SingTel – DBS

Bharti does not disappoint!

• Bharti’s 3QFY10 earnings slightly ahead of consensus due to healthy growth in network traffic.
• Upside potential for Bharti’s FY11F street estimates, if industry consolidation kicks in another 2-3
quarters
• Maintain HOLD for SingTel due to (i) National Broadband National (NBN) related concerns in
Singapore and (ii) potential pay TV losses in Singapore.

Bharti numbers slightly better than consensus. Bharti’s 3QFY10 net profit of INR 22.1bn as per US GAAP (-4% qoq, +2% yoy) was better than street expectations of INR 21.6bn. EBITDA stood at INR 39.1bn (-5% qoq, -3 yoy), due to slightly weaker contribution from the mobile business. Mobile ARPU at INR 230 was down 9% qoq, offset to a large extent by traffic growth of 7% qoq, highest in the last five quarters. This could be attributed to stable minutes of usage (MoUs) per subscriber, which had been declining for quite some due to more rural subscribers.

Management expects consolidation in another 2-3 quarters. Bharti’s management expects industry consolidation in another 2-3 quarters as initial excitement over cheaper price plans fades out and smaller players realize that their business models are unsustainable. Consensus has assumed continued price wars with 5% yoy decline in Bharti’s earnings in FY11F. In our view, there could be potential upside to consensus estimates, if sector consolidation starts to kick in.

Maintain HOLD with TP of S$3.15. We retain our forecasts for Bharti, but have lowered our forecasts for Singapore business due to NBN related concerns and pay TV related losses. As such, our FY10F/11F earnings for SingTel are trimmed down by 1%/2%.

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