Sometimes the markets behave in ways that appear irrational. VIL having sufficient market cap to launch an INR 200bn ($2.4bn) capital increase despite (in our view) being a failing business is one example. But what does it mean for Bharti, Jio and Indus?
Yesterday, Vodafone Idea's board approved INR 200bn (USD 2.4bn) in equity raise to fund its 4G expansion and 5G rollout. After the equity raise, the company then wants to attempt to raise a further c. INR 250bn in debt. In aggregate, therefore the company is hoping to raise INR 450bn (USD 5.4bn). Even if successful (we are sceptical), we do not think this is enough. Shares were down sharply by 14% today. Our thoughts below.
For 15 years, EM Telcos were engaged in a war for market share, with price the primary weapon. But peace is now breaking out globally. Mobile prices are rising across global EM (India, Brazil, Indonesia, Thailand among others). In this note, we analyze which markets have the greatest potential for recovery, based on 3 criteria: affordability, market structure and challenger returns.
In this note we revisit and update our thesis that Enterprise in EM is following an S-Curve. Key new work shows that as a result, absolute incremental Enterprise revenue in China has doubled each year for the past 3 years. This is why overall Telco revenues have sharply accelerated. We show the other countries/ stocks where the early signs are of the same thing happening.
India’s telecom fundamentals remained healthy in Q3, despite the slowdown in service revenue as the effect of last year’s price increase lapsed. EBITDA trend improved again, while capex intensity is expected to stay elevated to support 5G and rural rollout.
Last Friday, the Ministry of Communications and Information approved for Vodafone Idea to convert its dues to the government (interest related to spectrum and adjusted gross revenue (AGR)) into Rs 161.3 bn of shares. Moreover, the Indian press reported that the firm is now tapping on banks for further fund raising. As a result, shares rose 10%+ today. Our take below.
Bharti has performed extremely well over the last 2 years. While we remain bullish, we think that some of the near term upside is priced in, especially on the consumer mobile side. We stay bullish long term but having had a good run into the end of the year, we expect the stock to take a breather in the near term.
Bharti’s Q1 figures were strong, pretty much across the board. The stock has traded sideways for 6-9 months, but we think with the 5G auction now over, the conditions are right for the stock to resume its rally as we think expectations are likely to continue to rise, and in anticipation of the next price increase.
. VODAFONE IDEA: Big loss continues (IDEA IN, Mkt Cap USD3.5b, CMP INR8.7, TP INR9, 1% Upside, Neutral) IDEA saw a healthy 7% QoQ growth in adjusted EBITDA (on a pre-Ind AS 116 basis) to INR21b on an ARPU growth of 3%. But declining gross/active subscriber continued at an accelerated pace, with net debt ballooning to INR1.98t. The subscriber churn continues, despite the relief package of FY22. Its annualized EBITDA of INR84b in 1QFY23 may not be sufficient to meet: a) its INR87b in debt re...
RIL reported a robust set of Q1 results across the board, with three segments reporting a record quarter. Jio Platforms rebounded to positive net additions; Reliance Retail’s footfall surpassed pre-COVID level while higher crude oil prices and fuel margins drove O2C’s growth.
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