In an otherwise stable market, Bharti Airtel shares dropped 1% to Rs 738.70 on the BSE in intraday trade on Wednesday, bringing the two-day loss to 3%. In contrast, at 02:30 p.m., the S&P BSE Sensex was up 0.27 percent to 57,772. On March 2, 2023, the stock had fallen to a six-month low of Rs 736.20.
As a result, Bharti Airtel has underperformed the market in 2023, with a decline of 9% against a decline of 6% for the benchmark index. However, Reliance Industries (RIL) has lost 13.5% so far in 2023.
Analysts at JP Morgan say that Bharti Airtel’s rival, Reliance Jio, has fallen behind in the Indian market as a result of its introduction of cheap postpaid plans with unlimited 5G, which could delay the recovery of its key profit metrics.
The new family plans offered by Bharti may result in an ARPU decrease of Rs 100-200 per customer, and any subsequent price matching with Jio may result in an ARPU decrease of Rs 50-100 per customer. Reuters Analysts at JP Morgan were quoted in the report.
Analysts have maintained their “underweight” rating on Bharti Airtel, stating that the company’s ARPU expansion is in jeopardy and could even decrease in 2024 and 2025 due to a 5G price war. The full report can be found here. JP Morgan also believes that higher 5G capex, the absence of tariff increases, and deflation in premium ARPUs will result in a lower return on invested capital (ROIC). We will continue to keep an eye on the growth of 4G prepaid ARPU and the slow supply of entry-level smartphones following the upgrade from 2G to 4G. In a report from February, the brokerage firm stated, “Repeat UW.”
Bharti Airtel, on the other hand, is well-positioned for ROIC improvement, according to HSBC analysts, thanks to increased margins and increased invested capital turnover. Due to submigration from 2G to 4G, we anticipate strong growth in mobile revenue and ARPU; due to increased data usage, sub migration to higher bucket data plans; gains in post-paid subs of high value; and in a stock update, a brokerage firm announced a fragmented tariff increase.
The brokerage house’s analysts do not believe that ROIC growth will be hampered by the rollout of the 5G network because the adoption of 5G sub-handsets will drive the rollout across cities. Likewise, the organization keeps on putting resources into development regions, for example, home broadband, undertaking, computerized resources and server farms.