Buy Bharti Airtel
Published on Monday, November 23rd, 2009 at 12:04 PMAuthor: insightt95in (169 Articles)
Bharti Airtel
BUY
Price: Rs289 Target Price (Sept 2010): Rs360
Roaming tariffs lowered ahead of MNP
* What’s new: Bharti Airtel (BRTI) has introduced a new tariff plan ‘Turbo’
wherein airtime charge for roaming calls have been slashed by 20-60%.
To enroll into this tariff plan, a prepaid sub is required to pay a fee of Rs98
(Rs99 for subs on per-sec billing) with a 1-yr validity, while a postpaid sub
needs to take a tariff plan entailing a monthly rental of Rs249 (Rs299 for
subs on per-sec billing). Pulse rate for calls while roaming remains 1-min.
* Analysis: [1] BRTI’s Turbo offering is an extension of its Freedom (1-
1.2p/sec) and Advantage (50p-60p/min) tariff plans. While airtime charge
on roaming calls drops from 20-60%, the enrolment fee is Rs98/99 (for a
prepaid sub) vs. Rs50/69 for the Advantage/Freedom plan. [2] Advantage
/Freedom subs need to pay the full enrollment fee (Rs98/99) to switch to
the Turbo plan. [3] Impact on ARPUs is highly sensitive to two variables –
proportion of I/O roaming calls and traffic elasticity. Assuming 10% of a
subscriber’s call traffic emanates from ‘national roaming’, BRTI’s overall
wireless ARPU could be dented by 4-5% assuming minimal traffic elasticity
(Exhibit 1). [4] Ignoring the proportion of I/O roaming calls for a sub, ballpark
calculations indicate that assuming zero elasticity, national roaming
ARPU for a subscriber could drop by 40% (Exhibit 2), implying overall
ARPU decline of 4% (we estimate ~10% of BRTI’s wireless revenues come
from national roaming). [5] 15% roaming traffic elasticity would reduce
the potential dent on wireless ARPUs to ~3%; if a Turbo plan subscriber
maintains his/her monthly outlay, BRTI’s ARPU would marginally rise.
* Implications: We maintain our earning estimates and BUY rating for BRTI
(TP of Rs360); advise investors to accumulate the stock with a 12-mth
horizon. Our wireless revenue forecast for BRTI captures a 9.4%/7.5% qoq
drop in BRTI’s wireless ARPUs in 3QFY10E/4QFY10E. We expect near term
price performance to be muted as competition peaks and impact of per-sec
billing on wireless revenues/margins manifest in 2HFY10 results.
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