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A few points
1. The MTN deal is called off
2. Total telephone subscriber per 100 inhabitants in India is 32.57 wheras in USA that is 134. 92 as estimated in 2008 (reference http://www.itu.int/ITU-D/icteye/Reporting/ShowReportFrame.aspx?ReportNam...). So growth of AT&T and Bharti may not be extrapolated in same way just because of demographical differences. Bharti can give much higher growth rate
3.Low penetration of internet, digital life etc still gives ample scope to the service provider to grow far better extent in India compared to developed world
But the main worry of course
1. Dependency on GOI policy to a great extent
2. Competition amongst players in lowering the rate is uncertain and we may have to depend on each qtrly result of the company
But the above two are applicable in Banking sectors also and probably banks are more dependent on the hand of central govt.
I think any positive movement of GOI can increase the chance of growing the business of telephone service provider to greater extent.
This is really good info . As I was expecting MTN is called off and institutional investors will like it. That should be trigger for Bharati to move up.
I do agree that there is huge growth potential ahead. But remember that India has big kids population that won't go for phones soon. Now As far as stock is concerned which one is cheap .. Here is my analysis
Bharati Airtel :
CMP : 430 Rs.
Market Cap: 165000 Cr . Comes to around 35 Billion $
Operating Cash Flow ( net cash generated by business per year ) : 11000 Cr.
Source http://money.rediff.com/companies/bharti-airtel-ltd/15200022/balance-sheet
Net Income is : 8500 Cr. ( rough p/e 20 ) not bad
Debt to Equity : .23 .. I like that they have very less debt . One of the main reason is Bharati was all organic story so far. They didn't acquire any major ones and hence keeping their balance sheet clean.
Pros :
1. MTN deal off the table.
2. Low p/e
3. Low debt
4. Good cash flow
5. I think its operations in Sri Lanka should get boost after war ended in Sri Lanka. That should also drive growth.
6. Revenue Growth was 17% from 08 to 09. I don't think we will be able to sustain that kind of growth this year. But still new services could bring some good margins.
If Bharati can generate a cash flow of 18000 Cr this year. That will put its value at 1,80,000 cr. On Enterprise to cash flow basis.
Based on these analysis I agree Bharait is a good value pick.
AXIS Bank
CMP :1008
Market Cap: 36296 Cr.
Price to Book Value : 3.55
In banking industry p/e ration is of much less importance as compared to p/book value.
I will post some more analysis on AXIS soon.
That's an interesting question. Both are great companies . But not every good company is a good stock. Bharati is present in outstanding growing telecom market and has show exceptional performance. But I don't see much appreciation potential in stock in short to medium term for two reason a) it's market cap is already at very high level. b) It's trying to acquire MTN. But stock is a good candiate for long term if you can buy at better price. As growth stabilise I think company will start giving dividend that's when investors see returns. For example AT&T in USA is yielding 6% . Simply because there is not much growth opportunities for $150B dollar company.
I see much better prospects for AXIS Bank. As indian economy size expands india will need at least 20-30 world level banks. If we really look closely other than ICICI, HDFC and SBI there are not many banks who can claim to be global. Although banking industry is very crowded and there is huge potential for consolidation , AXIS Bank is very well positioned to take advantage of expanding economy.
In Summary , I would prefer AXIS Bank compared to Airtel today based on today's available information. I am also big fan of PNB though.