We believe that Bharti Airtel’s operating margins is likely to sustain around 40-42% in the coming years. We expect the ARPU to remain stable with a slightly negative bias with volume growth to support the downward pressure on tariffs.
Higher capex and improvement in network coverage will see further addition in the net subscriber additions, which has been growing at average 2 million per month in the last nine months.
We expect the net subscriber base will touch 61 million by FY08 on back of combination of low-priced entry plans and expanding network coverage. Based on above rationale, we recommend a BUY with target price of Rs705.