Bharti Airtel Share Price: Shares of telecom player Bharti Airtel extended their fall for the second consecutive session in Wednesday’s trade after global investment bank JPMorgan downgraded the telecom operator. Bharti Airtel fell 3.56 per cent to Rs 764.65 after the foreign broker downgraded the stock to underperform from overweight and slashed its target price to Rs 710 from Rs 860 earlier.
The stock has fallen 7.16 per cent in the last two trading sessions.The stock fell 4.07 per cent to hit a day low of Rs 760.60 today over its previous close of Rs 792.85.
“We believe higher 5G capex, a lack of tariff hikes and deflation in premium ARPUs (Average Revenue Per Units) will drive down ROICs (Return on Invested Capitals). Bharti’s shares bake in modest FY24E capex, a 10 per cent tariff hike and continued ROIC expansion in FY24 that are all at risk,” JPMorgan stated.
“The expectation in 2022 was another round of tariff hikes that also led to a rally in Airtel’s stock price. However, that didn’t come through. Instead, 5G spectrum auctions at relatively expensive prices pushed back tariff hikes as Bharti and (Reliance) Jio both focus on rolling out 5G services in order to get a first-mover advantage,” the global investment bank noted.
“Another elephant in the room remains the lack of convincing monetization drivers for 5G capex. The consumer use cases are limited, while enterprise use cases have not been developed. The high capex keeps ROICs under pressure, so telcos will have to find a way to monetize 5G,” it said.
JPMorgan cited three options. First, from direct tariff hikes; second from indirect tariff hikes with the removal of base plans; and third from cost per GB reductions, driving greater data consumption. “The last option is a risk for 4G-only players,” the investment bank noted.
As a result, Bharti may see lower free cash flow and RoIC going forward.
“Tariff hikes are unlikely in 2023 as telecom companies focus on 5G rollout and customer onboarding. Bharti Airtel’s current market price bake in modest FY24 capex, 10 percent tariff hike, and continued return on invested capital (RoIC) expansion in FY24 are all at risk,” it added.
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