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MOSL: BHARTI AIRTEL (Buy)-Bharti hikes tariff, other telcos likely to follow suit

BHARTI AIRTEL: Bharti hikes tariff, other telcos likely to follow suit

(BHARTI IN, Mkt Cap USD56.8b, CMP INR742, TP INR920, 24% Upside, Buy)

 

• The effective tariff hike of ~20% in prepaid plans is expected to contribute incremental revenue/EBITDA of INR103b/INR72b, thereby driving 13% consolidated EBITDA growth on a 2QFY22 annualized basis.
• To improve cash flow in the industry, other large players are expected to follow suit in the immediate future.
• Bharti's lower churn and strong network capability leaves room for a potentially healthy EBITDA increase, in line with the tariff hike in Dec'19.
• The significant reduction in the data allowance across price plans leaves limited possibility for downtrading. 

The math of a tariff hike - 13% rise in consolidated EBITDA

On 22nd Nov'21, Bharti announced a 20% price hike, effective 26th Nov'21, across its prepaid plans, which contributes 85% to India Mobile revenue (15% is postpaid). The tariff hike comes nearly eight quarters from its last hike (Dec'19), even as industry participants have been calling for the same since the last 12 months. With a 20% increase in prices and  expected ARPU at INR181, we expect incremental revenue/EBITDA contribution to its India Mobile business to be INR103b/INR72b, i.e. 16%/22% growth, which works out to a 13% growth in consolidated EBITDA on 2QFY22 annualized basis. On an FY24E basis, we revise higher our consolidated EBITDA estimate by 10% to INR821b.