bharti airtel - edelweiss - may 2011

8/2/2019 Bharti Airtel - Edelweiss - May 2011

1/12

Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL , Thomson First Call, Reuters and Factset. Edelweiss Securities Limited

Bharti Airtels (Bharti) Q4FY11 numbers were disappointing. We note that consensus

has revised down EBIT estimates 4.4% and 4.7% for FY12E and FY13E, respectively,

since the announcement of the result. The markets business bottoming out theory

was shaken with Q4FY11 results (voice RPMs declined 3.8% and mobile business

margin dipped 160bps Q-o-Q). However, the Street is optimistic on the stock due to

its relatively attractive valuations and expected strong free cash flow. In this note,

we highlight that the company will have to invest ~USD 4-7 bn in its business,

excluding routine capex of USD 2.5-3 bn p.a., in the next 2 years. This could hit the

estimated FY12-13 free cash flow or force the company to resort to debt, which could

inflate its enterprise value. Ergo, valuations could cease to be attractive.

USD 700 mn payment to Zain coming up in June 2011

Bharti completed the Zain acquisition in June 2010 for USD 10.7 bn, which

included a deferred payment of USD 700 mn to be made a year later. Since

Bharti marked down the subscriber base and margins post-acquisition we believe

it could also adjust the payment of USD 700mn down accordingly.

Likely investment of USD4-7bn to acquire spectrum in FY12-13E

Media reports indicate that Bharti is in talks with Qualcomm to acquire its BWA

licence at a total enterprise value of USD 1.2 bn. It has BWA spectrum in four

circles and if it buys Qualcomms licence, it will bag four more circles including

Mumbai and Delhi. Bharti has 10 MHz of 2G spectrum in most key circles. It has

3G spectrum in 13 circles and BWA spectrum in 4 circles. Thus, we assume that

it will acquire more spectrum over the next two years. Our analysis indicates

that it would require to spend USD4-7bn to become a pan-India 3G and BWA

player in addition to the routine capex of about USD5bn over the next two years.

Outlook and valuations: Still in investment mode; maintain HOLD

We believe competitive intensity continues to remain high. While RCOM and Tata

Docomo were tariff spoilers earlier, we notice that Vodafone is offering

aggressive schemes due to MNP. It is also offering combo plans (cross

subsidizing voice and data) as part of its 3G offering. The street is optimistic on

Bhartis ability to sustain competition due to its strong free cash flows. But our

analysis indicates pressure on cash flows as well. Thus, at 7.7x FY12E

EV/EBITDA, we remain cautious and maintain H OLD / Sec to r ou tpe r fo r m er .

India Equity Research | Telecom Company Update

BHARTI AIRTEL

Inv estments to dent free cash flowMay 12 , 2011

Reuters: BRTI. BO Bloomberg: BHARTI IN

EDELWEISS 4D RATINGS

Absolute Rating HOLD

Rating Relative to Sector O utpe r fo rme r

Risk Rating Relative to Sector Lo w

Sector Relative to Market Unde rwe igh t

Note:Please refer last page of the report for rating explanation

MARKET DATACMP : INR 366

52-week range (INR) : 400 / 254Share in issue (mn) : 3,797.5

M cap (INR bn/USD mn) : 1,319 /31,103

Avg. Daily Vol. BSE/NSE (000) : 6,160.4

SHARE HOLDING PATTERN (%)

Promoters* : 68.3

MFs, FIs & Banks : 8.7

FIIs : 17.2

Others : 5.8

* Promoters pledged shares

(% of share in issue): NI L

PRICE PERFORMANCE (%)

St ock Ni f ty EW T elecom m

I n d e x

1 month 0.9 (5.0) (2.2

3 months 9.9 5.7 6.8

12 months 27.4 10.6 10.6

Ganesh Duvvur

+91 22 4040 7586

[email protected]

Devyani Javer

+91 22 6623 3360

[email protected]

Financ ia ls

Year to March FY10 FY11 FY12E FY13E

Revenue (INR mn) 418,472 594,672 733,548 837,385

Rev. growth (% ) 13.2 42.1 23.4 14.2

EBITDA (INR mn) 167,633 199,662 255,465 308,755

Net profit (INR mn) 89,768 60,467 87,464 104,488

Shares outstanding (mn) 3,798 3,798 3,798 3,798

Diluted EPS (INR) 23.6 15.9 23.0 27.5

EPS growth (% ) 6.0 (32.6) 44.6 19.5

Diluted P/E (x) 15.5 23.0 15.9 13.3

EV/ EBITDA (x) 8.6 10.1 7.8 6.1

ROAE (%) 24.7 13.3 16.7 17.2


2/12

2 Edelweiss Securities Limited

Telecom Need for USD 4-7 bn of investment

Bharti has 10 MHz of 2G spectrum in most of the key circles. With the TRAI set-up

committee recommending pricing at a premium to both 3G and BWA spectrum, we

believe, Bharti would rather prefer to bid (since all future spectrum allotment would

likely be through auctions) for 3G and BWA spectrum. We discuss the following three

scenarios, which, we believe, Bharti will end up with in terms of investment

requirements, apart from the routine capex of USD 2.0-2.5 bn p.a. assumed by the

Street. Key assumptions in all the scenarios is that Bharti will acquire Qualcomms BWA

license for USD 1.2 bn (as reported by media) and intend to be a pan-India player for 3G

and BWA. We also assume spectrum prices for 2G at a 30% discount to the 3G spectrum

price and the last auction prices for 3G and BWA spectrum.

Scenar io 1 : We are assuming that Bharti will focus on more efficient networks i.e. 3G

and BWA. It would use its existing 2G spectrum for voice traffic, 3G spectrum for

carrying the voice traffic of its premium customers and BWA for data of its premium

customers. Under this scenario, its cash outflow over the next two years will be USD 3.9

bn with which it will become a pan-India 3G and BWA operator and continue to hold 2G

spectrum. With routine capex of USD 5 bn cumulative over the next two years, under

this scenario, its cash profits of USD 9.7 bn will be consumed almost entirely. Thus, inFY13, it would end up generating free cash flow of USD 800 mn, assuming it doesnt

acquire any more 2G spectrum. The Street is currently forecasting cumulative free cash

flow of ~USD 4-5bn over the next two years.

Tab le 1 : Scenar io 1

Source: Edelweiss research, Bloomberg, TRAI, DOT

Scenar io 2 : In this scenario, we assume that Bharti will acquire spectrum in 3G for not

only rest of the circles where it currently lacks presence, but also will also acquire

additional 3G spectrum in metros and category A circles. It would also acquire BWA

spectrum to become a pan-India player after acquiring Qualcomms BWA license. While

Qualcomms license and BWA spectrum will require investment of USD 2.2 bn, 3G

spectrum in rest of the circles and additional spectrum in key circles, at the earlier

auction price, will require investment of USD 3 bn. Thus, under this scenario, itsinvestment requirements over the next two years will exceed its cash profits.

USD mn Comments

Payment to Zain 700

Acquisition of Qualcomm's BWA company 1,200 As per media reports

Acquisition of 2G spectrum 0 Bharti would rather acquire 3G spectrum

Acquisition of 5 MHz 3G spectrum in rest of the circles 990To complete pan-India 3G presence at prices

'discovered' in the last auctionAcquisition of 20 MHz BWA spectrum in rest of the

circles1,027

To complete pan-India BWA presence at prices

'discovered' in the last auction

To t al cash ou t f low 3 ,9 17

Routine capex in FY12 and FY13 5,000 Including Africa and tower capex

To t al i n v est men t r equ i r ed in FY12 an d FY13 8 ,9 1 7

To t al cash p r o f i t s in FY1 2 an d FY1 3 9 ,7 13 As per Bloomberg consensus


3/12

Edelweiss Securities Limited 3

Bharti Airtel



Scenar io 3 : Under this scenario, we assume that due to policy flip-flop, Bharti would

participate in all auctions and acquire spectrum across the board to avoid uncertainty in

future. Thus, Bharti will acquire 5 Mhz of 2G spectrum in metros and Category A circles,

3G spectrum in rest of the circles, additional 3G spectrum in metros and Category A

circles, and BWA spectrum in rest of the circles after acquiring Qualcomms license. This,

we believe, from a cash-flow standpoint, is the worst case as it could entail investments

of USD 12.7 bn over the next two years. Thus, cash profits of USD 9.7 bn, as projected

by the Street, would be inadequate to fund these investments.



We believe, Scenario 1 is the base case, which will enable Bharti to become a pan-India

3G and BWA player. We have used the spectrum price, discovered through the earlier

auction for 3G and BWA, in our calculations. Even if we assume that 2G, 3G and BWA

spectrum prices would halve in the next round of auctions, the investment required

USD mn Comments

Payment to Zain in June 2011 700


Acquisition of 2G spectrum 0

We assume that Bharti will acquire either additional

2G or 3G spectrum to meet capacity requirements in

Metro & Category A; we assume Bharti will choose to

acquire 3G spectrum



Acquisition of 5MHz 3G spectrum in Metros and Category

A2,959

We assume that Bharti will acquire additional 3G

spectrum to meet its capacity requirements in high

usage circles.

Acquisition of 20Mhz BWA spectrum in rest of the circles 1,027To complete pan-India BWA presence at prices



Routine capex in FY12 and FY13 5,000 Including Africa and tower capex

To t al in v est men t requ i r ed in FY12 an d FY13 1 1 ,8 76


USD mn CommentsPayment to Zain in June 2011 700


Acquisition of 20 Mhz BWA spectrum in rest of the circles 1,027To complete pan-India BWA presence at prices


Acquisition of 2MHz of 2G spectrum in Metros and A

category circles862

We assume that Bharti will acquire 2G & 3G spectrum

to meet its capacity requirements in high usage

circles



Acquisition of 5MHz 3G spectrum in Metros and Category

A2,959

We assume that Bharti will acquire 2G & 3G spectrum

to meet its capacity requirements in high usage

circles


Routine capex for 2 years 5,000 Including Africa and tower capex

To t al in v est men t requ i r ed in FY12 an d FY13 1 2 ,7 38



4/12


Telecomwould be USD 8 bn, USD 9.4 bn and USD 10 bn under the three scenarios, respectively,

compared with cash profits of USD 9.7 bn cumulative over the next two years.

Outlook and valuations: Investment requirements exceed cash flows; maintain

HOLD

The Street has believed that since headline tariffs have remained stable for some time,

competitive intensity has reduced. Also, threat of cancellation of licenses of new entrants

and difficulty to fund further investments for smaller operators would bring back pricing

power to operators like Bharti and Vodafone. Thus, the Street believed that RPMs and

margins had bottomed out and would start improving. However, Bhartis Q4FY11

performance has raised doubts in the minds of investors, in our view.

But the Streets continued optimism on Bharti hinges on the forecasted strong free cash

flows from FY12 and cheaper valuations relative to the broad market. We believe, the

Street is only factoring in routine capex of USD 2.5-3.0 bn p.a. for FY12 and FY13 and

ignoring the investment Bharti may have to make to acquire 3G and BWA spectrum for

future growth. We agree that these investments are for the long term and should not be

adjusted against FY12 and FY13 cash flows. We, however, believe that investors must be

aware of these likely cash outflows. We expect Bharti to monetize its tower assets and

generate some cash flow. It must be noted that we are not assuming any cash outflow

that may occur on account of the one-time excess spectrum charge as recommended by

TRAI in our calculations.

In our view, competitive intensity continues to remain high. While the Street believes

consolidation is imminent, we believe, until 2010, RCOM and Tata Docomo were tariff

spoilers. However, with MNP implementation and launch of 3G services, we see

Vodafone offering attractive schemes to its existing high-end customers, which is forcing

Bharti to respond and, hence, the impact on RPMs and margins as seen in the Q4FY11

results. Thus, we continue to remain cautious and urge investors to focus on the likely

cash outflows that Bharti will witness. We maintain H OLD/ Sec to r Ou tpe r fo r m er

recommendation/rating on Bharti.


5/12


Bharti Airtel

An n e xu re

Tab le 1 : Pr i ce o f spect r um ( I NR m n)

Source: TRAI

3G (5 MHz) BWA (20 MHz)

Committee recommended price of

incremental spectrum 1800 MHz

(>6.2 MHz) per MHz

Met r o 7 1 ,0 8 3 5 0 ,5 7 2 4 ,547

Delhi 33,169 22,410 2,497

Mumbai 32,471 22,930 1,573

Kolkata 5,443 5,232 476

Cat eg or y A 6 7 ,5 1 9 6 2 ,0 1 3 19 ,338

Maharashtra 12,578 9,156 3,745

Gujarat 10,761 6,139 3,554

Andhra Pradesh 13,731 10,591 4,320

Karnataka 15,799 15,433 3,459

Tamil Nadu 14,649 20,695 4,261

Cat eg or y B 2 4 ,3 8 7 1 3 ,3 0 2 18 ,422

Kerala 3,125 2,587 2,322

Punjab 3,220 3,323 1,806

Haryana 2,226 1,199 1,079

UP (E) 3,646 1,425 2,526

UP (W) 5,140 1,839 3,188

Rajasthan 3,210 973 2,788

MP 2,584 1,247 2,545

WB 1,236 710 2,170

Cat eg or y C 4 ,5 1 8 2 ,5 9 1 3 ,412

HP 372 207 281

Bihar 2,035 993 1,537

Orissa 970 636 733

Assam 415 330 313

North East 423 213 320

J&K 303 213 229

Pan - I n d ia 1 6 7 , 5 0 6 1 2 8 , 4 7 8 4 5 , 7 1 9


6/12


TelecomTab le 2 : Bhar t i s spect r um p ro f i l e ( MHz)

Source: TRAI

2G 3G BWA Total (2G + 3G)

Met r o 2 7 .2 1 0 2 0 3 7 .2

Delhi 10.0 5 15.0

Mumbai 9.2 5 14.2

Kolkata 8.0 20 8.0

Cat eg or y A 4 3 .6 1 5 4 0 5 8 .6

Maharashtra 8.2 20 8.2

Gujarat 6.2 6.2

Andhra Pradesh 10.0 5 15.0

Karnataka 10.0 5 20 15.0

Tamil Nadu 9.2 5 14.2

Cat eg or y B 5 6 .0 1 5 2 0 7 1 .0

Kerala 6.2 6.2

Punjab 7.8 20 7.8

Haryana 6.2 6.2

UP (E) 7.2 7.2

UP (W) 6.2 5 11.2

Rajasthan 8.2 5 13.2

MP 8.0 8.0

WB 6.2 5 11.2

Cat eg or y C 4 2 .0 2 5 0 6 7 .0

HP 6.2 5 11.2

Bihar 9.2 5 14.2

Orissa 8.0 8.0

Assam 6.2 5 11.2

North East 6.2 5 11.2

J&K 6.2 5 11.2

Pan - I n d ia 1 6 8 .8 6 5 8 0 2 3 3 .8


7/12


Bharti Airtel

Company Description

Bharti is Indias largest integrated telecom operator providing mobile, broadband &

telephone (B&T) and enterprise services. It is Indias largest wireless operator with a

pan-India mobility network spanning all 22 telecom circles; its B&T services are currently

available in 95 cities. Bharti had a wireless subscriber base of ~162 mn in FY11, implying

wireless subscriber market share of ~20%. The enterprise services division provides

carrier (long distance services) and other services to corporates. Bharti has recently

launched 2G and 3G services as the fifth mobile operator in Sri Lanka. It has also

acquired 70% stake in Warid Telecom, Bangladeshs fourth largest telecom operator for

USD 300 mn in January 2010. Also, it acquired Zain to operate in the Africa market.

Investment Theme

We expect competitive intensity to increase, following the implementation of MNP and

launch of 3G services. We believe Bharti is relatively well placed among Indian telecos,

given its scale of operations, strong execution capabilities and robust balance sheet. We

expect the tough industry scenario to dampen Bhartis growth metrics in the near term.

The stock has outperformed the broad indices over the past three months as the Street

has turned optimistic. We remain cautious on the stock.

Key Risks

If operators maintain price discipline, then Bharti will not only retain market share but

will also be able to defend margins. Under-ownership of the stock could also lead to

continued stock outperformance.


8/12


TelecomFinancial Statements

I n com e st a t em en t ( I NR m n )

Year to March FY09 FY10 FY11 FY12E FY13E

Gross revenues 468,100 486,904 667,013 809,936 930,428Inter segment 98,485 68,432 72,341 76,388 93,043

Net revenues 369,615 418,472 594,672 733,548 837,385

Direct costs 151,997 175,712 254,421 314,116 361,153

Employee costs 16,992 19,028 32,784 40,251 41,869

Other expenses 48,949 56,099 107,805 123,716 125,608

Total operating expenses 217,938 250,839 395,010 478,083 528,630

EBITDA 151,677 167,633 199,662 255,465 308,755

Depreciation and amortisation 47,581 62,832 102,066 126,316 142,319

EBIT 104,096 104,801 97,596 129,149 166,436

Interest expenses 16,343 4,208 24,162 22,824 24,762

Other income 5,319 4,498 3,348 4,002 1,971

Profit before tax 93,072 105,091 76,782 110,327 143,645

Provision for tax 6,615 13,453 17,790 26,478 41,657

Core profit 86,457 91,638 58,992 83,848 101,988

Profit after tax 86,457 91,638 58,992 83,848 101,988

Minority interest 1,759 1,870 (1,475) (3,616) (2,500)

Profit after minority interest 84,698 89,768 60,467 87,464 104,488

Equity shares outstanding (mn) 3,796 3,798 3,798 3,798 3,798

EPS (INR) basic 22.3 23.6 15.9 23.0 27.5

Diluted shares (mn) 3,796 3,798 3,798 3,798 3,798

EPS (INR) fully diluted 22.3 23.6 15.9 23.0 27.5

CEPS (INR) 34.8 40.2 42.8 56.3 65.0

Dividend per share 1.0 1.0 1.0 1.2 1.2

Dividend payout % 5.1 4.8 7.5 6.2 5.1

Comm on s i ze me t r i c s - as % o f ne t r ev enues


Operating expenses 59.0 59.9 66.4 65.2 63.1

Depreciation 12.9 15.0 17.2 17.2 17.0

Interest expenditure 4.4 1.0 4.1 3.1 3.0

EBITDA margins 41.0 40.1 33.6 34.8 36.9

Net profit margins 23.4 21.9 9.9 11.4 12.2

Gr o w t h m e t r ics ( % )Year to March FY09 FY10 FY11 FY12E FY13E

Revenues 36.8 13.2 42.1 23.4 14.2

EBITDA 33.4 10.5 19.1 27.9 20.9

PBT 21.6 12.9 (26.9) 43.7 30.2

Net profit 26.4 6.0 (32.6) 44.6 19.5

EPS 26.4 6.0 (32.6) 44.6 19.5


9/12


Bharti Airtel

Balan ce sh eet ( I NR m n )

As on 31st March FY09 FY10 FY11E FY12E FY13E

Equity capital 18,982 18,988 18,988 18,988 18,988

Reserves & surplus 284,963 402,952 468,680 537,951 637,214

Shareholders funds 303,945 421,940 487,668 556,939 656,202

Minority Interest 10,704 25,285 28,563 24,947 22,447Secured loans 53,993 81,474 532,338 521,691 427,787

Unsecured loans 64,808 20,424 84,370 84,000 84,000

Borrowings 118,801 101,898 616,708 605,691 511,787

Sou r ces o f f u n ds 4 3 3 ,4 5 0 5 4 9 ,1 2 3 1 ,1 3 2 ,9 3 8 1 ,1 8 7 ,5 7 7 1 ,1 9 0 ,4 3 5

Gross block 549,810 678,122 931,873 1,071,373 1,210,873

Accumulated depreciation 140,675 195,493 280,447 383,452 500,803

Net block 409,136 482,629 651,426 687,921 710,070

Total fixed assets 409,136 482,629 651,426 687,921 710,070

Goodwill & Intangibles 40,364 59,890 637,317 614,006 589,037

Investments 38,053 52,419 6,224 6,224 6,224

Inventories 963 484 2,138 2,639 3,001

Sundry debtors 18,262 35,711 54,929 67,757 77,348

Cash and equivalents 11,145 25,323 9,575 19,294 24,083

Other current assets 77,216 41,995 58,393 73,355 83,739

Total current assets 107,585 103,513 125,035 163,045 188,170

Sundry creditors and others 162,942 153,427 312,373 284,096 287,580

Provisions 0 4,243 6,085 30,917 46,881

Total CL & provisions 162,942 157,670 318,458 315,012 334,461

Net current assets (55,357) (54,157) (193,423) (151,968) (146,291)

Net Deferred tax 1,254 8,342 31,394 31,394 31,394

Uses o f f u n d s 4 3 3 ,4 5 0 5 4 9 ,1 2 3 1 ,1 3 2 ,9 3 8 1 ,1 8 7 ,5 7 7 1 ,1 9 0 ,4 3 5

Book value per share (BV) (INR) 80 111 128 147 173

Free cash f low

Year to March FY09 FY10 FY11E FY12E FY13E

Net profit 86,457 91,638 58,992 83,848 101,988

Depreciation 47,581 62,832 102,066 126,316 142,319

Others 3,393 (31,098) (1) (13,749) (1)

Gross cash flow 137,430 123,372 161,057 196,415 244,306

Less: Changes in W. C. 16,931 (12,978) (123,518) 31,736 888

Operating cash flow 120,499 136,350 284,575 164,679 243,418

Less: Capex 136,304 128,312 831,178 139,500 139,500

Fr ee cash f low ( 1 5 ,8 0 5 ) 8 ,0 3 8 ( 5 4 6 ,6 0 3 ) 2 5 ,1 7 9 1 0 3 ,9 1 8

Cas h f l ow m e t r i c es

Year to March FY09 FY10 FY11E FY12E FY13E

Operating cash flow 120,499 136,350 284,575 164,679 243,418

Financing cash flow 13,852 (26,217) 510,367 (15,460) (99,129)

Investing cash flow (140,191) (81,875) (846,347) (139,500) (139,500)

Net cash flow (5,840) 28,258 (51,405) 9,719 4,789

Capex (140,171) (81,831) (846,347) (139,500) (139,500)

Dividends paid - - (4,443) (4,443) (5,224)


10/12


TelecomP r o f i tab i l i t y & l i qu id i t y r a t i os


ROAE (%) 32.5 24.7 13.3 16.7 17.2

ROACE (%) 31.1 23.5 12.0 11.2 14.1

Current ratio 0.7 0.7 0.4 0.5 0.6

Debtors (days) 17 24 28 31 32Fixed assets t/o (x) 1.0 0.9 1.0 1.1 1.2

Average working capital t/o (x) (5.6) (7.6) (4.8) (4.2) (5.6)

Debt/Equity 0.4 0.2 1.3 1.1 0.8

Debt/EBITDA 0.8 0.6 3.1 2.4 1.7

Adjusted debt/Equity 0.4 0.2 1.3 1.1 0.8

Oper a t i ng r a t i os


Total asset turnover 1.0 0.9 0.7 0.6 0.7

Fixed asset turnover 1.0 0.9 1.0 1.1 1.2

Equity turnover 1.4 1.2 1.3 1.4 1.4

D u pon t ana l y s i s


NP margin (%) 22.9 21.5 10.2 11.9 12.5

Total assets turnover 1.0 0.9 0.7 0.6 0.7

Leverage multiplier 1.5 1.4 1.8 2.2 2.0

ROE (%) 32.5 24.7 13.3 16.7 17.2

V a lua t i on pa r am e te r s


Diluted EPS (INR) 22.3 23.6 15.9 23.0 27.5

Y-o-Y growth 26.4 6.0 (32.6) 44.6 19.5

CEPS (INR) 34.8 40.2 42.8 56.3 65.0

Diluted P/E (x) 16.4 15.5 23.0 15.9 13.3

Price/BV(x) 4.6 3.3 2.9 2.5 2.1

EV/Sales (x) 4.0 3.4 3.4 2.7 2.3

EV/EBITDA (x) 9.7 8.6 10.1 7.8 6.1

Dividend yield (%) 0.3 0.3 0.3 0.3 0.3


11/12

Edelweiss Securities Limited

11

Bharti Airtel

Company Absolute

reco

Relative

reco

Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk

Bharti Airtel HOLD SO L Idea Cellular HOLD SP M

Mahanagar Telephone Nigam Ltd HOLD SU M Reliance Communication REDUCE SU H

Tulip Telecom BUY SO H

RATING & INTERPRETATION

ABSOLUTE RATING

Rat ing s Ex p ect ed abso lu t e r et u r ns ov er 12 m on t hs

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Rat ing s Cr i t er iaSector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe

within the sector

RELATIVE RISK RATING

Rat ing s Cr i t er ia

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Rat ing s Cr i t er ia

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


12/12


Telecom

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Board: (91-22) 4009 4400, Email: [email protected]

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Co ve ra g e g ro u p (s ) o f s t o cks b y p r ima ry a n a lys t ( s ) : Telecom

Bharti Airtel, Idea Cellular, Mahanagar Telephone Nigam Ltd , Reliance Communication, Tulip Telecom

Dis t r ibu t ion o f Ra t ings / Ma rke t Cap

Edelw e iss Research Coverage Un iver se

Rating Distribution* 118 51 17 189* 3 stocks under review

Market Cap (INR) 111 61 17

> 5 0 bn B et w e en 1 0 b n a n d 5 0 b n < 1 0 bn

Dat e Com pany Ti t l e Pr i ce ( I NR) Recos

Bu y Ho ld Redu ce To t al

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Recent Research

05-May-11 B ha r t i A i r te l Bottom out theory willhave to wait;Result Update

358 Hold

15-Feb-11 Tul ip Te lecom Mixed bag;

Result Update

1,269 Buy

14-Feb-11 Rel ianceCommun ica -

t i o n s

Business shrinks;Result Update

333 Hold

B ha r t i A i r te l EW I nd ices

400

700

1,000

1,300

1,600

7-May-10 7-Nov-10 7-May-11

Bharti Airtel Ltd.

EW Telecommunication Index

Nifty

HoldHold

Hold

Hold

Buy

Buy

200

260

320

380

440

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

May-11

(INR)

bharti airtel - edelweiss - may 2011

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