MOSL: TELECOM | IUC impact-Cutting Bharti/Idea’s EBITDA estimates-RJio’s EBITDA raised by 43% for FY19E

​Telecom | IUC impact: Cutting Bharti/Idea’s EBITDA estimates; RJio’s EBITDA raised by 43% for FY19E

• Post the Telecom Regulatory Authority of India’s (TRAI) cut in interconnect usage charge (IUC) to INR0.06/min from INR0.14/min, we have revised our model estimates and target price for Bharti, Idea and RJio.
• Bharti’s FY18/19E India wireless EBITDA is cut by 2.9%/4.4% and consolidated EBITDA by 1.7%/2.6%. Subsequently, we cut the target price to INR470 (prior: INR490).
• Idea’s EBITDA is revised down by 2.5%/4% for FY18/19E. We have thus cut the target price to INR105.
• RJio’s EBITDA for FY19/20E is raised by 43%/31%. We thus increase our DCF-based target price to INR190/share (ex-bonus; prior: INR 130).

Bharti’s consolidated EBITDA expected to drop 2.6% in FY19

• Following the TRAI’s reduction in IUC to INR0.06/min from INR0.14/min, we cut Bharti’s India wireless EBITDA by 2.9%/4.4% for FY18/19E. The revenue impact could be to the tune of 6-7%. This is higher in comparison to the meager 1-1.5% revenue/EBITDA impact in 4QFY15 when the IUC was reduced by 33% to INR0.14, due to higher incoming traffic from RJio over the last few quarters. Consolidated EBITDA should see a relatively low impact of 1.7%/2.6% for FY18/19E.

Idea’s consolidated EBITDA to drop 4% for FY19

• Idea should see a lesser impact on ARPUs (v/s Bharti) due to the cut in IUC. This is because of its lower market share than Bharti. We have cut Idea’s EBITDA by 2.5%/4% for FY18/19E.