We met the management of Bharti Airtel. Key takeaways from our meeting:
- Positive subscriber growth outlook; competitive intensity manageable
The pace of net additions is expected to remain strong, though the management acknowledged that multiple SIMs may be prevalent. Free minute schemes being offered by competition are not sustainable and BHARTI has not attempted to match such offers. Tariffs are already competitive and lowering them is no longer a differentiator to attract customers. However, BHARTI continues to closely monitor new
innovative tariff schemes and may evaluate the same based on customer uptake.
CMP:792 TARGET PRICE:977
- Evaluating synergies on potential Bharti-MTN deal
- Potential Bharti-MTN synergies include lowering procurement costs and replicating low-cost/high-usage model at MTN
- Deal uncertainties and probability of sweetening the offer forMTN shareholders raise short-term concerns
- Retain OW(V). Raise TP to INR977 (from INR876) as we roll over our multiples to FY11e. 3G factor supports our argument
- The objective of this report is to identify potential synergies not yet reflected in our forecasts (we include a sensitivity analysis), particularly on capex per base station, and to explore potential benefits of a shift to the low-cost, high-volume ‘minute factory’ model. We also discuss the legal and regulatory issues around the deal.