Shares of telecom player Bharti Infratel cracked up to 19 percent in morning trade on BSE on March 19, a day after the Supreme Court of India refused to offer any further relief to the telecom companies with regards to the AGR dues.
Shares of Bharti Airtel fell up to 11 percent but those of Vodafone Idea jumped up to 7 percent in morning trade on BSE.
Hearing the Department of Telecommunications (DoT) plea in the adjusted gross revenue (AGR) case, a bench of the Supreme Court of India on March 18 held that no further objections to its orders would be allowed against payable dues.
Most brokerages think that the telecom sector is moving towards a duopoly structure and Airtel and Reliance Jio are well-placed for this.
Global brokerage firm Credit Suisse said that SC’s rejection of self-assessment of AGR dues is particularly negative for Vodafone Idea and the company’s sustenance would remain under cloud without significant liquidity infusion.
On the other hand, Bharti Airtel would emerge as a key beneficiary of further market consolidation in a two-player scenario, Credit Suisse added.
The brokerage maintained its preference for Bharti Airtel and said its fair value could be Rs 622.
Morgan Stanley is of the view that AGR issue could create a duopoly structure and Airtel and Reliance Jio are well placed for this.
“Due to strong balance sheets they could gain market share,” Morgan Stanley said.
The global financial firm added that the bear case for Infratel increases if tenancy deletions from Vodafone Idea accelerate.
“Vodafone Idea’s FY21 ARPU would need to be Rs 235 to be FCF break-even. The company’s debt-to-EBITDA ratio is 30 times after building in total AGR liabilities,” Morgan Stanley said.
Airtel’s debt-to-EBITDA ratio is comfortable even after assuming AGR liabilities and despite correction, Morgan Stanley sees limited positive catalysts for Bharti Infratel.