Bharti Airtel concludes spectrum trading agreement with Jio; stock up 2.5%

Airtel has received Rs 1,004.8 crore (net of tax) from Jio for the proposed transfer.

Shares of Bharti Airtel hit a new record high of Rs 638.60, up 2.5 per cent on the BSE in the intra-day trade on Friday, after the company announced the closure of its agreement with Reliance Jio Infocomm to transfer the 'Right to Use' of Airtel's 800 MHz spectrum in three circles to Jio. The stock surpassed its previous high of Rs 629.15, touched on Thursday, August 12, 2021 in the intra-day trade.

Bharti Airtel in a statement said the company has received Rs 1,004.8 crore (net of tax) from Jio for the proposed transfer. In addition, Jio will assume future liabilities of Rs 469.3 crore relating to the spectrum, the company said.

In the past one month, the stock of Bharti Airtel has outperformed the market by surging 20 per cent, as compared to 4.8 per cent rise in the S&P BSE Sensex.

Bharti has a clear advantage to further gain high-quality subscribers in both pre-paid and post-paid categories, considering Vodafone Idea’s weak financial position. Despite high India capex in June 2021 quarter (Q1FY22), management reiterated its unchanged annual capex guidance of around Rs 24,100 crore for FY22.

"Although the recent tariff hike for selected customers is a clear positive, the same in the mass pre-paid segment remains key. Our FY22 estimates already bake in around 15 per cent tariff increase apart from the above-stated changes. Launch of JioPhone Next in Sept’21 will be closely watched out for in terms of pricing aggression strategy," analysts at Emkay Global Financial Services said in a result update.

The company management doesn’t expect average revenue per user (ARPU) to be more dilutive from the current levels i.e Rs 146 and will gradually pick up from Q2FY22 as it has got a better customer mix. The management continues with an ARPU trajectory of Rs 200 and ultimately Rs 300 going ahead, aided by strong customer conversion from 2G to 4G and other services.

Airtel gaining market share consistently and manage to deliver industry-leading ARPU without increasing the tariff hikes, a better service mix strong strategy to gain the market share going ahead. We believe Bharti Airtel has a resilient business structure from a long-term perspective and . Ebitda (earnings before interest, taxes, depreciation, and amortization) margins are likely to expand in the near term owing to its efficient execution capabilities, analyst at Axis Securities said in a note.