Reliance Jio Will Continue To Threaten Bharti Airtel’s Profitability, Brokerages Caution

The country's largest telecom operator Bharti Airtel Ltd. reported a 71.7 percent drop in its net profit in the January-March quarter amid stiff competition from the latest entrant in the sector – Mukesh Ambani-owned Reliance Jio Infocomm Ltd. It was the company's biggest drop in net profit for over four years.

In its post-earnings conference call on Wednesday, the company had warned that average revenue per user, already at an all-time low in the January-March quarter, could decline further.

Brokerage houses reiterated that ARPU will continue to remain under pressure due to competition from Reliance Jio, hurting Bharti Airtel’s profitability.

Jefferies On Bharti Airtel

• Rating: Hold
• Target: 380

• Despite topline missing estimates, robust margins impressed.
• Reduce earnings per share estimates lower by 2 percent in FY18 and higher by 8 percent in FY19.
• Competition will continue to be a significant threat on both ARPU compression and subscriber churn.

Also Read: Average Revenue Per User May Fall Further, Bharti Airtel Warns

Emkay On Bharti Airtel

• Rating: Reduce
• Target Price: Unchanged at Rs 306

• Reliance Jio will continue to be a threat to market share, expect aggressive competitive intensity.
• Deterioration in the balance sheet remains key a concern.
• Focus on cost optimisation and profitable minutes on the network to sustain benefit Africa business.
• Jio's VoLTE phone could be a game changer for Airtel to gain subscriber market share.

Motilal Oswal On Bharti Airtel

• Rating: Maintain Buy
• Target Price: Revise to 430 per share

• Telecom market to stabilise paving way for Airtel to reduce capital expenditure by 10 percent.
• Tower business housed under Bharti Infratel may see some moderation.
• Maintain 'buy' rating on the stock on the growth potential seen for the company in both India and Africa.
• Target price implies an upside of 17.8 percent from current market price

JM Financial On Bharti Airtel

• Rating: Buy
• Target: Rs 390

• Addition in the data subscriber segment in the fourth quarter is a positve surprise.
• Airtel Payments Bank could have led to decline in EBITDA margins.
• Africa operations turned positive due to company's sustained focus on costs and efficiency.
• Reliance Jio's plan of new 4G 'smart' feature phone with unlimited data is a key risk to the company.

The Bharti Airtel stock fell more than 7 percent as of 3:20 pm on the BSE.

Also Read: Bharti Airtel’s Profit Falls More Than 70% In January-March Quarter