As per Bloomberg data, telecom major Bharti Airtel since the start of 2019 provided returns to the tune of 55.8% and has stood as the third-best performing stock in the telecom pack (both service providers and equipment manufacturers) globally. In the top spot is Ubiquiti Networks, a wireless data communication products company based out of the US, while China-based ZTE, provider of telecom equipment, bags the second place.
Since the start of 2019, the stock of Bharti Airtel has managed to outperform the Bloomberg World Telecommunication index by a substantial 45%. Bloomberg World Telecommunication index is a capitalisation weighted index of the top telecom stocks of the world.
And after domestic telecom service providers decided on ending predatory-pricing regime amid huge leverage and worsening financial condition, fundamentals of these companies seem to be improving. Additionally, the Supreme Court verdict on AGR dues also prompted them to act upon. Telecom players hiked tariffs for prepaid plans in the range of 14-33% and the new rates came into effect from early December.
The decision on tariff hike by telecom players together with Jio's taking part in the tariff hike has resulted in the re-rating of the valuation of the telecom firms. Investors have already discounted for a tariff hike of as much as 40-45% for the players but due to the higher risk over AGR payments and spectrum dues, investors are favouring Bharti Airtel to Vodafone Idea. Furthermore, the company's augmented free cash as well as fund raising plan of up to $3 billion will help the incumbent tide over the AGR payments crisis.
Nevertheless, the company's leverage continues to be the pain point for the stock with debt to EBITDA, a measure of the firm's ability to discharge debt payments, was at 3.94, which is the fourth highest among leading telecom stocks globally.