Você está na página 1de 26

Detailed Report

SECTOR: TELECOM

Bharti Airtel

Out of turbulence
Shobhit Khare (Shobhit.Khare@MotilalOswal.com); Tel: +91 22 3982 5428 Nirav Poddar (Nirav.Poddar@MotilalOswal.com); Tel: +91 22 3982 5444

Bharti Airtel

Contents
Page No. US$10b free cash by FY14 ............................................................................... 4-6 Domestic business bouncing back ................................................................. 7-14 Turnaround in Africa business would be key ............................................... 15-18 Regulatory uncertainty, MNP, high gearing/forex exposure pose challenges ............................................................................................. 19-20 Raising price target to Rs430; maintain Buy .............................................. 21-23 Financials and valuation ............................................................................... 24-25

20 September 2010

SECTOR: TELECOM

Bharti Airtel
BSE SENSEX S&P CNX BLOOMBERG REUTERS

19,595

5,885

BHARTI IN

BRTI.BO

Rs358

Buy

Y/E MARCH

2009

2010

2011E

2012E

Out of turbulence
US$10b free cash by FY14: Bharti has been impacted by competitive pressures in the domestic market and uncertainty on Africa acquisition and 3G spectrum payouts. However, with peak coverage capex and 3G payments through, Bharti's India business is poised to generate substantial free cash. While the acquired Africa business would remain in an investment mode, we expect it to be self-sustaining. Bharti is set to enter a period of sustained high FCF - we expect >US$10b cumulative free cash generation by FY14 and estimate FCF of Rs28/ share in FY12 and Rs37/share in FY13 from India and South Asia. Domestic business bouncing back: While Bharti has been impacted by high competition, it has been able to defend domestic revenue market share as well as win back subscribers. While risk of another price war remains, we expect pricing pressure to be relatively benign. Bharti would be soon launching 3G services; incremental 3G revenue is likely to contribute ~5% to mobile segment by FY13. We estimate mobile revenue CAGR of 14% over FY10-12 v/s 7% growth in FY10. Turnaround in Africa business would be key: Bharti would soon launch Airtel brand, finalize outsourcing arrangements (IT outsourcing deal with IBM announced recently) and complete integration process for Africa business. While there is low risk of negative surprises, the extent of improvement in cost structure and market elasticity will determine the achievement of US$5b revenue/US$2b EBITDA target set out for FY13 (we model US$4.4b revenue/US$1.6b EBITDA). Regulatory uncertainty, MNP, high gearing/forex exposure pose challenges: The final policy on government levies and 2G spectrum allocation is awaited and remains an overhang. While competitive intensity has declined, there could be aggressive marketing by new GSM entrants post MNP implementation (in 3QFY11). Bharti's relatively high gearing at net debt/equity of 1.4x and net debt/annualised EBITDA of 3.4x makes it vulnerable to potential interest rate increases and forex fluctuations. Assuming ~US$10b forex exposure, Bharti gets impacted by Rs2.6/share for every Re1 depreciation in INR v/s USD. Raising price target to Rs430; maintain Buy: We upgrade our SOTPbased target price to Rs430 - Rs488/share for India & SA business (8.7x FY12E EBITDA; 15% discount to average 5-year EV/EBITDA of 10.2x) plus Rs84/share for Africa business (7x proportionate FY12E EBITDA) less Rs141/share FY12E net debt of Rs533b. Our valuation implies a negative value of Rs55/share for the Africa business. Bharti trades at an EV of ~9.4x FY11E and ~7.3x FY12E proportionate EBITDA. Maintain Buy.

Net Sales (Rs b) EBITDA (Rs b) NP (Rs b) EPS (Rs) EPS Growth (%) BV/Share P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x) RoE (%) RoCE (%)
KEY FINANCIALS

369.6 151.7 84.7 22.3 26.4 83.0 16.0 4.3 9.4 3.9 31.4 26.6

418.5 167.6 89.8 23.7 5.9 117.9 15.1 3.0 8.2 3.3 23.6 18.9

600.9 214.7 69.4 18.3 -22.7 137.1 19.6 2.6 9.1 3.2 14.4 10.0

716.3 269.3 86.3 22.7 24.3 157.2 15.7 2.3 7.0 2.6 15.5 8.9

Shares Outstanding (m) Market Cap. (Rs b) Market Cap. (US$b) Past 3 years Sales Growth (%) Past 3 years NP Growth (%) Dividend Payout (%) Dividend Yield (%)

3,793.9 1,357.8 29.0 31.2 28.2 4.2 0.3

STOCK DATA

52-W High/Low Range (Rs) Major Shareholders (as of June 2010) Promoter Domestic Inst Foreign Others Average Daily Turnover Volume ('000 shares) Value (Rs million) 1/6/12 Month Rel. Performance (%) 1/6/12 Month Abs. Performance (%)
STOCK PERFORMANCE (1 YEAR)

467/230 (%) 45.4 8.8 39.5 6.2

9,942.6 3,212.8 5/8/-35 13/20/-17

Bharti Airtel 520 440 360 280 200 Sep-09 Dec-09 Mar-10

Sensex - Rebased

Jun-10

Sep-10

20 September 2010

Bharti Airtel

US$10b free cash by FY14


Bharti has been impacted by competitive pressures in the domestic market and uncertainty on Africa acquisition and 3G spectrum payouts. However, with peak coverage capex and 3G payments through, Bharti's India business is poised to generate substantial free cash. While the acquired Africa business would remain in an investment mode, we expect it to be self-sustaining. Bharti is set to enter a period of sustained high FCF - we expect >US$10b cumulative free cash generation by FY14 and estimate FCF of Rs28/share in FY12 and Rs37/share in FY13 from India and South Asia. FCF generation to be strong We believe that Bharti is entering a phase of strong FCF generation in its domestic business, as peak coverage capex is behind, enhanced tower sharing has supported capex savings, and acquisition of 3G spectrum in 13 circles will enhance capacity in the urban centers. We believe FCF would be a key metric for Bharti, going forward. We expect Bharti's India and South Asia business (excluding the 3G spectrum payments and Africa business acquisition) to generate FCF of Rs22/share in FY11 and Rs28/share in FY12.
BHARTI: FCF (EX-AFRICA BUSINESS AND 3G SPECTRUM OUTLAY)

OCF (Rsb) 178 187 84

Capex ex-3G payment (Rsb) 204 107

FCF (Rsb) 218 140 161

Significant FCF generation as growth rebounds and peak capex behind


-94

-80

-64

-58

FY11E

FY12E

FY13E

FY14E

BHARTI: FCF/SHARE (EX-AFRICA BUSINESS AND 3G SPECTRUM OUTLAY) - RS

42 37

Bharti's domestic operations to generate FCF of ~Rs28/ share in FY12E

28 22

FY11E

FY12E

FY13E

FY14E

Source: Company/MOSL

20 September 2010

Bharti Airtel

FY11: US$14b investment in high growth potential areas FY11 is a year of significant investments for Bharti, which is pursuing two key growth drivers: (1) geographical expansion to Africa by acquiring Zain Africa at an EV of US$10.7b, and (2) securing 3G/BWA spectrum in 16/22 circles for a consideration of ~US$3.3b. Till FY10, Bharti had been primarily focusing on growing in the domestic market and had been operating near FCF breakeven levels for several years. We expect Bharti's consolidated capex/sales to decline from 20-22% in FY10/FY11 to ~16% in FY12 and 1012% in FY13/14. Bharti's capital employed has increased by more than 100% due to Zain Africa acquisition and 3G spectrum payments. With investments already made in two high growth areas, Bharti is poised for a growth sequel, led by data in the domestic market and relative under-penetration and usage elasticity in Africa.
BHARTI: CAPITAL EMPLOYED JUMPS >100% ON ZAIN AFRICA ACQUISITION/3G SPECTRUM PAYOUT (RS B)

Capital Employed

YoY (%)

106

Investing for growth significant increase in capital employed

67

34 338 FY08 452

33 602

1,239

1,353 9

FY09

FY10

FY11E

FY12E

BHARTI: CAPEX TO DECLINE GOING FORWARD (RS B)

Capex - India & SA

Capex - Africa

Capex/Sales (%)

Capex intensity headed sharply lower due to minimal coverage capex, benefits from tower sharing, and 3G spectrum

48

51 38 37 35 20 22 16 31 12 64 FY13E 35 10 58 FY14E
314 281

89 FY07

138 FY08

140 FY09

83 FY10

94 FY11E

80 FY12E

BHARTI: TOTAL SUBSCRIBER BASE OF ~250M BY FY12 (M)

Bharti (ex-Africa)

Bharti Africa

Bharti Africa constitutes ~20% of mobile subscriber base

246 203 128

68

89

109

43 193 205

128

160

178

FY10

FY11E

FY12E

FY13E

FY14E
Source: Company/MOSL

20 September 2010

Bharti Airtel

BHARTI: EXPECT REVENUE CAGR OF 16% OVER FY11E-13; AFRICA TO CONSTITUTE ~24% (RS B)

Bharti (ex-Africa)
716 601

Bharti Africa
803

893

233 204

175

Revenue growth to be driven by Africa, 3G, and rural markets

129
418

418

472

541

598

660

FY10

FY11E

FY12E

FY13E

FY14E

BHARTI: EXPECT EBITDA CAGR OF 20% OVER FY11E-13; AFRICA TO CONSTITUTE ~20% (RS B)

Bharti (ex-Africa)
269

Bharti Africa
311

348

93 76

Expect EBITDA CAGR of 17% over FY11-14

215 168

56

35 235 254

168

180

213

FY10

FY11E

FY12E

FY13E

FY14E

BHARTI: AFRICA MARGINS TO REACH ~40% BY FY14 (%)

Bharti (ex-Africa)

Bharti Africa

Consolidated

40

38

39 38

Africa margins to improve; domestic margins to be maintained

39 37 39

40 39

36 32 28

FY10

FY11E

FY12E

FY13E

FY14E

BHARTI: ZAIN AFRICA ACQUISITION TO BE EPS DILUTIVE IN FY11/FY12 (RS)

Bharti (ex-Africa)

Consolidated 35.5

We expect Africa acquisition to be dilutive in FY11 and FY12, marginally accretive in FY13

29.9 26.0 23.7 21.9 22.7 18.3 FY10 FY11E FY12E FY13E 29.5

32.4

FY14E
Source: Company/MOSL

20 September 2010

Bharti Airtel

Domestic business bouncing back


While Bharti has been impacted by high competition in the domestic business, it has been able to defend revenue market share as well as win back subscribers and traffic. While risk of another price war remains, we expect pricing pressure to be relatively benign. Bharti would be soon launching 3G services; incremental 3G revenue is likely to contribute ~5% of mobile revenue by FY13. We estimate mobile revenue CAGR of 14% over FY1012 v/s 7% growth in FY10. Back to growth After a lean patch in CY09, Indian wireless revenue growth has bounced back during the last two quarters. In CY09, revenue growth was impacted by a spate of new launches in the GSM market starting with RCom (January 2009) and accentuated by "per second" plans launched by Tata DOCOMO and "Simply Reliance" plans by RCom in 2Q/3Q FY10. Over the last two quarters, traffic growth for incumbents has improved to double digits (QoQ), led by usage elasticity as well as re-capturing traffic share/subscribers from new entrants. We note that the growth over the past two quarters also has a one-off component, as it was likely propelled by higher discounting in the market. RCom, which had been relatively aggressive in driving down the pricing, cut the discounted minutes on its network by almost 50% during 1QFY11. The revenue per minute for the four major private operators - Bharti, Idea, RCom, and Vodafone - has now converged at Rs0.44-0.45.
AGR GROWTH HAS PICKED UP

QoQ AGR grow th (%) 185 8 0 0 184 184

Adjusted Gross Revenue (Rsb) 200 9 6 2 0 0 -5 4 205 205 204 195 206 215

Sharp rebound in AGR growth after four lean quarters

154

160 4

171 7

1QFY08

2QFY08

3QFY08

4QFY08

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

INCUMBENTS REPORTED ROBUST TRAFFIC GROWTH (%)

19 18

Bharti

Idea

RCOM

Vodafone-India

15

Double digit QoQ traffic growth for GSM incumbents in last two quarters

12 101010 10

11 8 7 7 9 6

10 8 6 4

11 10 10 6 2 3 1 7 5

14 13 13 9 5

13 10 10

1 3QFY10 4QFY10 1QFY11

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

Source: TRAI/Company/MOSL

1QFY11

20 September 2010

Bharti Airtel

RPM HAS LARGELY CONVERGED; TRAJECTORY FLATTENING (RS)

0.66 Bharti 0.60 Idea RCOM Vodafone-India

Current RPM at Rs0.44-0.45; MNP is a threat to pricing

0.53

0.47

0.40 2QFY09 3QFY09 4QFY09 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11

Source: Company/MOSL

Bharti is going strong Bharti reached its peak subscriber and AGR market share (~25% and 34%, respectively) in 3QFY09. In the six subsequent quarters, while Bharti's subscriber share has declined ~350bp to ~22% largely due to multi-SIM usage/subscriber duplication, its AGR market share has remained almost steady at 33%+. This is commendable, given the hyper competition and tariff wars, in our view. We believe that the worst is behind in terms of competitive intensity. Sustaining market share should not be difficult for Bharti.
BHARTI: SUBSCRIBER AND AGR MARKET SHARE

Subscriber market share (%) 32.7 34.0

AGR market share (%) 33.4 33.8 33.4 33.2 32.9 33.3

Bharti has maintained revenue market share despite hyper competition

29.8 28.2 23.8

29.8

29.9

31.2
Steady 33%+ market share

23.6

24.1

24.2

24.6

25.0

25.1

24.3

24.3

23.7

22.9 22.1 21.7

1QFY08

2QFY08

3QFY08

4QFY08

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

Source: TRAI/MOSL

On-net calls constitute ~55% of local traffic - advantage incumbents TRAI data indicates that intra-network (on-net) calls constitute ~55% of the local traffic in India. High on-net share is due to attractive tariff plans and regional dominance of operators. Currently, termination charges are fixed at Rs0.2/min, which is significant given the RPM of Rs0.44-0.45/min. We believe that high on-net traffic gives a key incumbency advantage to Bharti.

1QFY11

20 September 2010

Bharti Airtel

INTRA-NETWORK (ON-NET) TRAFFIC CONSTITUTES ~55% OF LOCAL CALLS

Incumbents like Bharti have a significant advantage given high on-net calling

53% 51%

53%

53%

53%

54%

55%

56%

57%

57%

58%

58%

58% 55% 55%

2QFY07

3QFY07

4QFY07

1QFY08

2QFY08

3QFY08

4QFY08

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

Source: TRAI/MOSL

Rural penetration remains low; Bharti leads in coverage While the urban penetration in India has crossed 100%, rural penetration still remains low at <25%. Bharti has a strong market share of rural subscribers and would be a key beneficiary of potential increase in rural wireless penetration given its advantage of superior distribution and coverage. With urban areas already being saturated (penetration in excess of 100%), the wireless industry expects further subscriber net addition from rural areas. Bharti would be a key beneficiary as it has been maintaining a strong rural market share of ~25% (more than its overall subscriber market share of 21.5%). Bharti has also been witnessing an upward trend in rural subscriber mix. Bharti covers ~84% of India's population with a distribution network spanning ~1.5m outlets.
RURAL PENETRATION REMAINS LOW

Urban w ireless penetration (%)

Rural w ireless penetration (%) 112

Significant headroom for rural penetration to move up

64 9

66 11

74

81

87

95

103

11

14

15

17

20

23

1QFY09

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

RURAL INDIA CONSTITUTES ~33% OF INDIA'S OVERALL WIRELESS SUBSCRIBER BASE

Rural subscribers (m)

Urban subscribers (m)


472 525

584

392 287 315 347

427

216 71 1QFY09

224 91 2QFY09

254

280

301

330

361

393

93 3QFY09

112 4QFY09

126 1QFY10

142 2QFY10

165 3QFY10

191 4QFY10

Source: TRAI/MOSL

4QFY10

20 September 2010

Bharti Airtel

BHARTI: RURAL SUBSCRIBERS CONSTITUTE ~38% OF OVERALL MIX

Rural subscribers

Rural subscribers (% of total) 43

48

38

Bharti leads in rural coverage, with ~50m rural subscribers

34 33.0 34.8 36.4

37.7

1QFY10

2QFY10

3QFY10

4QFY10
Source: TRAI/MOSL

3G to be a growth driver in the medium term Bharti has won 3G spectrum in 13/22 circles across India and expects to launch commercially by the end of 2010. We expect 3G to be a significant growth driver over the medium-term given low VAS revenue share and broadband penetration in India. Non-voice revenue for Indian wireless operators constitutes only 10-13% of the mix v/s 25-30% in developed markets with 3G. GSM operators like Bharti, Vodafone and Idea have been showing strong growth in non-voice revenue over the past several quarters. We expect growth to accelerate post the launch of 3G services.
NON-VOICE REVENUE AT 10-13%

NTT-DOCOMO (Japan) Verizon (US) China Mobile 30 29 29 29 28 17 17 15 13 12 10

45

Indian non-voice revenues are low due to lack of 3G services, spectrum constraints, and lower maturity of subscribers

AT&T (US) Vodafone-Europe China Unicom Vodafone-Asia Pac and Middle East Vodafone-Africa and Central Europe MTN-South Africa Idea Bharti Vodafone Essar
NON-VOICE REVENUE AS % OF WIRELESS REVENUE (%)

13 Idea 11 Bharti Vodafone Essar

Non-voice revenue mix showing an uptrend

7 1QFY09 2QFY09 3QFY09 4QFY09 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11

Source: Company/MOSL

20 September 2010

10

Bharti Airtel

Bharti's 3G footprint covers 65-70% of its revenue/subscriber base Bharti has won 3G spectrum in 13/22 circles and BWA spectrum in 4/22 circles for a total outlay of ~Rs156b. Bharti's 3G footprint covers ~70% of its revenue base and ~65% of its subscriber base. Among the metro and A circles, Bharti did not secure 3G spectrum in Kolkata, Maharashtra and Gujarat circles. However, it has won BWA (broadband wireless access) spectrum in Kolkata and Maharashtra.
BHARTI: DETAILS OF 3G AND BWA SPECTRUM WON 3G WINNING PRICE (RSB) BWA AGGREGATE 3G+BWA AGR 1QFY11 (RS B) AGR SUBSSUBS MKT SHARE (%) AGR SUBS-

WINNING PRICE

MARKET CRIBERS SHARE (%) JUL-10 (M)

COVERAGE CRIBERS IN 3G COVE-

(RSB) PRICE (RSB)

CIRCLES (%) RAGE

Delhi Mumbai Kolkata Maharashtra Gujarat A.P. Karnataka T.N. (incl. Chennai) Kerala Punjab Haryana U.P. (W) U.P. (E) Rajasthan M.P. W.B. & A&N H.P. Bihar Orissa Assam N.E. J&K Aggregate (Rs b) No. of circles

33.2 32.5 5.2 9.2 13.7 15.8 14.6

33.2 32.5 5.2 9.2 13.7 31.2 14.6 3.3 5.1 3.2 1.2 0.4 2.0 0.4 0.4 0.3 156.1 16.0

15.4

3.3 5.1 3.2 1.2 0.4 2.0 0.4 0.4 0.3 123.0 13.0

33.1 4.0

6.3 2.8 1.5 3.2 2.3 7.9 8.5 6.8 1.5 3.2 0.7 1.7 4.3 4.8 3.0 2.0 0.7 5.5 1.9 1.3 0.8 0.9 71.5

39.6 21.2 27.6 20.0 19.3 42.0 52.8 34.0 15.9 38.5 17.2 17.5 30.0 49.7 30.6 29.4 45.3 49.8 41.6 36.5 35.0 36.9 33.3

6.8 3.2 2.9 7.1 5.8 14.1 13.4 11.5 3.2 5.1 1.6 4.8 10.3 10.9 7.4 6.6 1.4 12.3 4.8 2.6 1.6 1.9 139.2

21.3 10.7 16.2 14.9 16.2 28.0 32.5 19.4 12.5 22.5 9.9 13.9 20.6 30.4 21.4 22.8 25.0 29.6 27.7 27.2 27.6 39.8 21.5

8.8 3.9

4.9 2.3

11.0 11.8 9.5

10.1 9.6 8.3

2.3 6.8 2.8 1.0 7.7 1.7 1.1 1.3 69.7

3.4 7.8 4.7 1.0 8.8 1.9 1.1 1.3 65.4

Source: DoT/MOSL

While 3G will take time to ramp-up, we expect incremental 3G revenue to contribute ~5% of Bharti's mobile revenue in India by FY13. Increase in 3G subscriber base and higher data usage should result in higher ARPU although voice ARPU is likely to continue declining. Including 3G, we expect ARPU to start increasing as subscriber addition slows and data revenues pick-up.
3G REVENUE TO MOBILE REVENUE TREND

10.1%

Incremental 3G revenue to constitute ~5% of mobile revenue by FY13

4.8% 2.5%

FY12E

FY13E

FY14E
Source: Company/MOSL

20 September 2010

11

Bharti Airtel

3G LAUNCH LIKELY TO BRING IN MEANINGFUL ARPU UPLIFT

2G ARPU (Rs/ month)

ARPU incl. 3G (Rs/ month) 223 215

ARPU uplift to be led by lower incremental subscriber additions and contribution from data

215

212

209 201 199 195

FY11E

FY12E

FY13E

FY14E
Source: Company/MOSL

Balance sheet constraints might prevent irrational pricing Significant tariff pressures, new rollouts, 3G spectrum payments and acquisitions (Bharti) have resulted in increase in leverage for most operators. The top-4 operators (Bharti, Idea, RCom, and Vodafone) have an estimated gearing >3x on a net debt/EBITDA basis. We believe that high gearing would prevent operators from pricing aggressively.

FY11E NET DEBT/EBITDA (X)

4.5

4.3 3.2 2.8

-ve/marginal EBITDA RCom Vodafone Idea Bharti Tata Teleservices

-ve EBITDA Uninor

FY11E NET DEBT/EQUITY (X)

2.2 1.5 1.2 1.0 0.8 N.A. Tata Teleservices Uninor Bharti Idea RCom Vodafone

Source: Company/MOSL

20 September 2010

12

Bharti Airtel

Most operators have stretched balance sheets

New greenfield entrants facing significant challenges In January 2008, the government issued new licences to greenfield operators like Uninor, Sistema, Etisalat, Videocon, S Tel and Loop Telecom. The new entrants have together garnered just ~2.5% subscriber market share and even lower revenue market share on a pan-India basis. We continue to believe that greenfield operators are unviable and industry consolidation is the only option in the medium term.
MONTHLY NET SUBSCRIBER ADDITIONS BY NEW ENTRANTS (M)

Uninor 1.5

Sistema Shyam

Etisalat

Videocon

S Tel

1.0

0.85 0.84 0.48 0.10 0.01

0.5

0.0

-0.5 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10

Source: TRAI/MOSL

Case study: Uninor - cash loss of Rs55b in CY10 Uninor's reported financials and guidance confirm our thesis. The company has been the most visible and aggressive player amongst the new entrants. However, Uninor has been facing significant customer churn even in the initial phase (within six months) and is currently reporting an ARPU of Rs85/month on active subscribers and Rs50/month on reported subscriber base - a 60-80% discount to Bharti's current ARPU of Rs215/month.
UNINOR: ESTIMATED ARPU (RS/MONTH)

Mobile ARPU - reported subs 92

Mobile ARPU - active subs 85

Greenfield operators have been unable to make a significant dent in the market despite aggressive discounts

53

50

1QCY10

2QCY10
Source: Company/MOSL

According to the guidance from parent Telenor, Uninor is likely to incur an EBITDA loss of Rs35b-39b and capex of Rs16b-20b in CY10. This implies aggregate cash loss of ~Rs55b in CY10. While CY10 is the first year of commercial rollout for Uninor, we believe a turnaround would be challenging, given low tariffs and significant discounts being offered by Uninor.

20 September 2010

13

Bharti Airtel

UNINOR: SIGNIFICANT CASH BURN

EBITDA loss (Rsb) 28.5

Capex (Rsb)

Simple FCF (Rsb) 18

7.0

7.6

5.6

8.5

2.7

-13.2 -35.5 CY09 1QCY10

-11.2 -37 -55 2QCY10 CY10G


Source: Company/MOSL

Case study: Sistema Shyam - EBITDA loss of US$80-85m per quarter Sistema Shyam provides CDMA based mobile services under the MTS brand in 12 circles and is planning to launch in three more circles by the year end. Among the greenfield operators, Sistema was the first to do a commercial rollout due to readily available spectrum in the CDMA band. Sistema currently has a subscriber base of ~5.6m implying a subscriber market share of less than 1% on a pan-India basis. The company is incurring an EBITDA loss of US$80-85m per quarter while the current revenue run-rate is ~US$23m. Current mobile ARPU of ~Rs80 is at a 60% discount to market leader Bharti Airtel.
SISTEMA SHYAM: QUARTELY FINANCIALS (US$M)

Revenue

OIBDA* 599 14

Total debt 633 17 531 23 619

7 437

10

-28 176

-30 333

-41 -71 -77 1QCY10

-80 4QCY09

-85 2QCY10

4QCY08

1QCY09

2QCY09

3QCY09

* Operating Income Before Depreciation and Amortization


SISTEMA SHYAM: IMPLIED ARPU (RS)

Source: Company/MOSL

Implied ARPU (Rs/month) 262 29 186 131 102 30 22

QoQ decline (%)

15 12 87 77 79 -3

4QCY08

1QCY09

2QCY09

3QCY09

4QCY09

1QCY10

2QCY10

Source: Company/MOSL

20 September 2010

14

Bharti Airtel

Turnaround in Africa business would be key


Bharti would soon launch Airtel brand, finalize outsourcing arrangements (IT outsourcing deal with IBM announced recently) and complete the integration process for Africa business. While there is low risk of negative surprises, the extent of improvement in cost structure and market elasticity will determine the achievement of US$5b revenue/US$2b EBITDA target set out for FY13 (we model US$4.4b revenue/US$1.6b EBITDA). Africa business: key highlights Zain's Africa business was on a declining trend during CY09, as indicated by (1) stagnant subscriber base, (2) decline in market share (from ~37% to ~30%), and (3) decline in EBITDA margin from 34% in CY08 to 29% in CY09 (22% in 4QCY09). We believe Bharti would be investing in network and branding so as to put the business back on the growth path. Outsourcing initiatives and scale efficiencies are likely to start contributing to margins effective FY12 and could result in a big delta in FY13 (~500bp margin improvement in the base case). Zain Africa acquisition would be 12-16% EPS dilutive for FY11 and FY12, but could be EPS neutral by FY13, as the Africa business reaches breakeven. Bharti would be exposed to currency fluctuations. While its operating cash flows would be in African currencies, its debt/capex liabilities would be largely denominated in US$. Historically, most of the currencies in Bharti's 15 countries of operations in Africa have exhibited a depreciating trend vis--vis the US$. Bharti is targeting significant performance improvement for Africa business During CY09, Zain Africa reported revenue of US$3.7b (down 12%), EBITDA of US$1.1b (down 23%), and capex of US$1.1b (down 44%). As of December 2009, Zain had a subscriber base of ~42m (up 3%); CY09 ARPU is estimated at US$7.3/month (down 30%). Although Bharti has not given a formal guidance, its CEO-International, Mr Manoj Kohli has announced a target of 100m subscribers, US$5b revenue and US$2b EBITDA from Africa in FY13. Our FY13 estimates factor in a subscriber base of 89m, revenue of US$4.4b, and EBITDA of US$1.6b from Africa. Achievement of management targets in FY13 would imply an EPS accretion of ~16% in FY13 v/s 1% in our base case projections. Key assumptions for Africa business Increase in subscriber base from 36m in June 2010 to 43m in March 2011, 68m in March 2012 and 89m in March 2013. This implies a monthly net addition run rate of 0.68m during FY11, 2.1m in FY12, and 1.7m in FY13.

Zain Africa acquisition would be 12-16% EPS dilutive for FY11 and FY12, but could be EPS neutral by FY13, as the Africa business reaches breakeven

Achievement of management targets in FY13 would imply an EPS accretion of ~16% in FY13 v/s 1% in our base case projections

20 September 2010

15

Bharti Airtel

We assume ARPU of US$6.6/month in FY11 (v/s US$7.4/month reported by Bharti in 1QFY11), US$5.7/month in FY12 (down 15%), and US$4.7/month in FY13 (down 18%). We assume EBITDA margin of 28% in FY11 (v/s 29% in CY09). We factor in margin recovery of 400bp in FY12 to 28% and 500bp in FY13 to 37%, as benefits of efficiency improvements kick-in. The sharp margin improvement assumption for FY13 reflects (1) management guidance, (2) efficiency improvement from outsourcing/network sharing etc, and (3) operating leverage. We assume a capex of US$850m in FY11 (v/s US$1.1b in CY09 and Bharti's guidance of ~US$800m), US$750m in FY12 and US$650m in FY13.

BHARTI (ZAIN) AFRICA: REVENUE, EBITDA AND CAPEX TRENDS

Revenue (US$b) 4.2 3.7

EBITDA (US$b) 3.8

Capex (US$b) 4.4

5.0

We factor in a 1-year delay in achievement of US$5b revenue/ US$2b EBITDA by Bharti Africa

3.4 2.0 1.6 1.1 1.1 0.9 0.8 1.2 0.8 0.7 0.7

2.0 1.4

CY08

CY09

FY11E

FY12E

FY13E

FY14E

BHARTI (ZAIN) AFRICA: EBITDA MARGIN LIKELY TO IMPROVE (%)

33.6 29.4

32.0 27.7

37.0

40.1

Margin improvement to be led by operating leverage and cost cutting initiatives

CY08

CY09

FY11E

FY12E

FY13E

FY14E

CY09 MOBILE PENETRATION ACROSS BHARTI'S AFRICA FOOTPRINT (%)

123

75

Bharti estimates real penetration of ~20% due to dual SIM usage


Gabon Congo Brazzaville

61 48 45 39 35 35 33 33 23 23 19 17

16 Niger

14 DRC

Zambia

Ghana

Burkina Faso

Nigeria

Tanzania

Uganda

Madagascar

Kenya

Sierra Leone

Chad

Aggregate

Source: Company/MOSL

Malawi

20 September 2010

16

Bharti Airtel

CY09 MARKET SHARE FOR ZAIN AFRICA (%)

72

69

67

65

Low market share in Nigeria, Kenya, and Ghana

62 51 51 46 45 40 39 35 24 14 9 Ghana
4.2 Uganda

Congo B

Zambia

Gabon

Chad

Burkina Faso

DRC

Tanzania

Madagascar

Uganda

Nigeria
5.0 Kenya

Niger

Sierra Leone

CY09 ARPU FOR ZAIN AFRICA (US$)

24.5

Most countries have an ARPU less than US$10/ month


Gabon

Malawi

12.7

9.9

9.9

8.7

8.5

7.8

7.3

7.3

7.2

6.8

6.1

5.2 Tanzania

DRC

Zambia

Burkina Faso

Overall (est)

Nigeria

Ghana

Chad

Niger

AFRICA MOU PER SUBSCRIBER MUCH LOWER THAN INDIA (MINUTES/MONTH)

480

Bharti expects to exploit usage elasticity in Africa


103

Bharti (Africa)
COST SAVING LEVERS FOR AFRICA BUSINESS

Bharti (India)

OPEX Network, IT, BPO outsourcing leveraging Bharti's scale

CAPEX 2G+3G equipment procurement

Passive Infrastructure sharing

Passive Infrastructure sharing

Source: Company/MOSL

Madagascar

Congo Brazzaville

Malawi

Sierra Leone

Kenya
4.6

20 September 2010

17

Bharti Airtel

CY09 ZAIN AFRICA SUBSCRIBER MIX (%)

CY09 ZAIN AFRICA REVENUE MIX (%)

Others 33%

Nigeria 35%

Others 27%

Nigeria 36%

Kenya 5% Zambia 7% DRC 8% Tanzania 12%

Congo Braz zaville 6% Gabon 7% DRC 9%

Tanzania 7%

Zambia 8%

Source: Company/MOSL
CY09 ZAIN AFRICA EBITDA MIX (%) CY09 ZAIN AFRICA CAPEX MIX (%)

Congo Brazzaville 5% DRC 6% Malaw i 6% Niger 7%

Chad 5%

Others 4% Nigeria 37%

Others 31%

Nigeria 41%

Zambia 6% Kenya 6%

Tanzania 9%

Gabon 9%

Zambia 12%

Malaw i 6%

Ghana 10%
Source: Company/MOSL

20 September 2010

18

Bharti Airtel

Regulatory uncertainty, MNP, high gearing/forex exposure pose challenges


The final policy on government levies and 2G spectrum allocation is awaited and remains an overhang. While competitive intensity has declined, there could be aggressive marketing and promotion by new GSM entrants post MNP implementation (by the end of 2010). Bharti's relatively high gearing at net debt/equity of 1.4x and net debt/annualized EBITDA of 3.4x makes it vulnerable to potential interest rate increases and forex fluctuations. Assuming ~US$10b forex exposure, Bharti gets impacted by Rs2.6/share for every Re1 depreciation in the INR/USD rate. Potential implementation of TRAI recommendations: low probability, high impact event In May 2010, the telecom regulator (TRAI) issued recommendations on licensing conditions and 2G spectrum allocations. Most of the recommendations were negative for incumbents like Bharti. Key negatives if the recommendations are accepted would be: Rs45b (Rs12/share) one-time liability for 'excess spectrum' Hike in annual spectrum charges (~100bp impact) Potential payout of ~Rs150b (Rs40/share) on licence renewal Surrender of 900MHz spectrum for re-farming The positive outcome of the recommendations would be the proposed phased decline in licence fee. The government is currently reviewing the recommendations; we see low probability of these recommendations being implemented in their current form.
SUMMARY OF TRAI RECOMMENDATIONS RECOMMENDATIONS LIKELY IMPACT

Potential implementation of TRAI recommendations could imply Rs45b one-time liability for 'excess spectrum'

TRAI recommendations negative for GSM incumbents

One-time payout for spectrum allocation beyond 6.2MHz for GSM operators Hike in annual spectrum charges (linked to revenues) Significant payouts for spectrum (linked to 3G auction winning price) and return of spectrum allocated in 800MHz (CDMA) and 900 MHz (GSM) on license renewal Phased decline in license fee from 6-10% currently (circle-wise) to a uniform 6% by FY14 (charged as a percentage of AGR) Tightening of rollout obligations Linking of spectrum allocation beyond start-up spectrum to rollout obligations (v/s subscriber base currently) De-linking of future licenses with spectrum

One-time liability of ~Rs45b for Bharti EBITDA margin impact of ~110bp Payout of ~Rs150b for Bharti on license renewal for a period of ten years

Margin accretion of 100-200bp for Bharti by FY14 Increase in capex outlay of new entrants More investment in rural coverage required in order to get incremental spectrum allocation Further interest by new pan-India licensee unlikely Source: TRAI/MOSL

20 September 2010

19

Bharti Airtel

Implementation of mobile number portability remains an overhang Mobile number portability (MNP) has been delayed a number of times since December 2009. It is now likely to be implemented in 3QFY11. MNP implementation could drive increase in subscriber churn and higher subscriber retention costs, as operators will target high ARPU subscribers of competitors, especially in the post-paid segment. Post-paid subscribers (comprising 4% of total subscribers) constitute 17% of total revenue in the GSM segment. Post-paid ARPU is 4.5x pre-paid ARPU. Key retention measures apart from potentially better tariff structure would be (1) 3G presence and (2) improved service quality.
POST-PAID V/S PRE-PAID ARPU POST-PAID/PRE-PAID REVENUE MIX

Post-paid ARPU (Rs/month) Pre- paid ARPU (Rs/ month) 600 584

Post paid revenue (% of total) Pre paid revenue (%of total)

Post-paid ARPU at ~4.5x pre-paid


204 1QFY09

559

543

539

530

530

503

17

189 192 181 162 2QFY09 3QFY09 4QFY09 1QFY10

143 2QFY10

124 113 3QFY10 4QFY10

83

POST-PAID SUBSCRIBER BASE STAGNANT AT ~20M

Post paid subscribers (m)

Pre paid subscribers (m) 401 349 279 309

459

Post-paid base constitutes ~4% of GSM subscribers

196

215

240

17 1QFY09

19 2QFY09

18 3QFY09

18 4QFY09

19 1QFY10

19

20 3QFY10

20 4QFY10

2QFY10

Source: TRAI/MOSL

20 September 2010

20

Bharti Airtel

Raising price target to Rs430; maintain Buy


We are upgrading our SOTP-based target price to Rs430 - Rs488/share for India & SA business (8.7x FY12E EBITDA; 15% discount to average 5-year EV/EBITDA of 10.2x) plus Rs84/share for Africa business (7x proportionate FY12E EBITDA) less Rs141/share FY12E net debt of Rs533b. We no longer assign separate valuation for tower companies, as Bharti's consolidated financials under IFRS now capture EBITDA contribution from Indus Towers (42% stake). Our valuation implies a negative value of Rs55/share for the Africa business. Bharti trades at an EV of ~9.4x FY11E and ~7.3x FY12E proportionate EBITDA. Maintain Buy.
SOTP VALUATION: FAIR VALUE OF RS430 PER SHARE, 20% UPSIDE FY12 EBITDA (RSB) OWNER+ SHIP (%) PROPORTIONATE EBITDA (RS B) EV/EBITDA (X) FAIR VALUE VALUE/SH

India business (incl. towers) Africa business FY12 net debt Total Value Shares o/s (b) CMP (Rs) Upside (%)

213 56

100 80

213 45

8.7 7.0

1,848 314 533 1,629

488 84 141 430 358 20 Source: MOSL

3.79

COMPARATIVE VALUATIONS CMP (RS) RATING MCAP (US$B) EV (US$B) FY10 P/E (X) FY11E FY12E FY10 EV/EBITDA (X) FY11E FY12E FY10 EV/SALES (X) FY11E FY12E

Bharti * Idea RCom

358 78 166

Buy Buy Buy


ROIC (%)

29.0 5.5 7.3

41.6 8.0 13.9

15.1 25.3 7.0

19.6 54.3 31.2

15.7 42.6 21.7

8.2 9.0 6.9

9.4 10.1 9.6

7.3 7.5 7.8

3.3 2.5 2.4

3.4 2.5 3.1

2.8 2.0 2.6

ROE (%) FY12E FY10 FY11E FY12E

EBITDA MARGIN (%) FY10 FY11E FY12E

NET DEBT/EBITDA (X) FY10 FY11E FY12E

NET DEBT/EQUITY (X) FY10 FY11E FY12E

FY10

FY11E

Bharti Idea RCom

22.0 7.0 6.3

11.9 5.2 3.9

10.5 5.8 4.0

23.6 7.6 12.6

14.4 4.1 2.8

15.5 5.0 3.9

40.1 27.4 35.5

35.7 24.4 32.3

37.6 27.3 33.4

0.1 1.9 2.5

2.8 3.2 4.5


EPS (RS)

2.0 2.2 3.5

0.1 0.6 0.5

1.1 1.0 0.8

0.9 0.8 0.7

CAPEX/SALES (%) FY10 FY11E FY12E

SALES GR. (%) FY10 FY11E FY12E

EBITDA GR. (%) FY10 FY11E FY12E FY10

EPS GR. (%) FY12E FY10 FY11E FY12E

FY11E

Bharti Idea RCom * Proportionate

19.9 45.2 26.5 64.5 18.7 63.6 EV/EBITDA and

16.1 13.2 15.3 22.7 12.7 -3.0 EV/sales

43.6 23.4 -5.9

19.2 15.7 14.2

10.5 20.2 -15.1

28.1 9.9 -14.3

25.4 29.6 18.2

23.7 3.1 23.7

18.3 1.4 5.3

22.7 1.8 7.7

5.9 -22.7 24.3 2.0 -53.4 27.5 -20.7 -77.4 43.6 Source: Company/MOSL

20 September 2010

21

Bharti Airtel

BHARTI: ONE-YEAR FORWARD EV/EBITDA BAND

950 16x 725 14x 12x Average 10.2x 8x 6x

Bharti trading at ~25% discount to its 5-year average EV/EBITDA

500 275 50 Mar-05 Nov-05 Nov-08 Jun-06 Jan-07 Feb-10 Jun-09 Aug-07

BHARTI: ONE-YEAR FORWARD P/E BAND

740

565 26x 22x Average 17.9x 14x 10x 40 Mar-05 Nov-05 Nov-08 Feb-10 Jun-06 Jan-07 Jun-09 Aug-07 Sep-10
EV/EBITDA (X) CY10 CY11

Bharti trading broadly in line with its 5-year average P/E of ~18x

390

215

GLOBAL COMPARATIVE VALUATIONS (%) MKT CAP (US$B) REVENUE GR. (%) CY10 CY11 EBITDA GR. (%) CY10 CY11

China Mobile AT&T Vodafone Group Telefonica America Movil Verizon NTT DOCOMO France Telecom China Unicom MTN Group Bharti Airtel Zain Mobile telesystems Partner Comm Average

205 166 133 107 101 90 75 56 36 31 29 20 17 3

11 1 3 0 18 -1 0 -15 9 7 44 -24 39 5 5

6 1 8 3 16 1 10 0 9 11 19 -3 14 -4 7

Apr-08

8 4 -3 -4 16 0 0 -11 1 6 28 -20 34 9 4

3 4 5 3 16 3 9 0 11 11 25 -1 16 -4 7

4.6 4.4 5.4 5.2 8.6 8.2 6.0 5.8 7.6 6.5 5.4 5.2 4.4 4.0 5.0 5.1 5.0 4.5 4.7 4.2 9.4 7.3 7.0 7.1 4.4 3.8 4.8 5.0 5.8 5.5 Source: Bloomberg/MOSL

Sep-10

Apr-08

20 September 2010

22

Bharti Airtel

KEY ASSUMPTIONS FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E FY14E

ARPU and RPM declines to get arrested in FY12

Domestic mobile business to constitute 55-60% of Bharti's consolidated revenue and EBITDA

Mobile - India Subs (m) 20 37 YoY (%) 78 90 Average subs (m) 14 28 YoY (%) 65 91 Netadds per month (m) 0.7 1.5 YoY (%) 92 104 Total mobile traffic (b min) 70 153 YoY (%) 100 118 ARPU (Rs/month) 476 427 YoY (%) -8 -10 MOU 405 461 YoY (%) 21 14 Mobile RPM (Rs) 1.17 0.93 YoY (%) -24 -21 Mobile EBITDA margin (%) 36.1 37.7 Mobile Capex (Rs b) 42 72 Mobile Capex/sales (%) 50 51 Mobile - Africa Subs (m) YoY (%) Netadds per month (m) ARPU (US$/month) YoY (%) Capex (US$ b) Capex/Sales (%) Passive Infrastructure Indus Towers Towers (000s) Cellsites (000s) Tenancy ratio (x) Sharing revenue per operator per month (Rs EBITDA margin (%) Bharti Infratel Towers (000s) Cellsites (000s) Tenancy ratio (x) Sharing revenue per operator per month (Rs EBITDA margin (%) Revenue mix (%) Mobile (India & SA) 64 68 Telemedia 12 11 Enterprise 25 21 Passive infrastructure 0 0 Africa 0 0 EBITDA mix (%) Mobile (India & SA) 66 69 Telemedia 8 7 Enterprise 26 23 Passive infrastructure 0 0 Africa 0 0 Capex mix (%) Mobile (India & SA) 66 80 Telemedia 21 10 Enterprise 14 15 Passive infrastructure 0 0 Africa 0 0

62 67 50 79 2.1 41 285 86 366 -14 479 4 0.77 -17 39.2 108 50

94 52 78 57 2.7 29 475 67 325 -11 508 6 0.64 -17 31.0 65 21

128 36 111 42 2.8 6 610 28 249 -23 459 -10 0.54 -15 38.7 34 10

160 26 144 30 2.7 -3 843 38 215 -14 488 6 0.44 -19 35.8 53 14 43 1 0.7 7.3 0.85 25

178 11 169 18 1.5 -45 991 18 212 -2 488 0 0.43 -2 36.3 41 9 68 60 2.1 5.7 -22 0.75 20

193 8 186 10 1.2 -20 1108 12 215 1 498 2 0.43 -1 35.5 35 7 89 30 1.7 4.7 -18 0.66 15

205 6 199 7 1.0 -17 1187 7 223 4 498 0 0.45 4 33.4 30 6 109 23 1.7 4.2 -10 0.75 15

95 141 1.48 000s)

103 176 1.71

111 211 1.90 28.1 32.2 33 60 1.80 35.7 44.4 55 5 6 13 19 61 7 5 15 16 40 4 3 16 28

120 252 2.10 26.7 36.8 36 73 2.00 33.9 45.4 54 5 6 12 22 57 6 4 15 21

126 290 2.30 25.6 37.8 38 84 2.20 32.6 46.0 53 4 6 12 23 54 6 4 15 24

132 330 2.50 24.9 39.4 40 97 2.40 31.6 47.4 54 4 5 12 23 51 5 4 15 27

28 37 1.34 000s) 35.4 71 9 18 2 0 71 10 17 2 0 78 7 15 0 0 65 7 18 9 0 58 9 23 9 0 46 10 15 26 0

31 50 1.62 37.2 46.2 68 7 9 15 0 75 9 7 14 0 41 12 14 14 0

35 37 33 3 3 2 3 4 4 21 16 16 30 33 38 Source: Company/MOSL

20 September 2010

23

Bharti Airtel

Financials and valuation (Consolidated)


INCOME STATEMENT Y/E MARCH 2009 2010 2011E 2012E 2013E (RS MILLION) 2014E

Revenues

369,615

418,472

600,932

716,295

802,929

892,561

Change (%)
Total Expenses EBITDA

36.8
217,937 151,678

13.2
250,839 167,633

43.6
386,260 214,672

19.2
447,042 269,252

12.1
491,954 310,975

11.2
544,779 347,782

% of Gross Sales
Depn. & Amortization EBIT Net finance cost Other Income PBT Tax

41.0
47,581 104,097 11,613 589 93,073 6,615

40.1
62,832 104,800 178 468 105,090 13,453

35.7
101,826 112,846 27,999 1,049 85,897 16,843

37.6
125,764 143,489 35,665 1,218 109,042 22,713

38.7
135,112 175,863 30,148 1,348 147,063 31,658

39.0
140,165 207,616 22,932 1,486 186,171 47,585

Rate (%)
Minority Interest Adjusted PAT

7.1
1,759 84,699

12.8
1,870 89,767

19.6
-357 69,411

20.8
74 86,255

21.5
1,980 113,424

25.6
3,933 134,653

BALANCE SHEET Y/E MARCH 2009 2010 2011E 2012E 2013E

(RS MILLION) 2014E

Share Capital Additional Paid up Capital Reserves Net Worth Loans Minority Interest Other Liabilities Deferred Tax Liability Capital Employed

18,982 74,106 210,857 303,945 118,801 10,704 10,564 7,556 451,570

18,988 56,499 346,453 421,940 101,898 25,285 45,018 7,980 602,121

18,988 56,499 412,145 487,632 643,939 32,337 58,220 16,905 1,239,033

18,988 56,499 488,539 564,026 673,721 32,410 64,723 17,984 1,352,865

18,988 56,499 590,777 666,264 653,359 34,390 70,980 19,188 1,444,181

18,988 56,499 713,125 788,612 663,982 38,324 77,495 20,409 1,588,822

Gross Block Less : Depreciation Net Block Other Non-Current Assets Curr. Assets Inventories Debtors Cash & Bank Balance Short-term investments Other Current Assets Curr. Liab. & Prov. Creditors Other Current Liabilities Net Curr. Assets Appl. of Funds

603,221 153,722 449,499 10,370 144,079 963 28,528 11,145 38,010 65,434 152,377 89,317 63,060 -8,299 451,570

761,040 218,521 542,519 30,736 137,685 484 35,711 25,323 52,362 23,805 108,819 107,702 1,117 28,866 602,121

1,587,440 316,441 1,270,998 57,361 139,324 2,023 48,783 31,362 19,820 37,336 228,651 225,688 2,963 -89,327 1,239,033

1,702,989 440,432 1,262,557 57,732 240,769 2,273 55,597 81,362 59,218 42,319 208,193 204,988 3,205 32,576 1,352,865

1,797,266 573,434 1,223,832 58,112 383,079 2,614 62,149 131,362 139,218 47,736 220,841 217,385 3,456 162,238 1,444,181

1,889,928 712,719 1,177,210 58,502 585,759 2,949 68,972 221,362 239,218 53,257 232,649 228,935 3,714 353,110 1,588,822

E: MOSL Estimates

20 September 2010

24

Bharti Airtel

Financials and valuation (Consolidated)


RATIOS Y/E MARCH 2009 2010 2011E 2012E 2013E 2014E

Basic (Rs) EPS Cash EPS Book Value DPS Payout %(Incl.Div.Taxes) Valuation (x) P/E Cash P/E EV/EBITDA EV/Sales Price/Book Value Dividend Yield (%) Profitability Ratios (%) RoE RoCE Turnover Ratios Debtors (Days) Asset Turnover (x) Leverage Ratio Net Debt/Equity (x) 0.2 0.1 1.1 0.9 0.5 0.2 28 1.14 31 1.01 30 0.79 28 0.66 28 0.75 28 0.88 31.4 26.6 23.6 18.9 14.4 10.0 15.5 8.9 17.5 10.2 17.6 10.6 16.0 10.3 9.4 3.9 4.3 0.0 15.1 8.9 8.2 3.3 3.0 0.3 19.6 7.9 9.1 3.2 2.6 0.5 15.7 6.4 7.0 2.6 2.3 0.6 12.0 5.5 5.6 2.2 1.9 0.8 10.1 4.9 4.5 1.7 1.6 1.0 22.3 34.9 83.0 0.0 0.0 23.7 40.2 117.9 1.0 4.2 18.3 45.1 137.1 1.8 10.0 22.7 55.9 157.2 2.3 10.0 29.9 65.5 184.7 3.0 10.0 35.5 72.4 218.0 3.5 10.0

CASH FLOW STATEMENT Y/E MARCH 2009 2010 2011E 2012E 2013E

(RS MILLION) 2014E

Op.Profit/(Loss) bef Tax Other Income Interest Paid Direct Taxes Paid (Inc)/Dec in Wkg. Cap. CF from Op.Activity

151,678 589 -11,613 -4,359 -22,672 113,623

167,633 468 -178 -29,761 26,518 164,680

214,672 1,049 -27,999 -34,892 112,162 264,992

269,252 1,218 -35,665 -22,713 -26,529 185,563

310,975 1,348 -30,148 -31,658 7,575 258,091

347,782 1,486 -22,932 -47,585 7,636 286,387

(inc)/Dec in FA + CWIP (Pur)/Sale of Investments CF from Inv.Activity

-143,426 10,142 -133,285

-155,852 -14,282 -170,134

-830,305 32,597 -797,708

-117,322 -39,398 -156,720

-96,387 -80,000 -176,387

-93,543 -100,000 -193,543

Issue of Shares Inc/(Dec) in Debt Other Financing Activities CF from Fin.Activity

-3,640 21,738 5,933 24,031

27,617 -16,903 8,917 19,632

-3,754 542,041 470 538,757

0 29,782 -8,624 21,158

0 -20,362 -11,340 -31,702

0 10,622 -13,465 -2,843

Inc/(Dec) in Cash Add: Opening Balance Closing Balance

4,368 6,777 11,145

14,178 11,145 25,323

6,039 25,323 31,362

50,000 31,362 81,362

50,000 81,362 131,362

90,000 131,362 221,362

E: MOSL Estimates

20 September 2010

25

For more copies or other information, contact Institutional: Navin Agarwal. Retail: Manish Shah Phone: (91-22) 39825500 Fax: (91-22) 22885038. E-mail: reports@motilaloswal.com

Motilal Oswal Securities Ltd, 3rd Floor, Hoechst House, Nariman Point, Mumbai 400 021
This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. MOSt or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations. MOSt and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Group/Directors ownership of the stock 3. Broking relationship with company covered 4. Investment Banking relationship with company covered Bharti Airtel No Yes No No

This information is subject to change without any prior notice. MOSt reserves the right to make modifications and alternations to this statement as may be required from time to time. Nevertheless, MOSt is committed to providing independent and transparent recommendations to its clients, and would be happy to provide information in response to specific client queries.

Você também pode gostar