Bharti Airtel Jumps As Analysts Expect Benefits From The Partnership With Google

Shares of Bharti Airtel Ltd. rose 1.7% to Rs 728 apiece after analysts expected the company to benefit from the partnership with tech giant Google.

  • In an exchange filing on Friday, Bharti Airtel said that Google will invest up to Rs 5,250 crore($700 million) in the telecom service provider to acquire 1.28% ownership. Google will further invest Rs 2,250 crore ($300 million) towards multi-year commercial agreements.
  • Analysts expect the partnership to aid Bharti Airtel in competing against Reliance Jio, although Google’s investment in Airtel is lesser than its investment in Jio.
  • They also expect the partnership to focus on three key areas — 5G, cloud adoption and enabling affordable smart phones across price range. Another aspect where analysts expect the investment to focus on is the digital adoption in underpenetrated SME segment.
  • They also insist that the stock is ripe for re-rating upside due to strong earnings growth in India and Africa business, improvement in ARPU mix and market share gains

Of the 33 analysts tracking the company, 30 maintained ‘buy’, two maintained ‘hold’ and one maintained ‘sell’ recommendations. The overall consensus price of analysts tracked by Bloomberg implied a potential upside of nearly 19%

Motilal Oswal

  • Reiterates ‘buy’ on the stock with the target price unchanged at Rs 920; an implied return of 28.53%.
  • Google-Bharti Airtel partnership will focus on affordable smartphones across price ranges, 5G and acceleration of cloud adoption, particularly across SMEs.
  • Investment is Bharti Airtel could be more than an enabling one for Google as Airtel now looks to scale up deployment of Google’s network virtualisation solutions.
  • Bharti Airtel is likely to gain from leveraging Google’s technology platform to explore monetisation of its digital offering.
  • Partnership could enable offer handset lending, attractive pricing through cashback and other incentives, e-commerce partnership-led benefits and data analytics.
  • Expects 20% Ebitda CAGR for Bharti Airtel over FY22-24E.
  • Sees potential re-rating upside in both the India and Africa business on the back of steady earning sgrowth in each region due to tariff hike, improvement in ARPU mix and market share gains.
  • Sees an additional Ebitda potential of Rs 10,000 crore if Vodafone Idea is unable to infuse large scale capital and improve its ARPU/revenue to sustainable levels.
  • Strong earnings growth could drive free cash flow of Rs 42,570 crore/ Rs 48,810 crore in FY23E/FY24E as it may outpace the capex requirement.

ICICI Securities

  • Reiterates ‘buy’ on the stock with the target price unchanged at Rs 861; an implied return of 20.28%.
  • Long-awaited strategic investment fructified for the company with Google agreeing to subscibe 1.28% stake for $700 million.
  • The partnership is likely to focus on device ecosystem by increasing affordability of smartphone, network with a focus on 5G-readiness and cloud infrastructure.
  • The partnership with Google will help Bharti Airtel compete against Reliance Jio’s JioPhone Next in a few quarters, although Google’s investment is lesser in Airtel than Jio.
  • The partnership is likely to accelerate digital adoption with Bharti Airtel serving over 1 million SMEs.
  • Bharti Airtel is well placed to gain from gradually rising investment in digital ecosystem in SME enterprise segment.

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