Best Telecom Stocks – Bharti Airtel Ltd vs Reliance Communications Stocks

Company Overview of Bharti Airtel Ltd

Bharti Airtel Limited is an international telecommunications company that operates in five key sectors: Mobile Services, Homes Services, Digital TV Services, Airtel Business, and South Asia. In India, the Mobile Services segment offers voice and data telecommunications using 2G, 3G, and 4G technologies. 

Homes Services provides fixed-line phone and broadband services in 1,225 cities across India. The Digital TV Services segment includes standard and HD digital TV services with 3D features and Dolby surround sound, offering a total of 706 channels, including 86 HD channels, 4 international channels, and 4 interactive services.  

Company Overview of Reliance Communications Ltd

Reliance Communications Limited, an India-based telecommunications service provider, offers a range of services to various industries. These services, including wireline and wireless telecom services, cater to business and government clients. 

The company’s offerings cover network connectivity, cloud networking, data center services, and more, serving over 10,000 businesses of different scales. This includes multinational corporations as well as small and medium enterprises across sectors like BFSI, manufacturing, healthcare, IT, ITeS, and OTT.

Stock performance of Bharti Airtel

The table below shows the stock performance of Bharti Airtel Ltd over the past 1 year.

Stock performance of Reliance Communications

The table below shows the stock performance of Reliance Communications Ltd over the past 1 year.

Fundamental Analysis of Bharti Airtel Ltd

Bharti Airtel, commonly known as Airtel, is one of India’s leading telecommunications service providers. Established in 1995, the company offers a wide range of services, including mobile and fixed-line voice services, broadband, and digital TV. It has a substantial presence in several countries across South Asia and Africa, making it a key player in the global telecommunications market.  

The stock has a closing price of ₹1569.30, with a market cap of ₹938,349.08 crore. It offers a dividend yield of 0.48% and a book value of ₹105,563.90. Over 5 years, its CAGR stands at 30.61%, but its 5-year average net profit margin is negative at -6.94%. The stock has returned 61.83% in the last year, though it’s 13.36% away from its 52-week high and has seen a 10.50% decline in the past month.

• Close Price ( ₹ ): 1569.30
• Market Cap ( Cr ): 938349.08
• Dividend Yield %: 0.48
• Book Value (₹): 105563.90 
• 1Y Return %: 61.83
• 6M Return %: 16.43
• 1M Return %: -10.50
• 5Y CAGR %: 30.61
• % Away From 52W High: 13.36
• 5Y Avg Net Profit Margin %: -6.94  

Fundamental Analysis of Reliance Communications Ltd

Reliance Communications (RCOM) is a prominent Indian telecommunications company known for its innovative services and widespread network coverage. Established in 2002, it has played a significant role in revolutionizing the telecom sector in India by offering a variety of services including mobile, broadband, and enterprise solutions.   

The stock is priced at ₹1.88, with a market cap of ₹515.92 crore and a negative book value of ₹-82,136. It has delivered a 7.43% return over the past year, but its 5-year CAGR is 20.18%. However, the stock has a significantly negative 5-year average net profit margin of -1738.25%. It is currently 37.23% below its 52-week high and has seen a 14.55% decline in the past month.

• Close Price ( ₹ ): 1.88
• Market Cap ( Cr ): 515.92 
• Book Value (₹): -82136.00 
• 1Y Return %: 7.43
• 6M Return %: 13.94
• 1M Return %: -14.55
• 5Y CAGR %: 20.18
• % Away From 52W High: 37.23
• 5Y Avg Net Profit Margin %: -1738.25  

Financial Comparison of Bharti Airtel and Reliance Communications

The table below shows a financial comparison of Bharti Airtel Ltd and Reliance Communications Ltd.

Points to be noted:

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): Measures a company’s profitability before accounting for financial and non-cash expenses.
• PBIT (Profit Before Interest and Tax): Reflects operating profit by excluding interest and taxes from total revenue.
• PBT (Profit Before Tax): Indicates profit after deducting operating costs and interest but before taxes.
• Net Income: Represents the company’s total profit after all expenses, including taxes and interest, are deducted.
• EPS (Earnings Per Share): Shows the portion of a company’s profit allocated to each outstanding share of stock.
• DPS (Dividend Per Share): Reflects the total dividend paid out per share over a specific period.
• Payout Ratio: Measures the proportion of earnings distributed as dividends to shareholders.

Dividend of Bharti Airtel and Reliance Communications

The table below shows a dividend paid by the company.

Advantages and Disadvantages of Investing Bharti Airtel

Bharti Airtel Ltd

The primary advantage of Bharti Airtel Ltd lies in its strong market presence, offering seamless connectivity and extensive network coverage. With robust infrastructure and competitive offerings, it continues to attract a large customer base across India and internationally.

1. Extensive Network Coverage
   Bharti Airtel has an expansive network infrastructure across urban and rural areas, ensuring reliable and consistent connectivity. This wide reach solidifies its position as one of the leading telecom providers in India and globally.
2. Innovative Service Offerings
   The company regularly introduces customer-centric innovations, including affordable plans, fast internet services, and digital solutions. These offerings cater to a diverse audience, enhancing user experience and increasing customer retention.
3. Strong Financial Performance
   Airtel’s consistent revenue growth and strategic investments in 5G technology showcase its financial stability. This enables the company to expand its services while maintaining profitability in a competitive telecom market.
4. Global Footprint
   Bharti Airtel operates in multiple countries, making it a significant player in the global telecom space. Its international operations contribute to its revenue and enhance its global brand recognition.
5. Digital Ecosystem Expansion
   With ventures like Airtel Payments Bank and Airtel Xstream, the company is expanding into a broader digital ecosystem. This diversification strengthens its market position and aligns with emerging consumer trends in digital services.

The main disadvantage associated with Bharti Airtel Ltd. is its highly competitive industry, where pricing wars and market pressures could impact profitability. Despite its robust operations, external factors like regulatory changes and economic downturns pose significant challenges.

1. Intense Market Competition
   The telecom sector is marked by fierce competition, with rivals aggressively vying for market share. This can lead to price wars, squeezing margins and affecting revenue growth for Bharti Airtel.
2. Regulatory Challenges
   Frequent policy changes and regulatory obligations in the telecom industry can increase operational costs. Compliance with such measures might strain resources and impact Airtel’s financial stability in the long term.
3. High Debt Levels
   Airtel’s significant capital expenditure, particularly in expanding 5G infrastructure, has resulted in high debt levels. This financial burden could affect liquidity and limit the company’s ability to fund future initiatives.
4. Technological Disruption
   Rapid advancements in technology and the emergence of disruptive competitors can challenge Airtel’s market position. Failure to adapt or innovate quickly could lead to customer attrition and reduced revenue.
5. Economic Sensitivity
   Airtel’s performance is closely tied to economic conditions. Factors like reduced consumer spending during downturns or inflationary pressures on costs can negatively affect its profitability and growth prospects.

Advantages and Disadvantages of Investing Reliance Communications

Reliance Communications Ltd

The primary advantage of Reliance Communications Ltd lies in its established brand legacy in India’s telecom sector. Despite challenges, the company benefits from its historical presence and infrastructure, which could offer opportunities for revival or strategic partnerships.

1. Brand Recognition
   Reliance Communications benefits from strong brand recall due to its historical prominence in the telecom industry. This recognition provides a foundation for exploring opportunities in partnerships or alternative service models.
2. Infrastructure Assets
   The company owns significant telecom infrastructure, including fiber networks and towers. These assets hold strategic value and can be monetized or leased to generate revenue and strengthen its financial position.
3. Diverse Service Offerings
   Reliance Communications historically catered to a broad customer base with services ranging from mobile connectivity to enterprise solutions. This diversity provides potential for targeted revival in niche segments or specific markets.
4. Potential for Strategic Alliances
   The company’s assets and legacy make it a candidate for mergers, acquisitions, or joint ventures. Such alliances can bring in fresh investments and expertise to drive growth or operational stability.
5. Opportunities in Emerging Markets
   With global telecom trends shifting towards underserved regions, Reliance Communications could leverage its expertise and infrastructure to explore new opportunities in emerging markets, offering services aligned with local needs and economic conditions.

The main disadvantages facing Reliance Communications Ltd lie in its ongoing financial struggles and insolvency proceedings. These challenges have significantly impacted its operations, creating uncertainties regarding its ability to sustain or revive its telecom business.

1. High Debt Burden
   Reliance Communications faces an overwhelming debt load, limiting its financial flexibility. The inability to service this debt has led to insolvency proceedings, posing a substantial risk to its operational continuity.
2. Regulatory and Legal Challenges
   Ongoing legal disputes and regulatory scrutiny further strain the company’s operations. These challenges divert focus from business revival efforts and may result in penalties or unfavorable rulings.
3. Loss of Market Share
   The company’s financial struggles have caused it to lose significant market share to competitors. This loss weakens its brand value and reduces its potential for recovery in a highly competitive telecom sector.
4. Deteriorating Infrastructure
   Limited investment in maintaining and upgrading its telecom infrastructure has resulted in deteriorating service quality. This decline undermines customer trust and makes it harder for the company to regain its competitive edge.
5. Uncertain Revival Prospects
   The insolvency proceedings create uncertainty about the company’s future direction. The potential liquidation or restructuring outcomes could impact shareholders, creditors, and employees, raising questions about the sustainability of its operations.

How to Invest in Bharti Airtel and Reliance Communications Stocks?

Investing in Bharti Airtel and Reliance Communications stocks requires a systematic approach, starting with selecting a reputable stockbroker.

1. Open a Demat and Trading Account
   Begin by opening a Demat and trading account with a registered stockbroker such as  Alice Blue. This process involves submitting necessary documents like PAN card, Aadhaar, and bank details, which can be completed online for convenience.
2. Complete the KYC Process
   Ensure that you fulfill the Know Your Customer (KYC) requirements mandated by regulatory authorities. This step verifies your identity and address and is essential for activating your trading account.
3. Fund Your Trading Account
   After account activation, transfer funds from your bank account to your trading account. This capital will be used to purchase shares of Bharti Airtel and Reliance Communications. 
4. Place Your Buy Orders
   Utilize the trading platform provided by your broker to search for Bharti Airtel and Reliance Communications stocks using their respective ticker symbols. Decide on the number of shares you wish to purchase and place your buy orders accordingly.
5. Monitor Your Investments
   Regularly review the performance of your investments through your trading account. Stay informed about market trends and company-specific news to make informed decisions regarding holding or selling your stocks.

Bharti Airtel Ltd. vs Reliance Communications Ltd – Conclusion

Bharti Airtel stands as a market leader with robust financials, cutting-edge technology, and a global footprint. Its ability to innovate and adapt ensures sustained growth, making it a reliable choice for long-term investors in the telecom sector.

Reliance Communications faces significant challenges, including insolvency and declining market share. While its infrastructure and legacy offer strategic value, its financial struggles and uncertain future limit its appeal to investors, requiring cautious consideration for any potential opportunities.

Best Telecom Stocks – Bharti Airtel Ltd. vs Reliance Communications Ltd – FAQ

Disclaimer: The above article is written for educational purposes, and the companies’ data mentioned in the article may change with respect to time The securities quoted are exemplary and are not recommendatory.