Bharti Airtel second most valuable mobile operator in emerging Asia

Bharti Airtel has emerged as the second most valuable mobile operator among emerging markets in Asia behind China Mobile, thanks to a surge in its share price and equity expansion in the past one year.

At its current market capitalisation (m-cap) of around $41 billion, Airtel is ahead of Emirates Telecom, Telekom Indonesia and China Unicom. China Mobile remains Asia's top mobile operator with m-cap of $175 billion, according to data from Bloomberg.

Including Japan, which is a developed market, Airtel is the fifth most valuable mobile operator on the continent behind China Mobile, NTT, NTT Docomo, and KDDI Corp. Last year, Airtel was the seventh largest mobile operator in emerging Asia behind South Korea's SK Telecom and Telekom Indonesia in terms of m-cap.

Globally, Airtel now has the 11th largest m-cap in the industry behind Canada's BCE but ahead of France's Orange and Telefônica Brasil.

Airtel has been the top performing telecom stock globally last year. In the past 12 months, Airtel’s m-cap was up 135 per cent against 7 per cent rise in the combined m-cap of top 50 mobile operators. The top 50 mobile operators now have a combined m-cap of $1.63 trillion, up from around $1.52 trillion a year ago. Excluding Airtel, the industry’s m-cap is up by 5.6 per cent in the past one year.

Globally, the industry is dominated by AT&T and Verizon Commu­nications followed by China Mobile both in terms of m-cap, and revenues and earnings. AT&T currently leads the industry with m-cap of $275 billion and revenues of $181 billion. It is followed by Verizon, with m-cap and revenues of $240 billion and $132 billion, respectively.

Analyts attribute Airtel’s relatively higher m-cap to its superior valuation, as investors bet on a potential duopoly in the Indian mobile telephony market. “With the Aditya Birla and Vodafone groups unwilling to infuse equity in Vodafone Idea, we see a strong possibility of Vodafone Idea going for bankruptcy. Airtel should benefit from further consolidation in the industry,” analysts at Credit Suisse said after Supreme Court asked operators to pay adjusted gross revenue (AGR) dues to the government.

Airtel raised the due amount from equity investors, thanks to its higher m-cap, but its competitor, Vodafone Idea, is struggling to gather funds to pay its tax liability. This increases the prospects of a two-operator duopoly in India’s telecom sector. 

Analysts’ believe this would push up tariffs and margins in the industry, greatly benefitting Airtel. This has led to rally in Airtel — its stock price is up 87 per cent in the past one year despite the company reporting a combined net loss worth around $700 million in the past four quarters.

However, Airtel is still a relatively small operator in terms of revenues and earnings. With global revenues of around $12 billion in the latest trailing 12 months (TTM), Airtel is the sixth largest operator in emerging Asia behind Emirates Telecom and but ahead of South Korea's LG Uplus.

Globally, Airtel is the 17th largest mobile operator by revenues. Airtel’s operating margins are, however, little better than its peers and it reported $4.7 billion in earnings before interest, depreciation and ammortisation on TTM basis, which was the fourth largest among its peers in emerging Asia and 14th biggest globally.

Some say the rally in Airtel’s shares is due to a general bullishness on Dalal Street. “Indian industry leaders are among the most expensive stocks on most valuation parameters. I am not surprised at Airtel’s m-cap, given its leading position in the Indian telecom market,” said G Chokkalingam, founder and MD, Equinomics Research & Advisory Services.

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