>Bharti Airtel (HSBC)

The 15% fall in Bharti’s share price since the launch of RCOM’s GSM service in December is an overreaction, in our view. Instead, investors should focus on
Bharti’s market leadership strengths and RCOM’s longer-term structural limitations of
operations in 1800MHz which require additional base stations. We believe the combination of
low revenue yields and bloated cost structure will reduce the scope for disruptive pricing and
competitive intensity will become more rational. In our view, Bharti is well placed to limit
damage to its earnings on the back of its strong balance sheet, high revenue market share,
brand positioning, and scale. Reference can be made to the Korean experience, which suggests
that changes in subscriber market share do not translate into changes in FCF/revenue market
share.
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