HSBC retains ‘overweight’ rating on Bharti Airtel

RESEARCH: HSBC
RATING: BUY
CMP: RS 776

HSBC retains ���overweight��� rating on Bharti Airtel with a target price of Rs 1,002. The investment thesis expects sharp growth in the domestic wireless market, outstanding execution of a low-leverage , low-cost business model with high return on invested capital, and continued alignment of majority and minority shareholder interests.

Principal risks will be upward revision of subscriber-based criteria for additional spectrum, hike in spectrum charges, aggressive international expansion and higher capital expenditure (capex) than HSBC���s estimates. Receipt of 3G spectrum should aid Bharti in consolidating market leadership.

If the new entrants are able to manage roll-outs , players like Tata Teleservices, Reliance Communications and BSNL will be more vulnerable. The impact on Bharti will be the least. Bharti was willing to pay the government an additional Rs 2,600 crore for 4.4 MHz to start up 2G spectrum.