Telecom: TRAI Q4 data update

TRAI Q4 data showed industry gross revenues (ex-Loop & Videocon) grew at a slower pace of 2.5% qoq vs 3.4% sequential rise seen in Q3. Bharti revenues were largely in line which led to a flat revenue market share (RMS) qoq. Other large incumbents like Idea and Vodafone managed to outpace industry especially Idea which unsurprisingly posted >2x industry run rate on the back of very strong volume pickup in Q4. On the other hand, Rcom and Tata group lost a combined ~100bps in RMS as both recorded decline in sequential gross revenues. Telenor is now fourth largest operator by RMS in 3 of its 6 circles; indeed it has higher RMS than Rcom/Tata/BSNL in these 3 circles. From a broader perspective over past 3 years, Idea’s gross revenue growth in 8 circles where it is either 1 or No 2 operator and has 3G/900MHz spectrum is generally lower compared to the rest of areas. Overall, we remain optimistic on Bharti as it has fortified spectrum holdings and mitigated renewal risk to a large extent; although impending launch of Ril Jio and its data strategy remain the key concern, current valuations adequately factor such risk and we retain BUY on both Bharti and Idea.  

Idea, Vodafone gain RMS; Bharti growth in line

Incumbents Idea and Vodafone posted 4.3% and 5.7% rise in Q4 gross revenues respectively with Idea revenues >2x the industry run rate. Bharti revenues increased 2.4% qoq broadly tracking the overall growth while revenue share remained flat qoq. On the other hand, Rcom and Tata cumulatively ceded ~100bps in revenue share on the back of lackluster revenue performance.  

Bharti remains BUY on data upside, quality spectrum portfolio 

Bharti has to a large extent mitigated its renewal payout risk in subsequent auctions as it continues to own a quality spectrum portfolio after large purchases in Feb auctions; moreover, we expect Bharti to be key beneficiary of data growth over next 2-3 years and accordingly retain BUY on the stock with 9-12mth target of Rs380