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India's tele-density has improved from under 4% in March 2001 to around 71% by the end of March 2011. Cellular telephony has emerged as the fastest growing segment in the Indian telecom industry. The mobile subscriber base (GSM and CDMA combined) has grown from under 2Million at the end of FY00 to touch 812Million at the end of March 2011 (average annual growth of nearly 73% during this eleven year period). This drastic change has also influenced the stock market of the telecom sector. Every firm in the stock market under the telecom sector services have been in a growing trend. As per the technical analysis undergone, the firms of Bharti Airtel, and Idea Cellular has been growing by the EPS and also by the dividend rates given to the investors in the past 5 years period. So its more beneficial to invest in the Telecom sector stock since this sector is expected to further growth in the stock market in the forth coming period.

Bharti Airtel has been the market leader in the telecom sector in the past decade. From the Fundamental analysis we can find that the Net revenue increased to 38% which can be estimated as Rs. 373 billion. And the net income has been increased to 79 Billion. The financial statement analysis and the ratio analysis depicts that the financial

performance is stable and its proceeding are in a favourabl;e and looking an upward trend in the growth sector. The moving average of Bharti Airtel indicates that the Stock of Bharti Airtel is having a trend of a growing pace from current to 200 days moving average which motivates the investor to trade in that companys share which would give an increasing return.

The one year stock price movement of Bharti Airtel denotes that the price fluctuation ranges between Rs.441.35 to Rs.317.05 with an average of Rs.379.2 which indicates that the shares of this firm will be a feasible one to invest and expect an higher return on investment every year.

Bharti Airtel (Bharti) Bharti Airtel (Bharti) reported a mixed performance for FY2012, with revenue coming in-line with our as well as street expectations. The company, however, disappointed on the operating and profitability fronts due to higher depreciation and amortization expenses. Also, minutes of usage (MOU) of mobile India as well as Africa business declined by 1.0% and 2.5% qoq to 419min and 125min, respectively. We maintain our Neutral view on the stock. Result highlights: For FY2012, Bhartis consolidated revenue stood at Rs.18,477cr, up 6.9% qoq. Revenue from mobile services for India came in at Rs.10,176cr, up 4.0% qoq on the back of a 3.2% qoq increase in average revenue per minute (ARPM) to Rs.0.45/min. However, MOU declined by 1.0% qoq due to slow traffic growth. Zain Africas contribution to revenue stood at Rs.5,358cr, up by whopping 16.7% qoq, aided by INR depreciation and 2.5mn net subscriber additions. EBITDA margin of mobile India as well as Africa business increased by 0.18bp and 0.47bp qoq to 33.8% and 26.7%, respectively. However, EBITDA margin of all the other business segments declined sharply, which led to a 141bp qoq decline in Bhartis consolidated EBITDA margin to 32.2%. PAT came in at Rs.1,011cr, down 1.5% qoq, negatively impacted by higher depreciation costs of Rs.3,585cr in 3QFY2012 vs. Rs.3,184cr in 2QFY2012 and higher tax rates.

Bharti is on its way to turnaround its Africa business by bringing down its network operating expenditure by outsourcing various network-related developments. Thus, we expect the combination of stable KPIs and cost efficiencies to drive the EBITDA margin for the Africa business to 26.6% and 27.0% by FY2012 and FY2013, respectively. We expect Bhartis Indian and African mobile subscriber base to post a CAGR of 8.2% and 17.4% over FY201113E to 189.9mn and 60.9mn subscribers, respectively. However, key downside risks such as 1) uncertainty in regulatory outcome; 2) pricing scenario in Africa operations; and 3) delay in return on investments made in 3G launches, still loom. We maintain our Neutral rating on the stock

Idea Cellular

Idea Cellular witnessed an impressive top-line performance, ahead of our and consensus estimates, backed by a 6.7% qoq growth in mobile gross revenues, with a strong addition of 6.1mn subscribers (including Spice) during the quarter. The growth was further boosted by the NLD and Passive Infrastructure businesses, which witnessed a 35% and a 10.4% qoq growth, respectively. However, on the Bottom-line front, the company underperformed our estimates, on account of tariff pressures and higher costs incurred on the launch of five new service areas. Thus, considering the deteriorating performance by the company, which is expected to continue for the next 2-3 quarters, we have downgraded our estimates by 10-15% over FY2010E-12E. Further, considering the recent run-up in the stock price, coupled with its relative valuations, we recommend a Reduce on Idea. With the growing Indian economy, Indian telecom industry is expected to grow roughly by 20% in the next 5 years. This along with rapid mobile penetration will have a positive impact on Ideas earnings. While Idea Cellular is an investment worthy company, it is always best to invest in a company at an attractive valuation. Currently, Ideas stock is trading at a price of Rs. 65. But, does this price offer an attractive discount to Ideas right value (MRP) or is it over-priced? It is always best to invest at an attractive discount to its MRP, to get maximum returns at minimum risk.

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