Bharti Airtel loses Rs 12,000 crore in m-cap as Jefferies says Jio’s postpaid offer to dent ARPU’s

Shares of India’s largest telecom company Bharti Airtel lost more than Rs 12,000 crore in the market capitalisation as the global investment banking firm Jefferies said that the latest postpaid offer from Mukesh Ambani-controlled Reliance Jio Infocomm would make incumbents respond to it resulting in further degradation in ARPU’s of Bharti Airtel and Idea Cellular. Shares of Bharti Airtel extended losses in the late morning trade after opening lower in the early deals. The stock of Sunil Mittal-controlled and Gopal Vittal-led Bharti Airtel were the biggest losers among all the components of Sensex and Nifty on Friday.

The stock of Bharti Airtel dropped as much as 7.53% to a day’s bottom of Rs 381.2 on BSE while the stock crashed 7.43% to a day’s low of Rs 381.5 on NSE on Friday. Shares of Aditya Birla Group’s telecom firm Idea Cellular also declined heavily in the Friday’s dealings. Shares of Idea Cellular shed about 12.85% to an 8-year low of Rs 50.85 on Friday.

Following the massive declines in the share price of Bharti Airtel, the telecom giant lost about Rs 12,372 crore (approx) in the market capitalisation. According to the day’s low share price of Rs 381.2, Bharti Airtel commands a market capitalisation of nearly Rs 1,52,421 crore as against a market capitalisation of Rs 1,64,793 crore as per Thursday’s closing price of Rs 412.25 on BSE.

“This is at 50% discount to comparable packs by incumbents and 60% discount to postpaid ARPUs. We have been concerned on postpaid as it contributes 20% plus of revenues. With the sharp discount launch by Jio we expect incumbents to also respond and thus expect further decline in ARPU for Bharti and Idea. This is likely Jio’s first offer aimed at enterprise market. Remain cautious on the sector,” Jefferies said in a report.

“Incumbents will, in our view, have to respond to Jio’s plan and cut plan prices. Any 10% cut in postpaid prices will lead to around 2% cut in overall ARPU. Any 10% cut in postpaid prices will lead to 12 per cent/6 per cent EBITDA (Earnings before interest, tax, depreciation and amortization) hits for Idea and Bharti respectively,” Jefferies report said further.

Earlier yesterday, Mukesh Ambani-backed disruptive telecom player Reliance Jio Infocomm announced a new post-paid plan with a monthly rental of Rs 199 and an ISD calling service starting at a price of 50 paise per minute while during international roaming outgoing call would be charged at Rs 2 per minute onwards. “‘Zero-Touch’ postpaid plan to offer unlimited benefits at Rs 199 per month, international calling starting at 50 paise per minute and international roaming at Rs 2 for voice, data & SMS for all Jio customers,” Reliance Jio said in a statement.

The subscription for Reliance Jio’s postpaid plan will start from 15 May 2018. The customers opting for Rs 199 postpaid plan will not be required to pay any security deposit and they will get unlimited free voice, SMS and 25 GB data at 4G speed.

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