Telecom industry revenues will decline by 9% to $21.6 billion in the current fiscal year 2018-19 as incumbents continue to calibrate offers to match plans of Reliance Jio Infocomm Ltd, noted Deutsche Bank in a report.
Deutsche Bank said it expects the to-be-merged entity of Idea Cellular Ltd and Vodafone Group’s India unit to have a 37% revenue share in the next fiscal year of 2019-20. Bharti Airtel Ltd and Reliance Jio will have 36% and 25%, respectively.
The bank cut price target for Bharti Airtel to Rs475 from Rs595 and to Rs105 from Rs130 for Idea Cellular, saying the two companies traded at FY20E EV/EBITDA of 6.0x and 7.4x, respectively, below their long-term levels leaving room for valuation catch-up on earnings recovery.
Deutsche Bank forecast Bharti Airtel’s consolidated revenue to achieve a three-year compound annual growth rate of 9.7%, driven by 11.9% and 3% growth in India and Africa businesses, respectively.
Bharti Airtel’s expected growth in India is largely driven by the exit of most weak players from Reliance Jio’s entry and that Bharti Airtel has been at the forefront of buying these assets at distressed valuations, noted the report adding that its robust spectrum portfolio and growth in 4G data will continue to aid its cost leadership in India.
On Idea and Vodafone India, the bank said market continues to underestimate the to-be-merged entity’s market position.