Singtel's Bharti Airtel could narrow losses in 2020: analyst

It could lift Singtel’s FY20-21 net profits by 2% and 4% respectively.

Singtel’s Indian telco Bharti Airtel will benefit from its efforts to raise mobile tariffs in India as it will likely narrow its losses in 2020, according to a note by UOB Kay Hian.

Airtel, Vodafone Idea and Jio have unveiled new prepaid mobile plans effective 3 December with price hikes ranging from 15% to 52%. This comes on the back of mounting losses by Airtel and Idea in the past quarters. Airtel reported core net loss of $83m (INR4.4b) in Q2 2020 due to provisions for unfavourable court verdict on adjusted gross revenue as well as a competitive operating landscape.

“Based on our sensitivity analysis, the higher turnover arising from Airtel’s tariff hike (we modelled in an average ASP hike of 33% yoy) could lift Singtel’s FY20-21 net profits by 2% and 4% respectively,” said Chong Lee Len, analyst at UOB Kay Hian. “Whilst we view the tariff hike positively, near-term sentiment may be dampened by a recent capital raising exercise of US$3b by Bharti.”

Meanwhile, the report noted that Singtel will likely focus on defending its market share in both Singapore and Australia markets, amping up its digital businesses and in 2020 and keeping a tight lid on costs through digitisation.

The telco aims to have stable top-line and EBITDA for FY20 amidst competition in the consumer segment and weak enterprise business outlook. Dividends from regional associates are expected to amount to $1.2b in the same period.

“Barring unforeseen circumstances, we believe management could maintain ordinary dividend at 17.5 S cents for FY20. This translates into a net dividend yield of 5.1%,” said Chong Lee Len, analyst at UOB Kay Hian,” Chong said.

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