The telecom sector has been trending ever since the Supreme Court came out with its ruling on adjusted gross revenue (AGR). Despite the moratorium relief provided by the finance minister, the telcos are still staring at their poor financials and falling market share. Despite all the negatives, Emkay Research believes that there's an opportunity in the sector and thus, gave an 'equal weight' stance on the sector with an 'overweight' call on Bharti Airtel.
According to the brokerage, AGR for the industry including national long distance (NLD) revenue has declined 4 percent QoQ and increased 5 percent YoY. This sequential decline is primarily due to a sharp fall in BSNL's NLD revenue (-71 percent QoQ).
Meanwhile, Vodafone Idea continued to see pressure with a 6 percent QoQ revenue decline and 66bps decline in revenue market share. The telco has lost market share in 20 out of 22 circles which contribute 95 percent to its AGR. It continues to lose share in leadership circles such as Kerala, Maharashtra, Madhya Pradesh, and Gujarat, the report added.
In the case of Reliance Jio, the brokerage firm said the company continues to enjoy a strong position in B and C circles and commands number one position in 13 circles. These circles contribute 55 percent to Jio's revenues and 44 percent to industry revenues.
"Bharti Airtel reported a sequential revenue increase in key circles such as Maharashtra (+3 percent), Mumbai (+7 percent) and Tamil Nadu (+3 percent). However, 14 circles recorded revenue declines. Revenue from Top-7 circles declined 3 percent QoQ and contributed 61 percent to total revenues", said the brokerage.
Thus, Emkay Research maintained 'overweight' on Bharti Airtel with a target price at Rs 434 apiece while maintaining 'sell' call on Vodafone Idea with a target price at Rs 5 apiece.
Last week, the telcos received a little more relief when the government, on the recommendations of the committee of secretaries, cleared a two-year moratorium on payments for spectrum bought through auctions.
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