Here's Why Airtel Is Getting A Thumbs Up From Analysts

Shares of Airtel were gaining amid a broad-based sell-off in markets as the telecom operator received strong backing from analysts.

What Happened: Analysts at Axis Capital anticipate Bharti Airtel’s average revenue per user (ARPU) to grow by 7%-10% in the next 12-18 months, driven by the company’s strategic focus on subscriber premiumisation as users transition from feature phones to 4G and 5G smartphones.

Axis Capital noted that Airtel’s emphasis on feature-to-smartphone migration and premium users has positively impacted blended ARPU, even without tariff hikes.

The analysts added that there was more scope for growth in both prepaid and postpaid services as subscribers “progressively consume more data and services.”

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The current stability in the Indian telecom market is expected to continue, supporting a tariff hike, the brokerage said. However, Axis Capital suggests that tariff hikes in the next 9-12 months are unlikely. The analysis notes, “With the top two players controlling 78% of the overall market and a severely weakened Vodafone Idea, we expect a stable competitive environment and tariffs to continue to rise in the medium term.”

Incoming 5G Effect: Axis Capital highlighted that operators in markets with established 5G, like the US and China, have seen increased revenue growth due to factors such as higher data allowances, tiered speeds and other value-added services. The brokerage expects a similar surge in data usage in India with the introduction of 5G.

Axis Capital estimates Bharti Airtel’s consolidated revenue to grow at a compound annual growth rate of 11% between FY23 and FY26, supported by all India segments except direct-to-home. Additionally, the brokerage anticipates a 13% average growth in EBITDA, driven by margin expansion in India mobile from rising 5G network utilization.

The recent launch of Bharti Airtel’s Fixed Wireless Access (FWA) service is expected to contribute to the telco’s home service segment’s revenue growth by 70-90% (vs FY23) and will be margin-accretive, according to Axis Capital.

Price Action: Airtel’s share price was up 0.44% at ₹1,090 in late afternoon trading while the broader market was down 0.6%.

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