SingTel – DBSV

Bharti confirms intense competition

  • Bharti’s earnings were 37% below consensus estimate due to intensified competition
  • Bharti to remain aggressive in maintaining its revenue share. SingTel’s FY13F/14F trimmed 2%/3%.
  • HOLD with lower TP of S$3.25. Near-term cost pressures from mobile advertising in Singapore is another concern

Bharti hurt by rising competition with net profits 37% below expectations. 1Q13 profit of Rs.7.6bn (-37% y-o-y and -34% q-o-q) was 37% below consensus expectations of Rp12.15bn due to a sharp decline in EBITDA margins in India to 31.8% from 35.3% in March 2012, because of rising expenses. High depreciation and finance expenses in Africa had resulted in losses from Africa widening by 120% y-o-y to Rs. 6.7bn.

We had highlighted rising competition in our note on 2 July. Indian operators, including Bharti had lowered tariffs to 0.5 paisa per sec from 1.0 paisa through discount vouchers. At the same time, dealer commissions have also been raised substantially.

SingTel’s earnings trimmed slightly. Bharti is not willing to lose revenue share and intends to remain aggressive in preventing that from happening. We have lowered Bharti’s FY13F/14F earnings by 30% each, implying flat earnings in FY13F (with downside risks). After raising contribution from AIS and Telkomsel slightly, our SingTel’s FY13/14F earnings are trimmed 2%/3% respectively.

Maintain HOLD with slightly lower TP of S$3.25. The key change is lower valuation for Bharti based on the market price of Rs 255 per share. For SingTel, dividend yield of 5% remains the key attraction as growth is not exciting enough.

SingTel – DBSV

Bharti confirms intense competition

  • Bharti’s earnings were 37% below consensus estimate due to intensified competition
  • Bharti to remain aggressive in maintaining its revenue share. SingTel’s FY13F/14F trimmed 2%/3%.
  • HOLD with lower TP of S$3.25. Near-term cost pressures from mobile advertising in Singapore is another concern

Bharti hurt by rising competition with net profits 37% below expectations. 1Q13 profit of Rs.7.6bn (-37% y-o-y and -34% q-o-q) was 37% below consensus expectations of Rp12.15bn due to a sharp decline in EBITDA margins in India to 31.8% from 35.3% in March 2012, because of rising expenses. High depreciation and finance expenses in Africa had resulted in losses from Africa widening by 120% y-o-y to Rs. 6.7bn.

We had highlighted rising competition in our note on 2 July. Indian operators, including Bharti had lowered tariffs to 0.5 paisa per sec from 1.0 paisa through discount vouchers. At the same time, dealer commissions have also been raised substantially.

SingTel’s earnings trimmed slightly. Bharti is not willing to lose revenue share and intends to remain aggressive in preventing that from happening. We have lowered Bharti’s FY13F/14F earnings by 30% each, implying flat earnings in FY13F (with downside risks). After raising contribution from AIS and Telkomsel slightly, our SingTel’s FY13/14F earnings are trimmed 2%/3% respectively.

Maintain HOLD with slightly lower TP of S$3.25. The key change is lower valuation for Bharti based on the market price of Rs 255 per share. For SingTel, dividend yield of 5% remains the key attraction as growth is not exciting enough.

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