Mobile tariff hike a key trigger for Airtel stock

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Telecom services provider Bharti Airtel Ltd has seen meaningful improvement in its non-mobile business segments of home broadband and enterprises. The contribution of non-mobile segments to Airtel’s overall revenue has risen to 28% in FY22 from 21% in FY15, the management said at its analyst day held last week. The company is upbeat on the growth opportunities that this vertical offers.

Analysts share this optimism. The home broadband segment is estimated to have 40 million subscribers in 2025, implying a more than 15% compound annual growth rate (CAGR) over 2022, according to analysts at Emkay Global Financial Services Ltd. The domestic brokerage house forecasts Bharti’s subscriber base in this vertical to grow at double the industry’s run rate.

Second, Airtel’s thrust on its digital initiatives, especially the Airtel Payments Bank, is seen as a long-term growth lever. “Bharti has achieved significant scale on its payments bank and is progressing strongly across its other digital initiatives as well. Its emerging B2B businesses are poised to grow rapidly and add to the growth of the wireless business,” analysts at Kotak Institutional Equities said in a report on 28 March.

Revenue of Airtel Payments Bank rose sharply over the past three years, with Q3FY22 annualized revenues of 1,002 crore compared with 474 crore in FY2020.

Airtel Ads and Airtel IQ are among its other digital assets, where the company might explore monetization opportunities. That said, timely tariff hikes in its India mobile business is important for Airtel’s average revenue per user (Arpu) outlook and remain a trigger for the stock. As more customers upgrade from feature phones to smartphones, Airtel’s Arpus are poised to rise.

Airtel’s management has maintained its objective of raising tariff in CY22, but there is no clarity yet on the timeline. So, any delay there could be a dampener for the stock, according to analysts. Investors will also need to watch out for the upcoming 5G auction where Airtel may have to bid aggressively to compete with close competitor with deep pockets Reliance Jio. So, higher-than-expected capex on 5G auction is another downside risk for the Airtel stock.

Meanwhile, shares of Airtel were up 3% on Monday on the NSE, reacting to the management’s latest commentary. The stock had hit a 52-week high of 781.80 in November after the company announced much-awaited tariff hikes.

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