Airtel is up 45% this year – here’s why
Bharti Airtel's stock surges amid India's telecom transformation, backed by government support and 5G potential. Despite challenges like price wars and high capex, investors are optimistic about Airtel's role in shaping India's digital future.
Bharti Airtel has rallied 45% year-to-date, outperforming both the broader market and telecom peers, reflecting growing investor confidence in the company's turnaround and the improving outlook for the telecom sector.
Why it matters: India's 4G revolution sparked intense competition, leading to industry consolidation. Reliance Jio emerged as the winner, reshaping the telecom landscape through aggressive pricing and rapid market share gains.
Airtel by the numbers:
- Stock price grew from ₹1,050 to ₹1,472 this year
- Q1 FY25 revenue reached ₹38,506 crore, up 2.85% QoQ, as pricing changes go into effect across the country
- EBITDA margin at 51%, showcasing operational efficiency.
- The company's 3-year revenue CAGR is at 14%, indicating consistent growth.
Despite questions about the sustainability of Airtel's rally, several factors suggest a positive outlook:
- 5G leadership: With Airtel's aggressive 5G rollout the company has already covered over 3,500 cities.
- ARPU growth: Average Revenue Per User (ARPU) reached ₹200 in the latest quarter, signaling improved profitability. That is much higher than Reliance Jio's ARPU of ₹181.
- Market share gains: Airtel has been steadily gaining subscriber market share, especially in the high-value postpaid segment.
- Diversification success: non-cellular businesses such as Airtel Business, Digital TV, and Africa operations are showing strong growth, reducing dependence on the core mobile business.
- Debt reduction: The company has made significant strides in reducing its debt burden.
Furthermore, government support for a competitive three-player market benefits Airtel, helping with investor confidence in Airtel's future, and in anticipated rational spectrum pricing.
Big picture: India's digital transformation relies on quality telecom infrastructure. Airtel's ability to capitalize on 5G while maintaining financial discipline is resonating with investors.
Challenges remain: Intensifying competition could lead to further price wars, potentially impacting profitability. High capex requirements for 5G and network expansion may strain finances in the short term.
