Bharti announced that its plans to spend R600 bn or $9-10bn over the next three years on various network elements, predominately in the domestic business (see below). This is called Project Leap and it focuses on coverage expansion and network modernization, targets broadband homes and SMEs and also looks to implement more energy efficient solutions.
We are increasingly finding more positive data points and developments on this stock – such as relatively better domestic trends, strong spectrum holding, tower sales etc.
However, for re-rating, we will need to see more consistency, the R-Jio launch to be out of the way and improvement in Africa.
Good networks can help with customer churn and pricing power, which can lead to higher revenues and margins, and, in turn, higher future cashflows. See Figure below for select regional examples. However, we note stocks do not always tends to perform during the spend phase.
Project Leap’s $10-bn capex spread over three years is around 40% higher than our current cumulative forecast for Bharti’s Indian business. Its current Indian capex is around $2.2 bn per annum and total Bharti capex, including Africa, is around $10 bn over the next three years.
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