HDFC Securities is bullish on Bharti Airtel and has maintained buy rating on the stock with target price of Rs 1151.
HDFC Securities research report on Bharti Airtel
50 million customer mark (Oct 2007)
Bharti Airtel has crossed the 50 million customer mark (including mobile, broadband & telephone subscribers) and has achieved the distinction of becoming the first private telecom company in world to reach this landmark in a single country, within 143 months from the start of operations. Bharti Airtel crossed the 10 million customer mark in November 2004, 25 million in July 2006 and added another 25 million customers in just 14 months. This is among the fastest rates of customer addition by any telecom company in the world.
Facility based operator (FBO) license in Singapore (Sep 2007)
Bharti Airtel (Singapore) Pte Ltd has been awarded the Facility Based Operator (FBO) license in Singapore. Under this, the company will be able to operate international carrier facilities from Singapore and can provide highly reliable services to its customers on its owned infrastructure. Bharti will be establishing a PoP in Singapore for cable interconnection at the landing station and another PoP for providing connectivity to service providers and local carriers. With the PoPs, the company will be able to interconnect its cables with other service providers in Singapore to offer enhanced connectivity options. Multiple cable systems like Network i2i, SeMeWe4, Asia America Gateway, APCN2, EAC and C2C will aggregate at Singapore, making Singapore the interconnection hub for Airtel traffic between India and over 90 countries. This license will support Airtel’s robust portfolio of international voice and data services, including Private Lines, Internet, MPLS, Long Distance, Toll Free Services, and Mobile Roaming.
Sri Lankan services to start by end FY08 (Sep 2007)
Bharti Airtel Lanka Private Limited, a subsidiary of Bharti Airtel Limited, will launch wireless services in Sri Lanka by FY08 end. The company plans to invest approximately USD 200million in the Sri Lankan market. It will launch mobile services under the Airtel brand. With mobile penetration of around 30% and growing at a rate of approximately 2 million mobile users per annum, the market provides good opportunities for growth. Bharti Airtel Lanka also announced that it had signed a managed networks deal for its Sri Lanka operations with Huawei Technologies Co. Ltd. (“Huawei”), a leader in the next generation telecommunications network solutions for operators around the world. The three-year deal is valued at approximately USD 150million and includes telecom applications and software.
Outlook & Valuation
At the CMP of Rs. 942, the stock trades at 15.9 and 11.4 times FY08E and FY09E respectively on an EV/EBITDA basis. The significant free cash generated from FY09E will provide further growth opportunities in newer areas of communications and will drive revenues up at 40% CAGR over FY07-09E with EBITDA growth rates at 43% for FY07-09E. We maintain BUY rating with a target price of Rs. 1151 at 13.9 times FY09E EV/EBITDA.
HDFC Securities research report on Bharti Airtel
50 million customer mark (Oct 2007)
Bharti Airtel has crossed the 50 million customer mark (including mobile, broadband & telephone subscribers) and has achieved the distinction of becoming the first private telecom company in world to reach this landmark in a single country, within 143 months from the start of operations. Bharti Airtel crossed the 10 million customer mark in November 2004, 25 million in July 2006 and added another 25 million customers in just 14 months. This is among the fastest rates of customer addition by any telecom company in the world.
Facility based operator (FBO) license in Singapore (Sep 2007)
Bharti Airtel (Singapore) Pte Ltd has been awarded the Facility Based Operator (FBO) license in Singapore. Under this, the company will be able to operate international carrier facilities from Singapore and can provide highly reliable services to its customers on its owned infrastructure. Bharti will be establishing a PoP in Singapore for cable interconnection at the landing station and another PoP for providing connectivity to service providers and local carriers. With the PoPs, the company will be able to interconnect its cables with other service providers in Singapore to offer enhanced connectivity options. Multiple cable systems like Network i2i, SeMeWe4, Asia America Gateway, APCN2, EAC and C2C will aggregate at Singapore, making Singapore the interconnection hub for Airtel traffic between India and over 90 countries. This license will support Airtel’s robust portfolio of international voice and data services, including Private Lines, Internet, MPLS, Long Distance, Toll Free Services, and Mobile Roaming.
Sri Lankan services to start by end FY08 (Sep 2007)
Bharti Airtel Lanka Private Limited, a subsidiary of Bharti Airtel Limited, will launch wireless services in Sri Lanka by FY08 end. The company plans to invest approximately USD 200million in the Sri Lankan market. It will launch mobile services under the Airtel brand. With mobile penetration of around 30% and growing at a rate of approximately 2 million mobile users per annum, the market provides good opportunities for growth. Bharti Airtel Lanka also announced that it had signed a managed networks deal for its Sri Lanka operations with Huawei Technologies Co. Ltd. (“Huawei”), a leader in the next generation telecommunications network solutions for operators around the world. The three-year deal is valued at approximately USD 150million and includes telecom applications and software.
Outlook & Valuation
At the CMP of Rs. 942, the stock trades at 15.9 and 11.4 times FY08E and FY09E respectively on an EV/EBITDA basis. The significant free cash generated from FY09E will provide further growth opportunities in newer areas of communications and will drive revenues up at 40% CAGR over FY07-09E with EBITDA growth rates at 43% for FY07-09E. We maintain BUY rating with a target price of Rs. 1151 at 13.9 times FY09E EV/EBITDA.
