India’s Supreme Court dismissed curative petitions from Vodafone Idea and Bharti Airtel regarding the Adjusted Gross Revenue (AGR) dispute. For Bharti (Singtel’s 29%-owned associate), we estimate the original demand under the AGR case was INR630bn (S$9.75bn) (including liabilities on spectrum acquired from Tata, Telenor etc) of which Bharti has already paid INR180bn.
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Potential Bharti impact: The positive & the negative
Assuming Bharti pays the remaining AGR dues in 10 equal instalments, we estimate it will negatively impact Bharti’s Bloomberg consensus earnings by 8-16% over FY25-27 while the per share impact on the NPV of AGRs will by about INR40, or -2% based on Bharti’s current share price.
On the flip side, the impact on Vodafone Idea (#3 operator in India) will be much larger (-67% based on current share price) while its high leverage (11x FY25E net debt to EBITDA) will bring its survival into question. This in turn will mean that India could go down to 2 private mobile operators, or pricing would have to improve meaningfully for Vodafone Idea to survive.
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Potential impact on Singtel: Manageable impact on earnings & less impact on dividends
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Above is an excerpt from a report by Maybank Research. Clients of Maybank Securities may be the first to access the full PDF report @ https://www.maybanktrade.com.sg/.
