Bharti Airtel Shares Jump To 2-Yr High On Prospect Of Telecom Duopoly In India

Shares of Bharti Airtel Ltd. rose to the highest in more than two years after a Supreme Court order raised the prospects of a telecom duopoly in India.

Bharti Airtel shares gained as much as 6.31 percent to Rs 503.80 apiece—the highest since Nov. 3, 2017. Peer Vodafone Idea Ltd.’s stock fell as much 39.2 percent but pared some of the losses on a likely telecom relief from the government.

On Thursday, the apex court dismissed petitions of telecom operators seeking a review of the definition of ‘adjusted gross revenue’ that makes them liable to pay thousands of crores in pending dues. Regulatory data released on the same day showed further erosion in the subscriber base of Vodafone Idea and Bharti Airtel.

These developments put at risk the existence of Vodafone Idea—something Aditya Birla Group Chairman Kumar Mangalam Birla warned about in December—and raises the prospects of a two-player telecom market, Rajiv Sharma, head of research at SBICAP Securities Ltd., said in an interview to BloombergQuint on Friday. “From a medium- to long-term view, you definitely see there is more upside to Bharti (Airtel) if this were to be a two-player market.”

If the subscriber base of Vodafone Idea is split between Reliance Jio and Bharti Airtel in a ratio of 6:4, after factoring in any sharp corrections, Bharti Airtel’s stock could still net gain up to Rs 80—nearly 17 percent over Thursday’s close—if the operator maintains an average revenue per user of Rs 150-160 on the new base, Sharma said.

Moody’s Investor Services too saw Vodafone Idea’s rivals gaining due to Supreme Court’s ruling on Thursday.

The operator’s financial burden will weaken its ability to compete against Reliance Jio and Bharti Airtel, which will likely gain a higher local market share, Annalisa Di Chiara, analyst at the rating agency, said in a note. While a fresh blow, the judgment is no real surprise and Bharti Airtel had already made provisions to help offset the impact on its balance sheet, she said.

Still, according to Chiara, the wireless carriers’s debt and leverage are set to rise as the impact of the ruling “on its credit profile will likely be significant”.

Bharti Airtel has a total debt of Rs 1,06,598 crore, with AGR dues contributing Rs 34,260 crore. Vodafone Idea lugs Rs 1,17,300 crore on its books, of which it owes the government Rs 44,150 crore in telecom dues.―Bloomberg Quint