years and inflows from approximately Rs 210 billion rights issue could help the company reduce debt. The report expects the Gross and net debt to decline in FY25.
Also Read: Vodafone Idea Continues Its Streak; Lost 1.3 Million Wireless Subscribers in Jan: TRAI
Long-Term Growth Intact
However, according to the report, unlike 3G/4G investment cycles, the current market situation is far superior, and it is expected that Bharti Airtel should benefit from VIL's dwindling market share as the company is unable to raise capital to upgrade its network. In the long term, there should be enough opportunities to monetize the heavy investments as the Indian Telecom Sector of INR 2.2 trillion market size is catered by two large players only with less competition.
Also Read: Airtel 5G Plus Launched in Ladakh
Conclusion
Hence, considering the above, MOFSL says that the stock of Bharti Airtel could remain range bound in the short term and hence derived a SOTP-based target price of Rs 950. Bharti Airtel in its recent announcement has launched 5G Plus services in Ladakh. With this launch, the districts of Leh and Kargil get ultrafast Airtel 5G Plus services with speeds up to 20-30 times faster than the current 4G speeds. Airtel 5G Plus is available in over 500 cities across India.
