Bharti Airtel: Outperforming Despite Daily Losses

Bharti Airtel, one of India's leading telecommunications service providers, has been making headlines recently, despite experiencing daily losses in the stock market. The company's resilience and strategic moves have contributed to its outperformance, making it an interesting case study for investors. Let's delve into the factors driving Bharti Airtel's recent performance and explore how it compares to its industry peers.

Bharti Airtel's revenue growth and earnings decline can be attributed to various factors, including market competition, regulatory changes, and economic conditions. However, the company's strategic moves have helped it maintain a strong position in the market. Some key factors contributing to Bharti Airtel's outperformance include:

1. Dividend Growth and Strong Free Cash Flow: HSBC maintained a 'Buy' rating on Bharti Airtel with a target price of ₹1,940/share, indicating a potential upside of 21.9% from the current market price (CMP) of ₹1,591.00. This is due to the company's expected dividend growth and strong free cash flow (FCF).
2. Acquisitions and Strategic Partnerships: Bharti Airtel has been actively expanding its portfolio through acquisitions and partnerships. For instance, it acquired a 26% stake in AMP Energy Green Three for Rs 37.89 crore, which is a special purpose vehicle (SPV) set up to operate a 50 MW hybrid wind-solar power project. Additionally, Bharti Airtel partnered with the Indian Army to bring connectivity to remote villages in North Kashmir, enhancing its network infrastructure and reach.
3. Market Share Gains: Despite the telecom sector's active subscriber base shrinking for the fourth consecutive month in October 2024, Bharti Airtel continued to gain momentum and narrowed its market share gap with Jio. This indicates that the company is effectively managing its customer base and market position.
4. Financial Strength: Bharti Airtel's revenue increased by 7.79% in 2023 compared to the previous year, reaching 1.50 trillion. Although earnings decreased by -10.53%, the company's strong financial performance and growth in revenue demonstrate its resilience.
5. Spectrum Liability Settlement: Bharti Airtel prepaid Rs 3,626 crore to the Department of Telecom to clear all liabilities for spectrum it had acquired in 2016. This move demonstrates the company's commitment to financial discipline and responsible management of its liabilities.

In conclusion, Bharti Airtel's outperformance despite daily losses can be attributed to its strategic moves, strong financial performance, and effective management of its customer base and market position. While the company's revenue growth and earnings decline may not be as impressive as some of its industry peers, such as Safaricom, Bharti Airtel's performance is more favorable compared to other major players like Vodafone Idea and MTN Group. As the telecommunications industry continues to evolve, investors should keep a close eye on Bharti Airtel's strategic moves and financial performance to identify potential opportunities.