MyValueResearch

Bharti Airtel Ltd.

Bharti Airtel ltd., established in 1995, is an integrated telecom solutions provider, offering GSM-based mobile services across India in 23 telecom circles, broadband and telephone services in 15 circles and enterprise services, which have two sub-units – carriers (long distance services) and services to corporates. The company has a strategic alliance with Singtel, the largest of its kind made by SingTel outside Singapore and with Vodafone, which is one of the largest single foreign investments made in the Indian telecom sector. Bharti Airtel plans to foray into the retail segment, through a joint venture, which would be finalised depending on the kind of infrastructure required for the retail foray.

INVESTMENT RATIONALE

§ Revenues from mobile services represented 81% of the total revenues for the quarter ended September 30, 2008. The company continues to maintain its leadership position with strong earning visibility and excellent execution record. Bharti’s strong cash position will enable the company to continue with its expansion plans.

§ The company improved its monthly subscriber additions from 2 million to nearly 2.5 million in 2008, gaining market share amid heightened competition. Airtel’s share in new subscribers has increased substantially to 28.7 per cent, probably driven by aggressive reduction in tariffs and continuing popularity of the lifetime recharge scheme.

§ The company is also well placed to tap into the opportunities arising from the new 3G policy as well as IPTV and DTH, with an aim to become an integrated entertainment company with a presence across all three ‘screens of contact’ with the consumer, namely mobile, personal computer and television. The 3G policy may allow the company to offer premium value-added services that could boost realisations.

§ The tie-up with Apple to bring the hugely successful iPhone to India is a success for Bharti Group.

§ Bharti’s Enterprise Carrier division has witnessed strong growth helped by increased national and international long distance usage, improving overall margins.

§ On the tower business, the tenancy continues to be 1.22 for Bharti, indicating challenges in attracting newer players to share infrastructure. However, the company has managed to increase rental revenues. Better tenancy for the tower business may improve contributions to its business.

§ Bharti AXA Investment Managers, a JV between Bharti Ventures Limited and AXA Investment Managers (AXA IM) and AXA Asia Pacific Holdings (AXA APH, through NMIPL) is targeting assets worth USD 10 billion under its management by 2012.

§ Bharti Airtel has sought the government’s approval to pick up 65% in Bharti Teleports, a newly formed uplinking company. Telports are used by broadcasters to uplink their channels so that these can be downloaded by MSOs, cable operators and Direct-to-Home players.

§ Co. is on the strong ground on a combination of expected sharp growth in the Indian wireless market, execution of a low-leverage, and low-cost business model with a high return on invested capital, and a close alignment of majority and minority shareholder interests. Bharti may continue to be the market leader with 25% market share by the end of FY10.