The brokerage house believes that the deal between Bharti Airtel and Google is going to prove to be better for both the companies. Talking about the Indian telecom industry, Airtel can prove to be the winner through this deal.
Recently, India’s leading telecom company Bharti Airtel has made a big deal with Google. According to the deal, Google will further invest $ 100 million in Airtel. Apart from making cheap smartphones, this deal has been done for the use of 5G. Through this deal, Google will buy 1.28 percent stake in Airtel at a price of Rs 734 per share. Brokerage house Motilal Oswal believes that this deal is going to prove to be better for both the companies. Talking about the Indian telecom industry, Airtel can prove to be the winner through this deal. Strong growth is expected in the business of the company. Those who invest in shares will also get the benefit of which. The brokerage has given investment advice in the stock.
How will Airtel benefit?
Bharti Airtel can take advantage of Google’s tech platform to explore the monetization of its digital offerings. It may be possible to seize the opportunity of a large pool of feature phone customers (more than 300 million) in the market through affordable devices. Airtel can leverage Google’s 5G technology solutions to offer use cases to SMEs/consumers including cloud services. At the same time, the company can achieve huge value through this new growth area over time.
Valuation and View
Talking about Airtel, the stock is trading at 5.6x Consolidated EV/EBITDA on FY24E basis. Whereas Employed India Business is trading at a multiple of 8.5. The brokerage house has projected 20% CAGR growth in EBITDA for FY22-24E. The brokerage believes that after this deal, potential rerating is expected in India and Africa business. Earning growth is better in both the sectors and will also benefit from tariff hike. There is improvement in ARPU and market share has also increased. Overall strong earnings growth is expected in the company. The brokerage house has given a target of Rs 920 for the stock. Whereas the current price of the share is Rs 716. In this sense, 29 to 30 percent return can be given in it.
Google will also benefit
Airtel is already using Google’s 5G-ready evolved packet core and software defined network platform. It is now planning to deploy Google’s network virtualization solutions to deliver a better network experience. In such a situation, this deal may be more than a capable investment to make ads for Google in India. This deal certainly looks to benefit Google in building front-end solutions.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
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