Why Bharti Airtel Share Price is Falling

The telecom sector has been the backbone of the country since pandemic, making it world's second-largest telecommunications market with a vast subscriber base of 1.17 billion (bn).

But even with this vast subscriber base, the telecom industry is experiencing fall in the average revenue per user.

Over the past few years, the industry had witnessed a heavy decline of revenue streams in core areas like voice and text messaging along with severe competition from Over-the-Top service providers, even dragging the best 5G stocks lower.

With the industry continuing these struggles in 2023, India's telecom behemoth Bharti Airtel has dropped 6% in two days.

Here is what drove the stock downhill.

5G capex to pressure growth

The company plans to invest Rs 270-280 bn in the telecom network on the 5G rollout.

While it plans to increase capital expenditure by 10-15%, it has no plans to charge a premium rate for 5G services. It is because the rate hike has failed in several countries that have attempted to do so.

The company earlier had an annual average capex of Rs 240-250 bn for fiber, broadband, data centers, and much more.

This concern over higher capital expenditure on 5G, lack of monetisation opportunities, absence of tariff hikes, and competition in the high-quality user segment is bound to pressure its return on invested capital (ROICs).

The absence of a 4G tariff hike and focus on the premium user segment by rival company Reliance Jio is also expected to restrict the growth.

Further, a change in the strategy of Reliance Jio to target high-end subscribers by pitching better in-building connectivity and unlimited data plans could also push Airtel to spend more to defend its market share.

This expense would reduce average revenue per user (ARPU) and subscriber growth, pulling down the revenues.

Due to these factors, two foreign brokerages, JP Morgan and BofA (Bank of America), have downgraded the rating for the telecom operator.

This downgrade in ratings has increased the traded volume over the counter, causing the stock to decline by over 8% in the last two consecutive sessions.

How Bharti Airtel shares have performed lately

Bharti Airtel shares have declined more than 5% in the last five days and more than 8% in the month gone by.

The stock was also under pressure in the first half of 2022. However, it reversed the trend in July and moved higher, registering a gain of over 14% in the second half of 2022.

At the current price, Bharti Airtel trades at a PE multiple of -268 and a price to book value multiple of 5.4.

For the September 2022 quarter, the total promoters' stake in the company decreased by 0.8% and stood at 55.1% compared to 55.9% in June 2022. Meanwhile, mutual funds decreased their stake by 1.4% to 10.7% in September 2022.

About Bharti Airtel

Bharti Airtel Limited is an Indian multinational telecommunications services corporation. It is India's second-largest network operator.

It offers an integrated suite of telecom solutions to its enterprise customers with long-distance connectivity, nationally and internationally. The company also offers Digital TV and IPTV Services.

It operates in four strategic business units mobile, Telemedia, enterprise, and digital TV.

The company also deploys, owns, and manages the passive infrastructure of telecom operations under its subsidiary Bharti Infratel.

For more details about the company, you can have a look at Bharti Airtel's factsheet and quarterly result.

You can also compare Bharti Airtel with its peers.

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