Anand Rathi recommends ‘Sell’ on wireless stocks
Anand Rathi turned negative on the telecom sector after tariff cuts. It has downgraded Bharti to a ‘Sell’ (Neutral) and Idea to ‘Neutral’ (Buy).
By ET Bureau |
MUMBAI: Anand Rathi turned negative on the telecom sector after tariff cuts. It has downgraded Bharti to a ���Sell��� (Neutral) and Idea to ���Neutral��� (Buy).
���Our target prices are under review, but we have cut the sector rating to Sell (from Neutral), and downgrade Bharti to a Sell (Neutral) and Idea to Neutral (Buy). Industry revenues are likely to decline in the near term.
The 40p estimated ARPM on RCOM���s plan is similar to the ARPM on Tata���s ���promotional��� offer, but 30% below 1Q ARPM of major telcos. With 5-7% projected quarter-on-quarter ���minutes growth��� over the next few quarters, we see don���t see wireless revenues growing on a quarterly basis, at least until 1QFY11,��� said Anand Rathi Securities in a note.
Faster-than-expected tariff decline is likely to further squeeze smaller operators and new entrants (Aircel, Tata, Telenor), potentially leading to a quicker resolution in terms of industry consolidation.
Following the lines of Reliance Communications, Bharti Airtel may adopt adopt a circle-by-circle approach, and would look to maintain some price premium, given its superior branding/distribution/coverage. ���A potential EPS downside of over 20% is likely. Assuming FY11 ARPM of 45p (vs. current assm: 52p) and 10% higher MOU, we estimate 22% downside to our estimated FY11 EPS for Bharti��� the brokerage said.
���Our target prices are under review, but we have cut the sector rating to Sell (from Neutral), and downgrade Bharti to a Sell (Neutral) and Idea to Neutral (Buy). Industry revenues are likely to decline in the near term.
The 40p estimated ARPM on RCOM���s plan is similar to the ARPM on Tata���s ���promotional��� offer, but 30% below 1Q ARPM of major telcos. With 5-7% projected quarter-on-quarter ���minutes growth��� over the next few quarters, we see don���t see wireless revenues growing on a quarterly basis, at least until 1QFY11,��� said Anand Rathi Securities in a note.
Faster-than-expected tariff decline is likely to further squeeze smaller operators and new entrants (Aircel, Tata, Telenor), potentially leading to a quicker resolution in terms of industry consolidation.
Following the lines of Reliance Communications, Bharti Airtel may adopt adopt a circle-by-circle approach, and would look to maintain some price premium, given its superior branding/distribution/coverage. ���A potential EPS downside of over 20% is likely. Assuming FY11 ARPM of 45p (vs. current assm: 52p) and 10% higher MOU, we estimate 22% downside to our estimated FY11 EPS for Bharti��� the brokerage said.
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