Telecoms to record modest growth in Q1 as disruptive phase behind; Reliance Jio, Airtel well positioned
₹180, driving 2.3% QoQ growth in revenue and 2.5% QoQ growth in EBITDA. For Bharti, we expect MBB subs addition at ~6 million, resulting in a 1.8% QoQ rise in ARPU to ₹196, driving 2.4% QoQ growth in India wireless revenue and 2.3% QoQ growth in EBITDA. We expect VIL’s subs losses to continue; however, its ARPU is likely to rise 1.7% QoQ to ₹137.
We expect net tenancy additions for Indus Towers to remain healthy; hence, EBITDA is likely to rise 3% QoQ in 1QFY24." The majority of them have maintained their positive stance on the sector. Further, Bharti Airtel remains the top pick of brokerages, while Reliance Jio is not rated as it is not listed. Datta said, "Due to falling competitive intensity, given weak financial position of peers, we maintain our positive stance on the sector.
We also factor in delayed tariff hikes and build in ARPU of Rs205/235. Reiterate ‘BUY’ on Bharti (preferred pick) at SOTP-based TP of Rs923 as we incorporate minor changes in our assumptions." Also, JM Financial's note said, "Bharti remains our top pick (revised TP of ₹975) as we expect a structural uptrend in industry ARPU (9-10% CAGR over FY24-28) driven by future investment needs – the industry requires an ARPU of ₹267-296 in the next 3-4 years for a pre-tax RoCE of 12-15% to justify capex. We maintain HOLD on Indus Towers (revised TP of ₹160) due to duopoly risks and a SELL on VIL (unchanged TP of ₹6) due to concerns around survivability." Going forward, Vora sees Bharti and Jio as well positioned in the medium term with growth levers such as subscriber upgrades, market share gains, and tariff hikes.
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