Bharti Airtel falls 3% in two days; stock nears 6-month low

Thus far in the calendar year 2023, Bharti Airtel has tumbled 9%, as compared to 6% decline in the S&P BSE Sensex and 13% fall in Reliance Industries' shares

Shares of Bharti Airtel dipped 1 per cent to Rs 738.70 on the BSE in Wednesday's intra-day trade, in an otherwise firm market, extending its two-day decline to 3 per cent. In comparison, the S&P BSE Sensex was up 0.27 per cent at 57,772 at 02:30 pm. The stock had hit a six-month low of Rs 736.20 on March 2, 2023.

Thus far in calendar year 2023, Bharti Airtel has underperformed the market by falling 9 per cent, as against 6 per cent decline in the benchmark index. Reliance Industries (RIL), however, has slipped 13.5 per cent thus far in 2023.

According to analysts at JP Morgan, the launch of cheaper postpaid plans with unlimited 5G by Reliance's Jio has put rival Bharti Airtel on the back foot in the Indian marke,t and may delay recovery in its key profit metric.

Bharti's new family plans can drive ARPU drops of Rs 100-200 per subscriber and any subsequent price matching to that of Jio can drive further ARPU drops of Rs 50-100 per subscriber, a Reuters report said quoting JP Morgan analysts.

Analysts have maintained their "underweight" rating on Bharti Airtel, saying that ARPU expansion for Bharti is at risk, and could even reduce over 2024-25 as 5G price wars take place. CLICK HERE FOR FULL REPORT

JP Morgan also believes a combination of higher 5G capex, lack of tariff hikes and deflation in premium ARPUs will drive down Return on Invested Capitals (ROICs). "We remain circumspect on ARPU support from 4G prepaid hikes and 2G to 4G upgrades given slow entry level smartphone supply. Reiterate UW," the brokerage firm said in February report.

However, analysts at HSBC think Bharti Airtel is well positioned for ROIC improvement, with margin expansion and improving invested capital turnover. "We expect robust mobile revenue growth and ARPU to rise, driven by sub migration from 2G to 4G; sub migration to higher bucket data plans due to a surge in data usage; gains in high-value post-paid subs; and segmented tariff hikes," the brokerage firm said in a stock update.

Analysts at the brokerage house don’t think the 5G network rollout will impede the rise in ROIC as the rollout will vary across cities and will be driven by 5G sub handset adoption. In addition, the company continues to invest in growth areas such as home broadband, enterprise, digital assets and data centres.