Nomura Report On Bharti Infratel Ipo - 101212

Bharti Airtel
BRTI.NS BHARTI IN
EQUITY RESEARCH
TELECOMS
December 10, 2012
Tower IPO another sentiment driver?
Rating
Remains
Unlocking valuenot realizing

value
Reduce
Target price
Remains
INR 290
Closing price
December 5, 2012
INR 330
Potential downside
Bharti Infratel IPO

Bharti Infratel (BIL) is expected to list this month. With 81k towers, it will be
the largest listed towerco globally. The indicative price range as reported
in recent press reports (Reuters reported dated 30 Nov 2012), is INR210240/share, vs our implicit valuation of INR202. Given what we consider
strong interest in global towercos currently (60% average share price
increase this year in listed global tower stocks), along with BILs limited
10% free float and EV/EBITDA of 12x (based on the indicative price
range), or a 40% discount to our global peer average estimate, we expect
decent investor interest in the IPO.
Anchor themes
Domestic pricing trends,
regulations and African
performance will be the key
drivers of the stock.
Nomura vs consensus
Our target price is 10% below
consensus due to operational
and regulatory concerns.
We are relatively more bullish on towercos

Relative to those of the operators, cashflow, churn and margins of the
towercos are more appealing, in our view. Towercos also have lower
technology obsolescence and capex risks. Tenancies should rise
moderately given data and voice growth along with limited spectrum we
expect BILs tenancies to rise to 2.2x by FY15F vs. 1.9x now.
Research analysts
India Telecoms
Sachin Gupta, CFA - NSL
sachin.gupta@nomura.com
+65 6433 6968
but not every towerco is the same are Indians different?

1) Avg monthly rental in India of USD800 is well below USD1.5-2k in
Indonesia and the US; 2) Indias supply is much higher 387k towers vs.
70k in Indonesia and 150k in the US (spectrum in India is much less, too);
3) tenancies in India of 1.8x are similar to Indonesia but much lower than
2.7x in the US; 4) BIL's revenue and EBITDA growth of 8-12% in FY14F is
below the 20% towerco peer average; 5) BILs gearing of 0.8x is well
below the peer average of 4.6x; and 6) we estimate average payback in
India at 8 years vs. 4 years in Indonesia. There is a step-down clause for
incremental tenants in India, which is not common in Indonesia.
31 Mar
Currency (INR)
Revenue (mn)
FY12
Actual
FY13F
Old
New
FY14F
Old
New
Neeraja Natarajan - NSL

neeraja.natarajan@nomura.com
+65 6433 6961
Pankaj Suri - NSFSPL
pankaj.suri@nomura.com
+91 22 4053 3724
Gopakumar Pullaikodi - NSFSPL
gopakumar.pullaikodi@nomura.com
+91 22 4053 3733
Shweta Dixit - NSFSPL
shweta.dixit@nomura.com
+91 22 672 35457
FY15F
Old
New
714,508 796,524 796,524 857,097 857,097 923,354 923,354
Reported net profit (mn)
42,594
39,828
39,828
54,495
54,495
66,794
66,794
Normalised net profit (mn)
47,890
39,828
39,828
54,495
54,495
66,794
66,794
FD normalised EPS
12.61
10.49
10.49
14.35
14.35
17.59
17.59
FD norm. EPS growth (%)
-27.3
-16.8
-16.8
36.8
36.8
22.6
22.6
25.9
N/A
31.1
N/A
22.8
N/A
18.6
EV/EBITDA (x)
8.3
N/A
7.9
N/A
6.7
N/A
5.8
Price/book (x)
2.5
N/A
2.3
N/A
2.1
N/A
1.9
Dividend yield (%)
0.3
N/A
0.3
N/A
0.7
N/A
1.4
ROE (%)
8.6
7.6
7.6
9.6
9.6
10.7
10.7
132.4
120.5
120.5
101.1
101.1
79.7
79.7
FD normalised P/E (x)
Net debt/equity (%)
-12.1%
Source: Company data, Nomura estimates
Key company data: See page 2 for company data and detailed price/index chart.
See Appendix A-1 for analyst

certification, important
disclosures and the status of
non-US analysts.
Nomura | Bharti Airtel
December 10, 2012
Key data on Bharti Airtel

Incomestatement(INRmn)
Relative performance chart (one year)
Year-end 31 Mar
Revenue
Cost of goods sold
Gross profit
SG&A
Employee share expense
Operating profit
FY11
595,383
-123,054
472,329
-373,677
0
98,652
FY12
714,508
-147,960
566,548
-463,106
0
103,442
FY13F
796,524
-177,170
619,353
-521,693
0
97,661
FY14F
857,097
-181,777
675,320
-558,476
0
116,844
FY15F
923,354
-189,331
734,022
-603,978
0
130,044
EBITDA
Depreciation
Amortisation
EBIT
Net interest expense
Associates & JCEs
Other income
Earnings before tax
Income tax
Net profit after tax
Minority interests
Other items
Preferred dividends
Normalised NPAT
Extraordinary items
Reported NPAT
Dividends
Transfer to reserves
200,718
-102,066
0
98,652
-21,813
0
-57
76,782
-17,790
58,992
1,475
5,397
0
65,864
-5,397
60,467
-3,797
56,670
237,123
-133,681
0
103,442
-38,185
0
-74
65,183
-22,602
42,581
13
5,296
0
47,890
-5,296
42,594
-3,797
38,797
249,373
-151,712
0
97,661
-38,195
0
0
59,465
-19,029
40,436
-609
0
0
39,828
0
39,828
-3,550
36,277
282,297
-165,453
0
116,844
-35,657
0
0
81,188
-25,980
55,208
-712
0
0
54,495
0
54,495
-8,174
46,321
313,466
-183,422
0
130,044
-30,617
0
0
99,427
-31,817
67,610
-816
0
0
66,794
0
66,794
-16,699
50,096
20.5
18.8
18.8
17.0
0.3
7.4
2.5
9.6
19.5
79.3
33.7
16.6
10.2
23.2
6.3
38.9
2.3
13.4
9.4
29.1
25.9
25.9
23.4
0.3
6.4
2.5
8.3
19.1
79.3
33.2
14.5
6.0
34.7
8.9
25.7
1.4
8.6
6.9
31.1
31.1
31.1
28.1
0.3
6.3
2.3
7.9
20.1
77.8
31.3
12.3
5.0
32.0
8.9
22.3
1.2
7.6
6.2
22.8
22.8
22.8
20.6
0.7
5.7
2.1
6.7
16.3
78.8
32.9
13.6
6.4
32.0
15.0
18.8
1.0
9.6
7.4
18.6
18.6
18.6
16.8
1.4
4.9
1.9
5.8
14.0
79.5
33.9
14.1
7.2
32.0
25.0
17.7
0.9
10.7
8.2
52.5
25.2
20.0
18.1
11.5
5.2
7.6
13.2
7.7
11.0
-24.9
-24.8
-27.3
-27.3
-16.8
-16.8
36.8
36.8
22.6
22.6
15.94
17.36
17.35
128.44
1.00
11.22
12.61
12.61
133.29
1.00
10.49
10.49
10.49
142.78
0.94
14.35
14.35
14.35
156.20
2.15
17.59
17.59
17.59
172.20
4.41
Valuation and ratio analysis

Reported P/E (x)
Normalised P/E (x)
FD normalised P/E (x)
FD normalised P/E at price target (x)
Dividend yield (%)
Price/cashflow (x)
Price/book (x)
EV/EBITDA (x)
EV/EBIT (x)
Gross margin (%)
EBITDA margin (%)
EBIT margin (%)
Net margin (%)
Effective tax rate (%)
Dividend payout (%)
Capex to sales (%)
Capex to depreciation (x)
ROE (%)
ROA (pretax %)
Growth (%)
Revenue
EBITDA
EBIT
Normalised EPS
Normalised FDEPS
Per share
Reported EPS (INR)
Norm EPS (INR)
Fully diluted norm EPS (INR)
Book value per share (INR)
DPS (INR)
Source: ThomsonReuters, Nomura research
(%)
1M
3M 12M
Absolute (INR)
22.5 31.1 -12.9
Absolute (USD)
18.1 31.3 -18.1
Relative to index
Market cap (USDmn)
Estimated free float (%)
52-week range (INR)
3-mth avg daily turnover
(USDmn)
Major shareholders (%)
20.1 23.2 -34.1

22,327.8
32.1
400.95/215.8
29.80
Bharti Telecom Ltd
45.3
Singapore Telecom
15.6
Source: Thomson Reuters, Nomura research
Notes
Earnings volatility should remain

high and valuations arent
inexpensive yet
December 10, 2012
Cashflow(INRmn)
Year-end 31 Mar
EBITDA
Change in working capital
Other operating cashflow
Cashflow from operations
Capital expenditure
Free cashflow
Reduction in investments
Net acquisitions
Reduction in other LT assets
Addition in other LT liabilities
Adjustments
Cashflow after investing acts
Cash dividends
Equity issue
Debt issue
Convertible debt issue
Others
Cashflow from financial acts
Net cashflow
Beginning cash
Ending cash
Ending net debt
Notes
0
-23,550
34,047
36,730
70,776
599,456
FY15F
313,466
-1,475
-60,445
251,546
-163,150
88,395
0
0
0
0
0
88,395
-8,174
0
-30,000
0
0
-38,174
50,221
70,776
120,997
519,235
FY13F
36,730
18,132
70,944
1,373
44,609
171,788
0
675,444
0
690,889
87,043
1,625,164
143,078
213,575
95,530
452,183
547,154
FY14F
70,776
18,132
72,628
1,442
44,609
207,588
0
655,288
0
710,889
87,288
1,661,053
143,078
214,149
95,273
452,500
527,154
FY15F
120,997
18,132
74,471
1,514
44,609
259,724
0
619,766
0
730,889
87,556
1,697,935
143,078
217,860
92,001
452,939
497,154
Notes
55,380
1,054,717
28,304
0
116,739
431,713
0
-6,308
542,144
1,625,164
59,295
1,038,948
29,016
0
116,739
482,658
0
-6,308
593,089
1,661,053
66,301
1,016,394
29,832
0
116,739
541,278
0
-6,308
651,708
1,697,935
0.30
2.7
0.38
2.6
0.46
3.3
0.57
4.2
3.02
124.50
2.83
132.37
2.62
120.54
2.12
101.07
1.66
79.67
24.3
3.9
325.3
-297.1
30.4
4.3
481.0
-446.3
30.9
2.8
416.7
-383.0
30.6
2.8
429.4
-396.0
29.1
2.8
416.4
-384.5
FY11
200,718
120,566
-154,584
166,700
-231,819
-65,119
57,079
-372,676
0
0
-57,079
-437,795
-3,794
0
578,290
FY12
237,123
-3,054
-41,169
192,900
-183,609
9,291
-11,908
0
0
0
11,908
9,291
-3,797
0
-2,830
FY13F
249,373
6,036
-57,819
197,589
-177,363
20,227
0
0
0
0
0
20,227
-3,797
0
0
FY14F
282,297
-1,436
-62,449
218,412
-160,815
57,597
0
0
0
0
0
57,597
-3,550
0
-20,000
-141,029
433,467
-4,328
13,903
9,575
607,133
8,061
1,434
10,725
9,575
20,300
669,932
0
-3,797
16,430
20,300
36,730
653,502
FY11
9,575
6,224
54,929
2,139
39,210
112,077
0
651,426
0
637,317
64,244
1,465,064
84,370
197,947
87,528
369,845
532,338
0
46,650
948,833
28,563
0
116,472
357,446
0
13,750
487,668
1,465,064
FY12
20,300
18,132
63,735
1,308
44,609
148,084
0
674,932
0
660,889
86,711
1,570,616
193,078
190,913
104,882
488,873
497,154
0
50,781
1,036,808
27,695
0
116,739
395,682
0
-6,308
506,113
1,570,616
0.30
4.5
Leverage
Net debt/EBITDA (x)
Net debt/equity (%)
Activity (days)
Days receivable
Days inventory
Days payable
Cash cycle
Cash flow outlook is strong, but

spectrum renewal payment structure
is unclear
Balancesheet(INRmn)
As at 31 Mar
Cash & equivalents
Marketable securities
Accounts receivable
Inventories
Other current assets
Total current assets
LT investments
Fixed assets
Goodwill
Other intangible assets
Other LT assets
Total assets
Short-term debt
Accounts payable
Other current liabilities
Total current liabilities
Long-term debt
Convertible debt
Other LT liabilities
Total liabilities
Minority interest
Preferred stock
Common stock
Retained earnings
Proposed dividends
Other equity and reserves
Total shareholders' equity
Total equity & liabilities
Liquidity (x)
Current ratio
Interest cover
Gearing levels are high at 2.6x

relative to regional telcos
December 10, 2012
Tower IPO another sentiment driver?

Global towercos are up 60% YTD and have outperformed their respective local
markets by 45% on an average. There is plenty of market activity in this space:
Tower acquisitions by Indonesian towercos TBIG (from Indosat) and Protelindo (from
CI and MKP domestically, and KPN in Netherlands);
Acquisitions in the US, namely Crown Castles acquisition of T-Mobiles towers and
SBACs acquisition of Towercos assets;
A 16% sell down by Protelindos parent, followed by a 4% sell-down by TBIGs; and
The upcoming IPO by Bharti Infratel.
With the Bharti Infratel (BIL) listing expected in the next few days, we believe
investor sentiment towards Bharti shares could improve. Although Bharti will not
realise any cash gains from this IPO (its shareholding will be diluted to 79% post listing
vs. 86% earlier), the listing will lead to a market-driven valuation for this business,
which is the first of its kind and of this magnitude in India, in our view.
BIL is already one of the largest tower companies globally, with 81k towers and
154k tenancies (average tenancy 1.9x) as of Sep-12.
Bharti Infratel has 34k of its own towers (average tenancy of 1.8x) and a 42% share of
Induss (unlisted) 111k towers (average tenancy of 2.0x).
BIL (consolidated) generated revenue of INR96bn, EBITDA of INR36.8bn and NPAT
of INR7.5bn in FY12. It contributed to 12-15% of revenue / EBITDA for Bharti in FY12.
The US tower companies have smaller portfolios, with towers in the range of 13-51k,
although with much higher tenancy of 2.7x.
In comparison, Indonesian players have smaller portfolios with 6-18k towers, and
tenancy ratio of 1.8x.
Fig. 1: BIL IPO structure
Bharti Airtel
Financial Investors
QIBs
11%
79%
Non-Institutional
Buyers
IPO
10%
Bharti Infratel
Fresh issue (146mn) and

an offer for sale (43mn)
Retail
Individual
Aditya Birla
telecom
Vodafone India
100%
42%
Bharti Infratel Ventures
42%
16%
Indus Towers
Source: Company reports, BIL IPO prospectus
December 10, 2012
Valuation comparison
USD8-9bn implied market cap. As per recent press articles (including Reuters, Bharti
Infratel IPO band set at 210-240 rupees/share, 30 November 2012), the BIL IPO price
range of INR210-240 per share implies a market cap of USD8-9bn, or EV per tower of
USD98-112k and EV/EBITDA of 11-12x (based on an annualized FY13F EBITDA).
Our current implied EV for Bharti Infratel is USD7.6bn or INR202 per share (see
Figure 3).
Based on the IPO prospectus, the company is planning to raise INR40-45bn
(USD730-835mn). The issue consists of a fresh issue of shares (146mn or 8% of the
final outstanding share count) and an offer for sale (43mn or 2%).
Use of funds (based on the IPO prospectus): a) installation of 4,813 new towers for
INR11bn; b) upgrading and replacement on existing towers for INR12bn; c)
undertaking green initiatives at tower sites for INR6bn; and d) general corporate
purposes.
Fig. 2: Implied valuation for Infratel as per an IPO price range of INR210-240 per share
Low-end
Share price (INR)
Shares outstanding post IPO (mn)
Implied market cap (INR mn)
Implied market cap (USD mn)
(Discount ) / Premium to Nomura v aluation
240
1,889
1,889
396,606
453,264
7,932
9,065
4%
19%
Consolidated tow ers (as of Sep-12)
80,656
FY13F EBITDA (INR mn)
37,714
Implied EV/tow er (USD k)
High end
210
98
112
10.5x
12.0x
Bharti's current market cap (INR mn)
1,230,228
1,230,228
Bharti's current market cap (USD mn)
24,605
24,605
Implied value per Bharti share (INR)
82.5
94.3
% value contribution to Bharti
25%
29%
Implied EV/EBITDA (FY13F)
Source: Press articles (Reuters, Bloomberg), Nomura research
December 10, 2012
Fig. 3: Nomuras Infratel valuation

INFRATEL VALUATION BREAKDOWN
NPV (INR mn)
417,105
Infratel
176,901
Indus @ 42%
240,203
NPV (US$ mn)
8,342
Infratel
3,538
Indus @ 42%
4,804
Debt
Infratel
Indus @ 42%
Equity
36,354
36,354
380,750
(in USD mn)
7,615
SHO at Infratel (mn) after lisiting
1,889
Infratel per share value (INR)
202
Contribution to Bharti
Value of minority stake of 21% (Rs mn)
79,958
Value of minority stake of 21% (US$ mn)
1,599
Bharti SHO (mn)
3,797
Im plied value for Infratel per Bharti share (INR)
79
Note : For NPV, we assume WACC of 10% and growth rate of 2-3%, with cash flows discounted back to FY17F.
Source: Nomura estimates
December 10, 2012
Fig. 4: Estimated single tower payback period for Indian / and Indonesian tower companies
INDIA
INDONESIAN TOWERS
Capex assumptions
Capex assumptions
Initial cost of tow er (USD)
60,000
Initial cost of tow er (INR)
3,000,000
Revenue assumption
Sharing rev enue per operator per month (INR)
Revenue assumption
35,000
Stepdown with incremental tenancy

Sharing rev enue per operator per month (USD)
31,500
-10%
Employ ee costs as % of sales
113
147
Land/site rental cost (not included in opex ) per tow er (IDR mn)
16,477
1,713
1,713
16.8
19.3
0%
Cost assumptions
30%
2,262
2,941
10%
Increase from inflation

SG&A and other
16,477
630
Increase in rents
Land/site rental cost per tow er site p.a. (USD )
Sharing rev enue per operator per month (IDR 000s)
700
Cost assumptions
Land/site rental cost per tow er site p.a. (INR 000s)
100,000
Site maintanence per tow er p.a. (IDR mn)
15%
18.5
Increase in rents
30%
20%
Site maintanence per tow er p.a (USD )

Other costs as % of sales
30%
1,924
1%

SG&A
2,308
1%
20%
12%

SINGLE TOWER FINANCIALS
22
20%
20%
Income statement (USD)
Sharing factor
1.0
2.0
Sharing factor
1.0
2.0
8,400
15,120
Rental rev enues
20,553
41,106
2,262
2,941
Site maintanence
1,924
2,308
Employ ee
840
1,092
Others
SG&A and others
452
588
4,845
10,499
58%
69%
Annualized rev enue per tow er
8,400
16,800
D&A
3,000
3,000
D&A
Tax
554
2,250
Tax rate
30%
30%
Rental rev enues pa

Costs
Rent
EBITDA
Margin %
Costs
Cash flow
Selling and marketing ex penses

EBITDA
Margin %
Maintanence capex @5% of sales

FCF
Pay back period
493
2,446
2,935
15,978
35,369
78%
86%
20,553
41,106
Cash flow
5000
5000
Land/site rental cost (not included in opex )
1,744
2,006
Tax
2,745
7,592
25%
25%
11,489
25,771
1,028
2,055
10,462
23,716
9.6
4.2
Tax rate
Net operating cash flow
206
4,292
8,249
420
840
3,872
7,409
15.5
8.1

FCF
Pay back period
Source: Protelindo, Bharti Infratel prospectus, Nomura research
December 10, 2012
How does BILs indicative valuation compare with global

peers?
Based on the indicative price published in the aforementioned press report, we arrive at
the following valuation comparisons between BIL and its global peers.
On EV/EBITDA, we estimate that BIL would be valued at around a 35% discount to the
US and Indonesian towercos.
On EV/tower and EV/tenant, we estimate that BIL would be valued at an 80% discount
to peers.
BILs estimated FCF yield of 4% compares to around 3% for peers.
However, on an indicative P/E basis, BILs valuation implies a 30% premium.
Why such a differential?
Lower rentals The average monthly rental in India of USD800 is significantly lower
than USD1,500-2,000 in Indonesia and the US. However, the upfront investment
capex for towers in Indonesia is around USD100k compared to around USD40-60k in
India, as per discussions with operators and BILs prospectus.
There is a step-down clause for incremental tenants in India, which is not common in
Indonesia.
Supply in India is much higher with 387k towers vs. 70k in Indonesia and 150k in
the US. This is due to lower entry barriers or topography challenges in other
countries, or zoning regulations. Also, spectrum in India is far less per operator too,
hence needs more towers.
Tenancies in India are an average 1.8x, which is similar to Indonesia vs 2.7x in the
US.
Revenue growth we believe the revenue/EBITDA growth of BIL and Indus has
lagged that of their Indonesian peers in the past year. On a consolidated basis,
Infratels rental revenue rose by 9% and EBITDA by 13% in FY12. In 1H13, we
estimate Infratels rental revenue and EBITDA rose by 3% and 7% y-y, respectively.
In comparison, average revenue/EBITDA growth for Indonesians was 20%/50% last
year. For FY13F, we forecast 30-50% growth in revenue and EBITDA for Indonesian
tower cos.
While we continue to see room for tenancies to rise in India, our cautiousness is
around the timing given: 1) uncertain operator landscape in next 12-24 months where
we could see consolidation and we are already seeing various operators scale back
their aspirations; 2) upgrade to 3G has added only incremental 0.3x tenancy per
tower; and 3) operators are likely to take a demand-driven approach for further 3G
capacity upgrades and data take-up is still 12-24 months away from its inflection
point.
Estimated gearing level for BIL of 0.8x is significantly lower than that of its global
players at 3-7x net debt to EBITDA, which explains the implied EV/EBITDA discount,
in our view. We think, potentially, Infratel could be geared up and pay dividends to
Bharti over time, although this has not been indicated by the company.
We estimate the average payback time in India is eight years vs. four years for
Indonesia (at 2x tenancy). See Figure 4 for a more detailed breakdown or our
estimate.
Uncertain regulatory risks increasingly, the Indian regulator wants to bring
towercos as well under the licensing regime.
December 10, 2012
Fig. 5: Implied current EV/tower of comparables (USDk)
Fig. 6: Implied current EV/tenant of comparables (USDk)

450
1,200
400
1,000
350
300
800
250
600
200
400
150
100
200
CCI
SBAC
CCI
AMT
TBIG
TOWR
BIL
(INR240)
BIL
(INR210)
SBAC
AMT
TBIG
TOWR
BIL
(INR240)
50
BIL
(INR210)
Source: Company reports, Nomura research

Fig. 7: Valuations Average estimated premium for BIL versus global peers
Avg. premium for BIL vs Indonesian peers
Avg. premium for BIL vs US peers

IPO price reflects premium
IPO price reflects discount

FCF yield
P/E (x)
EV/ EBITDA (x)
EV/ tenant (USD k)
EV/ tower (USD k)
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
Source: BIL prospectus, company reports, Nomura research
Fig. 8: Revenue and EBITDA growth outlook for the US and Indonesian tower cos
Revenue growth
2012F
2013F
EBITDA growth
2012F
2013F
Net debt/ EBITDA

2012F
American tower cos.

AMT
17%
9%
18%
10%
3.9x
CCI
17%
4%
18%
4%
6.9x
SBAC
36%
24%
35%
28%
8.9x
Protelindo
33%
25%
31%
25%
3.2x
TBIG
55%
46%
55%
46%
5x
5%
8%
2%
12%
0.8x
Indonesian tower cos
Indian tower cos

BIL
Source: Company reports, Nomura estimates

Note : For BIL, YE is March. Growth metric under 2012F/ 2013F refers to FY13F/ FY14F for BIL.
December 10, 2012
Fig. 9: Valuation comparison

Bloomberg
Global Tower Cos
ATC
Crown Castle
SBA Commns
SMN
Tower Bersama
STP
BIL
GTL Infra
Average
Regional Telcos
AIS
Axiata Group
Bharti Airtel
China Mobile
Digi.com
Far EasTone
Globe Telecom
Idea Cellular
Maxis
MobileOne
PT XL Axiata
Reliance Com
SK Telecom
Taiwan Mobile
DTAC
China Telecom
China Unicom
Chunghwa
KT Corp
LG Uplus
PLDT
PT Indosat
PT Telkom
SingTel
StarHub
TM
Telstra
True
Average
Median
ticker
Rating
AMT US
CCI US
SBAC US
TOWR IJ
TBIG IJ
SUPR IJ
Not listed
GTlI IN
NR
NR
NR
BUY
NEUTRAL
NR
NR
NR
ADVANC TB
AXIATA MK
BHARTI IN
941 HK
Digi MK
4904 TT
GLO PM
IDEA IN
Maxis MK
M1 SP
EXCL IJ
RCOM IN
017670 KS
3045 TT
DTAC TB
728 HK
762 HK
2412 TT
030200 KS
032640 KS
TEL PM
ISAT IJ
TLKM IJ
ST SP
STH SP
T MK
TLS AU
TRUE TB
Buy
Buy
Reduce
Neutral
Neutral
Neutral
Neutral
Reduce
Reduce
Buy
Neutral
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Neutral
Buy
Neutral
Buy
Reduce
Neutral
Neutral
Neutral
Currency
USD
USD
USD
IDR
IDR
IDR
INR
INR
EV/EBITDA (x)
Div Yield (%)
FCF Yield (%)
13F
11
12F
13F
11
12F
11
11
29,644 77.8 46.5 34.0

19,712 129.7 80.7 163.4
8,637 n/m n/m n/m
2,182 65.5 35.9 24.4
2,750 54.1 44.5 31.0
371
na
na
na
7,791 56.6 45.0 38.0
324
n/a n/a
n/a
76.7 50.5 58.1
1.5
n/m
n/m
1.0
1.5
na
na
na
1.4
2.0
5.2
n/m
1.0
1.4
na
na
na
2.4
2.9
1.7
n/m
1.2
1.9
na
na
na
1.9
22.9
19.8
24.6
18.9
38.5
na
12.4
19.1
22.3
19.6
19.5
22.6
14.8
28.2
na
12.1
na
19.5
17.6
n/a
n/a
n/a
18.9
n/a
n/a
n/a
18.6
n/a
n/a
n/a
11.8
0% 0%
0%
19.9
0% 0%
0%
na
na
na
na
10.8 0.9% 1.2% 1.4%
na
na
na
na
16.3
1.0
1.9
2.6
2.0
2.2
1.7
3.9
1.0
1.3
3.3
1.8
1.7
3.2
7.1 10.4
1.1
1.2
1.5
3.9
2.6
4.1
0.9
1.3
1.9
n/m
8.8
4.3
n/m
2.8
3.9
3.3
2.1
1.7
0.8
1.0
1.0
n/m
1.0
n/m
1.9
1.8
2.1
n/m n/m
n/m
1.5
1.1
1.1
0.7
0.4
0.2
n/m 27.0
7.2
n/m n/m
n/m
5.2
0.3
n/m
n/m
2.6
3.8
n/m n/m
4.2
1.6
2.3
2.8
6.0
2.1
2.1
n/m n/m
n/m
1.4
2.7
2.3
4.9
6.3
2.3
n/m n/m
n/m
2.6
3.5
2.9
2.3
2.1
2.2
11.2
7.7
8.0
4.8
13.5
11.0
6.0
8.8
12.2
8.9
6.5
8.3
4.0
15.3
8.2
4.0
5.9
7.6
3.8
5.3
7.9
5.3
5.1
8.3
10.1
7.0
6.6
8.3
7.8
7.8
10.2
7.2
7.6
4.7
12.6
9.7
5.8
7.3
12.5
9.5
6.1
7.9
4.4
14.3
8.3
3.9
4.9
7.6
3.7
5.3
7.9
4.7
4.7
8.1
9.7
7.0
6.3
8.5
7.5
7.4
9.5
6.8
6.7
4.5
12.1
9.0
5.7
6.5
12.3
9.0
5.7
7.3
4.1
13.7
8.2
3.7
4.0
7.6
3.6
3.9
7.4
5.7
4.4
7.7
9.7
6.2
6.4
6.5
7.1
6.6
Local
Mkt Cap
price
(USDmn)
75
67
68
20,550
5,800
4,875
225
9
THB
216
MYR
6.0
INR
325
HK$
89
MYR
4.9
NT$
72
PHP
1,154
INR
98
MYR
6.4
S$
2.7
IDR
5,950
INR
74
KRW 153,000
NT$
107
THB
87
HK$
4.0
HK$
12
NT$
94
KRW 37,350
KRW
7,380
PHP
2,610
IDR
6,150
IDR
8,900
S$
3.3
S$
3.8
MYR
5.5
A$
4.4
THB
5.1
20,939
16,557
22,701
252,106
12,384
8,007
3,736
5,964
15,862
2,020
5,267
2,809
11,399
13,977
6,736
45,216
40,848
25,061
8,999
3,505
13,662
3,477
18,288
43,165
5,266
6,376
56,826
2,412
PEG
PE (x)
11
24.2
20.0
25.7
12.5
26.0
26.3
15.3
42.8
22.0
15.0
15.7
32.8
6.7
21.7
17.2
17.2
60.1
15.5
6.8
10.8
13.0
20.9
14.8
14.3
21.1
31.7
15.4
n/m
19.4
17.2
12F
18.0
17.7
31.0
12.1
23.6
20.3
14.8
26.1
22.2
17.0
15.2
23.1
10.6
18.9
18.0
15.9
29.6
16.3
7.7
55.3
15.3
22.3
13.3
14.7
18.7
22.0
14.2
n/m
18.7
18.0
15.7
16.6
22.6
11.6
22.2
17.3
14.2
20.2
22.2
15.8
14.3
16.6
9.5
17.4
19.2
13.7
16.4
16.4
8.4
10.3
14.6
25.0
12.5
13.6
18.9
21.0
14.5
n/m
16.6
16.4
13F
3.9%
3.2%
0.3%
3.5%
3.6%
3.4%
5.5%
0.0%
6.2%
5.3%
2.2%
0.7%
6.1%
4.2%
20.4%
2.0%
0.9%
5.8%
5.4%
2.0%
7.2%
1.2%
3.5%
4.8%
5.3%
9.1%
6.4%
n/m
4.5%
4.2%
12F
5.6%
3.9%
0.3%
3.5%
4.5%
4.4%
5.7%
0.0%
6.2%
5.5%
2.6%
0.5%
6.1%
4.8%
5.6%
2.2%
1.0%
5.5%
5.4%
1.4%
6.5%
0.7%
4.8%
5.2%
5.3%
4.1%
6.4%
n/m
4.0%
4.5%
13F
12F
13F
3.6% 4.1%
3.9% 4.4%
3.5% 4.6%
-0.6% -3.1%
-3.2% -12.8%
na
na
2.9% 3.3%
na
na
1.7% 0.1%
4.8%
4.5%
5.5%
-0.5%
-1.0%
na
4.1%
na
2.9%
6.4%
6.8% 4.8%
4.5%
2.2% 4.5%
0.7%
0.8% 1.6%
3.7%
5.2% 5.9%
5.8%
4.7% 4.6%
5.2%
5.0% 6.4%
6.0%
4.3% -1.1%
0.0% -4.5% 2.6%
6.2%
5.2% 5.1%
5.5%
6.5% 5.0%
3.5%
3.5% 1.1%
0.7%
n/a
n/a
6.1% 32.6% 17.4%
5.2%
4.2% 5.1%
5.2% 10.1% 4.7%
2.2%
9.8% 7.0%
1.8% -3.6% -10.5%
5.5%
3.7% 6.4%
5.4%
8.9% 5.8%
3.4% -34.0% -7.7%
4.8%
7.9% 6.1%
2.0%
3.8% 4.9%
5.2%
9.9% 8.1%
5.5%
6.5% 5.8%
5.3%
6.7% 6.2%
4.3%
8.7% 3.0%
6.4%
9.7% 9.6%
n/m -27.4% -4.9%
4.3%
3.6% 4.0%
5.2%
5.0% 5.0%
5.9%
6.7%
4.7%
7.0%
4.6%
6.9%
9.6%
2.7%
5.4%
5.7%
3.2%
n/a
11.3%
5.1%
2.7%
11.0%
1.1%
6.4%
11.2%
4.0%
7.4%
7.9%
9.4%
6.1%
5.9%
5.1%
9.5%
-19.0%
5.5%
5.9%
Bloomberg consensus for NR companies. BIL numbers are our estimates. Prices as on 6 December 2012.
Source: Company reports, Bloomberg, Nomura estimates.
Fig. 10: Expected for utilisation of net proceeds by BIL

(INRmn)
Total
FY14F
FY15F
FY16F
Installation of 4,813 new tow ers
10,866
5,071
4,253
1,541
Upgradation and replacement on existing tow ers
12,141
5,049
5,307
1,785
6,394
2,991
2,768
634
Green initiatives at tow er sites

Source: Bharti Infratel prospectus
10
December 10, 2012
The appeal of towers

Relative to operators, towercos cashflow, churn, margins, and maintenance costs are
more appealing, in our view. They also have lower technology obsolesce and capex
risks.
Adjusted margin for BIL was 59% (1H13), we estimate, vs. 82% for Indonesian and
64% for the US counterparts (9M12).
Data has a long way to go in India (15% take-up) and voice usage is still rising. This,
along with limited spectrum, should see tenancies rise. We estimate 2.2x tenancies (for
Infratel on a consolidated basis) by FY15F vs. 1.9x now.
Fig. 11: Bharti Infratel (consolidated) estimates summary (INR mn)

2011
2012
2013E
2014E
2015E
No. of Towers
P&L
78,442
79,064
81,194
83,775
85,996
Average no. of towers
76,182
78,753
80,129
82,484
84,885
135,583
146,242
159,653
172,892
186,163
1.78
1.86
1.99
2.10
2.19
34,724
34,625
33,180
33,133
33,038
1.6%
-0.3%
-4.2%
-0.1%
-0.3%
778
764
664
690
688
55,608
60,661
63,568
68,741
73,807
22%
9%
5%
8%
7%
29,473
33,860
35,465
38,595
41,522
Chg% y-y
18%
15%
5%
9%
8%
as a % rental revenue
53%
56%
56%
56%
56%
No. of tenants
Average Tenancy ratio
Sharing Revenue/Operator/Month
- % Change
Revenue/Operator/Month (US$)
Revenue
Revenue from tenants
Chg% y-y
Energy and other disbursements
Other Income
Total Revenue
Chg% y-y
EBITDA
1,177
1,450
1,450
1,450
1,450
86,258
95,971
100,483
108,786
116,779
21%
11%
5%
8%
7%
32,465
36,841
37,714
42,160
46,914
Chg% y-y
29%
13%
2%
12%
11%
Margins
38%
38%
38%
39%
40%
Source: Company reports, Bharti Infratel prospectus, Nomura estimates
11
December 10, 2012
Fig. 12: Tower and tenancy assumptions for Indus and Infratel
INFRATEL Towers
additions
Average INFRATEL Towers
Average Tenancy Ratio (Infratel)
2011
2012
2013E
2014E
2015E
32,775
33,147
34,647
36,892
38,777
2,211
372
1,500
2,245
1,885
31,670
32,961
33,897
35,770
37,835
1.70
1.79
1.84
1.95
2.05
0.19
0.09
0.05
0.11
0.10
37,009
36,908
36,908
36,908
36,908
- % Change
Revenue/Operator/Month (US$)
-3%
0%
0%
0%
0%
829
815
738
769
769
INDUS (STANDALONE)
Total Indus Towers
additions
2011
2012
2013E
2014E
2015E
108,732
109,325
110,825
111,625
112,425
5,502
593
1,500
800
800
105,981
109,029
110,075
111,225
112,025
Average tenancy ratio
1.79
1.90
2.09
2.20
2.30
Incremental tenancy
0.17
0.11
0.19
0.11
0.10
30,587
31,496
31,000
30,690
30,383
8%
3%
-2%
-1%
-1%
Average Indus Towers
- % Change
Source: Company reports, Bharti Infratel prospectus, Nomura estimates
Fig. 13: BIL (consolidated) Tower

trends
Fig. 14: BIL (consolidated) Tenants

trends
Fig. 15: BIL (consolidated) Sharing

revenue per sharing operator per
month (INR)
82,000
Tenants
Tenancy ratio
36,000
80,000
78,000
180,000
2.0
160,000
1.9
140,000
1.9
34,000
1.8
33,000
1.8
32,000
40,000
20,000
70,000
FY11
FY12
Source: Company data, Nomura research
154,296
149,908
1.7
1.6
1.6
FY11
31,000
1.7
0
FY10
FY10
142,086
80,000
124,819
72,000
100,000
60,000
73,921
74,000
79,064
78,442
76,000
80,656
120,000
35,000
FY12
1H13
30,000
29,000
28,000
FY10
1H13
FY11
FY12
1H13
12
December 10, 2012
Fig. 16: BIL (cons.) EBITDA margins
Fig. 17: Indus EBITDA margins
EBITDA
EBITDA adj. for energy related passthrough
EBITDA margin
EBITDA margin adj. for energy related passthrough
EBITDA
EBITDA adj. for energy related passthrough
EBITDA margin
EBITDA margin adj. for energy related passthrough
(INRmn)
(INRmn)
40,000
70%
40,000
35,000
60%
35,000
30,000
50%
25,000
60%
50%
30,000
40%
25,000
40%
20,000
30%
20,000
30%
15,000
15,000
20%
10,000
10%
5,000
-
0%
FY10
FY11
FY12
20%
10,000
10%
5,000
0%
1H13
FY10
FY11
FY12
1H13
Some uncertainties to note

Given BILs 42% holding in Indus, if Indus were ever to list (42% owned by Bharti with
total 111k towers), we think BIL could attract a holding company discount.
Post-IPO, we estimate BILs free-float will be 10%, with the balance 79% owned by
Bharti and 11% owned by financial institutions and corporate bodies. Further selldowns cannot be ruled out, in our view.
Operator consolidation could be a perceived positive for operators, but would be a
negative for towercos, in our view.
Our views on Indian telcos

Since the recent lacklustre spectrum auctions, Bhartis share price has recovered by
17% vs. the market up by 4%. The BIL listing could be another sentiment driver, in our
view.
Notwithstanding recent sentiment drivers, we remain cautious on Indian operators for
the following reasons:
Volatile domestic trends we dont dismiss the real potential for price hikes for 1-2
quarters (given adjustments are being made at the second derivative level), but we
struggle to see them being sticky beyond that. We will continue to observe the next
few quarterly trends.
Regulations are still uncertain it is still the same government, same regulators and
same fiscal deficit problems, so we dont expect a complete U-turn on spectrum
prices. Reserve prices will likely be reduced, we believe, which essentially could see
more competition.
High valuations in the 19-31x FY13-15 P/E range for the operators we cover.
13
December 10, 2012
Fig. 18: Indian telcos Share price performances (YTD)

Bharti
RCOM
IDEA
Sensex
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
1-Jan
15-Jan
29-Jan
12-Feb
26-Feb
11-Mar
25-Mar
8-Apr
22-Apr
6-May
20-May
3-Jun
17-Jun
1-Jul
15-Jul
29-Jul
12-Aug
26-Aug
9-Sep
23-Sep
7-Oct
21-Oct
4-Nov
18-Nov
2-Dec
-40%
Source: Bloomberg
Fig. 19: Tower and tenancy outlook

2.46
2.27
800
1.9
700
1.6
600
1.7
2.00
1.77
1.38
500
400
300
2.50
2.11
1.05
258
1.50
1.13
361
290
376
387
396
405
413
420
309
1.00
200
Tower sharing ratio
0.50
100
0.00
FY 2017E
FY 2015E
FY 2014E
FY 2013E
FY 2012
FY 2011
FY 2010
FY 2009
FY 2008
FY2016E
Telecom towers installed base ('000)
900
Source: Bharti Infratel prospectus (estimates as per Analysys Mason)
14
December 10, 2012
Fig. 20: Implied value for Bharti based on reported IPO

pricing
Share price (INR)
Shares outstanding post IPO (mn)
Implied market cap (INR mn)
Implied market cap (USD mn)
(Discount ) / Premium to Nomura v aluation
Fig. 21: Implied value for Bharti based on Nomura estimates

INFRATEL VALUATION BREAKDOWN
Low-end
High end
210
240
1,889
1,889
396,606
453,264
7,932
9,065
4%
19%
Consolidated tow ers (as of Sep-12)
80,656
FY13F EBITDA (INR mn)
37,714
Implied EV/tow er (USD k)
98
112
10.5x
12.0x
Bharti's current market cap (INR mn)
1,230,228
1,230,228
Bharti's current market cap (USD mn)
24,605
24,605
Implied EV/EBITDA (FY13F)
Implied value per Bharti share (INR)
82.5
94.3
% value contribution to Bharti
25%
29%
Source: Press articles (Reuters, Bloomberg), Nomura research
NPV (INR mn)
417,105
Infratel
176,901
Indus @ 42%
240,203
NPV (US$ mn)
8,342
Infratel
3,538
Indus @ 42%
4,804
Debt
36,354
Infratel
Indus @ 42%
36,354
Equity
380,750
(in USD mn)
7,615
SHO at Infratel (mn) after lisiting
1,889
Infratel per share value (INR)
202
Contribution to Bharti
Value of minority stake of 21% (Rs mn)
79,958
Value of minority stake of 21% (US$ mn)
1,599
Bharti SHO (mn)
3,797
Implied value for Infratel per Bharti share (INR)
79
Note : For NPV, we assume WACC of 10% and growth rate of 2-3%, with cash flows
discounted back to FY17F.
Source: Nomura estimates
Fig. 22: BIL P&L (INRmn)

P&L Account
Revenue from Operations
2008
2009
2010
2011
2012
H1 2013
7,051
50,506
70,387
85,081
94,521
49,720
Other Income
1,267
901
1,177
1,450
1,189
Total Income
7,057
51,773
71,288
86,258
95,971
50,909
634%
38%
21%
11%
19,464
25,252
30,151
33,583
18,490
Chg % y-y
Power & Fuel
2,582
Rent
708
5,268
8,800
9,773
10,581
5,280
Employee benefit expense
176
1,309
2,404
2,854
2,977
1,575
Other Expense
1,004
9,363
9,748
11,015
11,989
5,937
Total Costs
4,468
35,403
46,203
53,793
59,130
31,282
EBITDA
2,589
16,370
25,086
32,465
36,841
19,627
EBITDA Margin
D&A
D&A as a % of Revenue
Interest
37%
32%
35%
38%
38%
39%
1,632
12,372
17,617
20,191
21,462
10,935
23%
24%
25%
23%
22%
21%
341
1,145
3,540
4,326
4,072
1,882
6,810
PBT
616
2,853
3,928
7,947
11,307
Tax
212
901
1,399
2,433
3,799
2,205
PAT
404
1,952
2,530
5,515
7,507
4,605
384%
30%
118%
36%
Chg % y-y
15
December 10, 2012
Indian tower overview

We are relatively more optimistic on the stable and consistent growth profile for
towers in India versus service businesses. Structural drivers for tower/tenancy
demand from voice/data remain intact, in our view.
Voice is still growing and data is still in infancy stage. India has in the past been a
spectrum-starved market. Although more spectrum will likely be made available over
time, as we have seen in the past three years, this is a tough and with an uncertain
regulatory battle. Less spectrum means more towers and, hence, should be good for
towercos, in our view.
However, smaller operators are clearly scaling back their operations, which we believe
could adversely impact demand.
Moreover, if investors are optimistic about consolidation in the operator market, that
could also raise questions over towers.
Based on the Bharti Infratel IPO prospectus, Indian tower industry tenancies are
expected to rise from 685k currently to 937k in FY16F, implying an 11% CAGR.
Fig. 23: Overview of various tower players in the market
Towers
Tenancies
120
2.5
100
2.0
80
1.5
60
1.0
40
0.5
-
Indus
BIL
(consolidated)
BSNL/ MTNL
RTIL
Viom
GTL
BIL
(standalone)
ATC
Tower Vision
Ascend
Telecom
20
Source: Bharti Infratel red herring prospectus
Potential growth drivers

Data growth Internet penetration is at around 10% in India (Source: Internet World
Stats), and pure data is still 5% of revenue, with Bharti reporting 2% take-up of 3G by
its users only (although 22% data users in its base). A larger chunk of this growth will
likely be via wireless networks, for which coverage/capacity is essential.
Voice traffic is also likely to grow at ~15% pa for the next three years for incumbent
carriers, we estimate, especially as we see new entrants scale back their aspirations for
this market network advantage is important to manage churn.
The incremental rollout is happening at 1800-2100Mhz, where capex cost can be1.53.0x higher than for the 900 MHz rollout (higher operating cost, too), in our view.
16
December 10, 2012
2%
0%
0%
Source: Company reports
Source: Company reports
Fig. 27: India Outlook for tenancies

New additions of leases
% change in total towers
4%
10
2%
20%
60
15%
40
10%
20
5%
0%
0%
FY17F
FY16F
FY15F
FY14F
FY13F
FY12
FY11
FY10
FY09
FY17F
6%
20
25%
80
FY16F
8%
30%
100
FY14F
10%
30
35%
120
FY13F
12%
40
40%
140
FY12
14%
160
FY11
16%
50
FY10
18%
60
% change in total leases
('k)
FY09
New tower additions
FY15F
Fig. 26: India Tower outlook
('k)
2Q13
4%
5%
1Q13
6%
10%
4Q12
8%
15%
3Q12
10%
20%
Vodafone
2Q12
12%
25%
3Q11
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Jun-09
0.0
Sep-09
100.0
14%
30%
2Q11
200.0
16%
35%
Idea
1Q11
300.0
40%
4Q10
400.0
18%
3Q10
500.0
Bharti
45%
2Q10
600.0
1Q12
Chg % y-y (RHS)
1Q10
Total minutes (in bn for top 3 telcos, LHS)
Fig. 25: Indian telcos Data as a % of mobile revenue
4Q11
Fig. 24: Indian telcos Total minutes trends
Some concerns regarding BIL and the growth outlook

Lack of clarity on spectrum and spectrum prices.
Exit and scale back of smaller operators.
Return-focused approach on data, which implies tenancies/towers could rise slowly.
Regulatory decisions such as imposing license fee for tower companies could see
impact on margins.
17
December 10, 2012
Fig. 28: India Tower and tenant market share (FY12)

40%
Indus
35%
30%
Tenats share
BIL (consolidated)
25%
20%
Viom
RTIL
15%
BSNL/ MTNL
BIL (standalone)
10%
GTL
5%
Ascend
0%
0%
ATC
Tower Vision
5%
10%
15%
20%
25%
30%
35%
Tower share
Source: Bharti Infratel prospectus, company reports
Fig. 29: India tower transactions (historical, and expected)

16.0
14.0
EV per tower (INR mn)
12.0
Rcom (5% stake

sale)
10.0
Bharti
Quippo (5K towers)
8.0
6.0
Aircel (17.5K
Towers)
Spice (875 towers)

TTSL(13K towers)
4.0
Essar (4.6K towers)
Xcel (1.7k towers)
2.0
0.0
Apr-07
TTSL (2.5K Towers)

BIL (80k towers
listing)
Transcend (325
towers)
Feb-08
Dec-08
Sep-09
Jul-10
May-11
Mar-12
Dec-12
18
December 10, 2012
A regional comparison of towercos

One of the key differences between Indian tower companies and peers in Indonesia and
the US, we find, is in rental revenue. This results in estimated payback for Indian towers
to be twice as long as that for Indonesian peers with implications for the ROIC
profile, too. We believe this could be one of the drivers behind valuation differentials
between Indian companies and Indonesian companies.
On rental revenue
Indian tower companies generate INR30-35k in rent per month per tenant or USD700.
In comparison, Indonesian tower companies charge an average USD1,500 per month
or USD2,000 for the US peers (see Figure 30).
We note that, in the past 11 quarters, tower rentals have remained flattish for Infratel
but appear to have risen slightly for Indus (see Figure 31).
Fig. 30: Global towercos Revenue/tower and revenue/tenant

USD/
month
Revenue/ tower
Revenue/ tenant
Global avg. for revenue/ tower
Global avg. for revenue/ tenant
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Indus
BIL
Protelindo
TBIG
AMT
SBAC
CCS
Source: Company data, Bharti Infratel prospectus, Nomura research
Fig. 31: Rental revenue trend for Infratel and Indus

Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12
INFRATEL
Sharing Revenue (INR)/ Month
36,878 36,290 38,041 37,859 36,599 36,203 37,117 37,623 37,277 36,532 36,839
Chg % y-y
Sharing Ratio
INDUS
Sharing Revenue (INR)/ Month
0%
4%
-1%
-1%
0%
-2%
-1%
2%
1%
-1%
1.62
1.65
1.65
1.68
1.73
1.77
1.79
1.81
1.82
1.82
1.81
29,674
30,379
31,389
30,847
30,501
31,963
31,112
32,272
32,563
30,139
31,711
5%
21%
9%
3%
5%
-1%
5%
7%
-6%
2%
1.71
1.75
1.78
1.80
1.83
1.87
1.89
1.91
1.94
1.97
1.96
Chg % y-y
Sharing ratio - Indus
Source: Bharti Infratel prospectus
On cost structure and margins

EBITDA margin for BIL and Indus (adjusted for energy related pass-through) is around
50-60%, we estimate, based on company data. This compares to ~65% for the US and
~80% for Indonesian towercos.
Such a big difference may seem appealing for Indonesian towercos; however, we
expect some of this difference can be attributed to the fact that BIL, Indus and the US
19
December 10, 2012
players add land lease costs to their operating expenses, while Protelindo doesn't.
TBIG includes amortization of leases to cost of operations, but adds back this
amortization number before reporting EBITDA.
Rental costs (we assume most of this is for land / roof-top leases) for BIL and Indus are
around 17% of rental income. This metric is 5pp higher for the Americans. The
Indonesians amortize this expense over the length of the term; hence the number
recorded is just ~5% pa, on average.
Indian towercos appear to be managing SGA as % of sales better than global
counterparts, in our view Indus reports this metric at 4%; and we expect the number
for BIL to be similar. Protelindo and the US towercos record this at 10% of sales, on
average.
Employee expenses as a % of sales are broadly similar for India and Indonesia. We
don't have this cost item reported separately by the US companies.
Fig. 32: Global towercos EBITDA margins (period ended

Sep12)
90%
Fig. 33: Global towercos Rental expenses as a % of sales

(period ended Sep12)
30%
80%
25%
70%
20%
60%
50%
15%
ATC
SMN
TBIG
SMN
TBIG
ATC
CCI
SBAC
GTL
BIL
consolidated
0%
Indus
0%
CCI
5%
10%
SBAC
10%
20%
BIL
consolidated
30%
Indus
40%

Note: We have adjusted BIL and Indus numbers for energy-related passthrough revenue/costs and other income.

Note: We have used SMN: amortization of insurance and site rentals; TBIG:
land lease and license cost amortization; and ATC: rental and management
costs. We have adjusted BIL and Indus revenue for energy-related passthrough and other income.
Fig. 34: Global towercos SG&A as a % of sales (period

ended Sep12)
Fig. 35: Global towercos Employee cost as a % of sales

(period ended Sep12)
25%
6%
20%
5%
15%
4%
10%
3%
2%
5%
BIL
consolidated
ATC
SMN
CCI
SBAC
Indus
1%
0%

Note: We have used BIL: other expenses. We have adjusted BIL and Indus
revenue for energy-related pass-through and other income.
0%
Indus
SMN
BIL
consolidated
TBIG

Note: We have adjusted BIL and Indus revenue for energy-related pass-through
and other income.
20
December 10, 2012
On payback period
We estimate that the lower rentals prevalent in the Indian tower market results in twice
as long payback periods as those in other markets, which increases the risk for Indian
towercos, in our view.
Fig. 36: Estimated single tower payback period for Indian / and Indonesian tower companies
INDIA
INDONESIAN TOWERS
Capex assumptions
Capex assumptions
60,000
Initial cost of tow er (INR)
3,000,000
Revenue assumption
Sharing rev enue per operator per month (INR)
Revenue assumption
35,000

31,500
-10%
Employ ee costs as % of sales
113
147
Land/site rental cost (not included in opex ) per tow er (IDR mn)
16,477
1,713
1,713
16.8
19.3
0%
Cost assumptions
30%
2,262
2,941
10%

SG&A and other
16,477
630
Increase in rents
Land/site rental cost per tow er site p.a. (USD )
Sharing rev enue per operator per month (IDR 000s)
700
Cost assumptions
Land/site rental cost per tow er site p.a. (INR 000s)
100,000
Site maintanence per tow er p.a. (IDR mn)
15%
18.5
Increase in rents
30%
20%
Site maintanence per tow er p.a (USD )

Other costs as % of sales
30%
1,924
1%

SG&A
2,308
1%
20%
12%

22
20%
20%
Sharing factor
1.0
2.0
Sharing factor
1.0
2.0
8,400
15,120
Rental rev enues
20,553
41,106
2,262
2,941
Site maintanence
1,924
2,308
Employ ee
840
1,092
Others
SG&A and others
452
588
4,845
10,499
58%
69%
8,400
16,800
D&A
3,000
3,000
D&A
Tax
554
2,250
Tax rate
30%
30%
Rental rev enues pa

Costs
Rent
EBITDA
Margin %
Costs
Cash flow
Selling and marketing ex penses

EBITDA
Margin %

FCF
Pay back period
493
2,446
2,935
15,978
35,369
78%
86%
20,553
41,106
Cash flow
5000
5000
Land/site rental cost (not included in opex )
1,744
2,006
Tax
2,745
7,592
25%
25%
11,489
25,771
1,028
2,055
10,462
23,716
9.6
4.2
Tax rate
206
4,292
8,249
420
840
3,872
7,409
15.5
8.1

FCF
Pay back period
Source: Protelindo, Bharti Infratel prospectus, Nomura research
21
December 10, 2012
Appendix
Fig. 37: Global tower deals
Date
Buyer
Seller
INDIA
Dec-07
Dec-07
Dec-07
Apr-09
Apr-09
May-09
Oct-09
Jan-10
Jan-10
Aug-10
Country
Investor group
Investor group
Quippo
Viom
Viom
ATC
ATC
GTL Infra
Viom
ATC
Bharti
RCOM
Spice
Tata
Quippo
Xcel Telecom
Transcend Infra
Aircel
Tata Tele
Essar Telecom
AMERICAS
2002
2003
2003
2004
2005
2005
2006
2006
2007
2007
2008
2008
2008
2009
2009
2009
2009
2010
2010
2010
2010
Aug-10
Oct-10
2010
2010
2010
2010
Feb-11
2011
Jul-11
2011
2011
2011
2011
2012
2012
2012
2012
Dec-11
Dec-11
ATC
ATC
AAT Communications
National Grid
ATC
Crown Castle
Crown Castle
SBA Communications
Crown Castle
Private Equity
SBA Communications
SBA Communications
SBA Communications
ATC
ATC
ATC
ATC
ATC
SBA Communications
SBA Communications
ATC
ATC
ATC
Crown Castle
ATC
ATC
ATC
ATC
ATC
ATC
ATC
ATC
ATC
Crown Castle
SBA Communications
ExteNet
SBA Communications
Crown Castle
ATC
ATC
NIHD
Iusacell
SBA Communications
Crown Castle
SpectraSite
TrinTel
Mountain Union
AAT Communications
Global Signal
National Grid Wireless
OptaSite
Light Tower
TowerCo
XCEL Telecom
Tower Portfolio
Insight
Cincinnati Bell
Essar Telecom
Stake in ExteNet (DAS)
Tower Portfolio
Telefonica
Telefnica del Peru
Telefnica Colombia
New Path (DAS)
Telefonica
Cell C
MTN
VTR
Tower Portfolio
Millicom
Telefonica
Telefonica
MTN
NextG (DAS)
Mobiltie
SBA Communications (DAS)
TowerCo II
T-Mobile Towers
Telefnica Colombia
Telefnica Moviles
Mexico, Brazil
Mexico
US
UK
US
US
US
US
US
US
US
US
US
India
Brazil
India
US
India
US
Panama
Chile
Peru
Colombia
US
Colombia
South Africa
Ghana
Chile
Brazil
Colombia
Mexico
Chile
Uganda
US
US
US
US
US
Colombia
Chile
Dec-11
ATC
Colombia Telecom
Colombia
Dec-11
Dec-11
Dec-11
Nov-12
ATC
ATC
ATC
ATC
Telefnicas Mexico
Telefnicas Mexico
na
KPN Towers
Mexico
Mexico
US
Germany
Nov-10
ATC
Cell C
South Africa
Aug-11
May-11
ATC-MTN JV
ATC-MTN JV
MTN Ghana
MTN Ghana
Ghana
Ghana
Number of
sites
Deal value
USDmn
Implied value per

tower USDK
49,000
23,000
875
13,000
5,000
1,700
325
17,500
2,535
4,600
1,184
310
134
1,475
880
155
20
1,870
295
415
219
271
152
113
176
92
65
107
116
90
811
143
784
3,487
7,800
467
551
1,855
10,749
350
528
340
423
1,730
230
366
196
4,629
131
32
197
2,003
3,800
145
310
1,003
5,800
290
433
224
346
98
51
19
100
421
32
20
40
88
72
128
72
430
513
20
585
182
416
95
172
1,000
1,093
125
1,450
2,800
18
95
162
223
251
574
487
310
562
541
540
829
821
659
817
57
223
53
510
91
198
33
168
584
1,422
179
2,000
122
294
83
503
209
207
463
252
3,200
430
134
770
400
206
115
267
287
1,000
175
175
686
195
285
24.8
35
na
486
na
na
110
45.6
21.1
na
na
39.8
72
65
na
135
na
na
110
65
80
na
na
199
235
208
375
102
278
475
500
500
3,200
1,856
180
666
2,126
2,362
558
962
2,325
3,252
7,200
125
558
200
143
185
144
144
134
277
111
879
86
176
170
178
470
446
389
140
170
AFRICA
Dec-11
ATC-MTN JV
MTN Uganda
Uganda
Dec-11
ATC-MTN JV
MTN Ghana
Ghana
INDONESIA
2006
2008
2008
2008-10
2008-09
2010
2010
2011
Jun-11
2011
2011
Jul-12
Oct-12
2012
Nov-12
TBIG
STP
Protelindo
Protelindo
Protelindo
TBIG
Protelindo
Inti Bangun
TBIG
Mitratel
Mitratel
SMN
Carlyle
TBIG
Protelindo
Mobile 8
344
Bakrie Telecom
540
Flexi
53
Hutch
3,603
Mobile 8
578
SKP
1,380
Hutch
1,000
Smartfren
705
Mitrayasa Sarana Informasi (Infratel)
263
Telkomsel
2,800
Telkom
1,500
CI and MKP
200
Stake in Solusi Tunas Pratama
25% stake in STP
Indosat
2,500
KPN
Netherlands
261
519
97
22
December 10, 2012
Fig. 38: BIL Balance sheet

Balance Sheet
2008
2009
2010
2011
2012
H1 2013
119,409
171,841
179,400
179,549
169,132
167,849
3,238
7,375
13,241
20,250
23,469
25,570
122,647
179,216
192,641
199,799
192,601
193,419
1,478
2,092
6,814
137
481
1,994
Other Current Assets
36,536
25,969
25,667
32,958
41,660
40,622
Current Assets
38,013
28,061
32,481
33,095
42,140
42,615
Total Assets
160,660
207,277
225,122
232,894
234,741
236,034
LT Borrowings
30,256
13,770
39,660
37,170
23,888
26,565
Fixed Assets
Other Non-current Assets
Non- Current Assets
Cash & Bank
Other non current liabilities
8,509
21,655
24,109
28,686
31,006
29,140
38,765
35,425
63,769
65,856
54,894
55,705
1,092
12,066
3,248
5,468
7,704
5,604
Othe current Liabilities
18,252
56,269
21,830
21,621
26,900
31,676
Current liabilities
19,343
68,335
25,078
27,089
34,605
37,280
Total Liabilities
58,108
103,760
88,846
92,945
89,499
92,985
102,553
103,517
136,276
139,949
145,242
143,049
H1 2013
Non Current Liabilities

ST Borrowings
Shareholders' fund
Source: Company data, Bharti Infratel Prospectus
Fig. 39: BIL Cash flows (INRmn)

Cash Flow
2008
2009
2010
2011
2012
PBT
616
2,853
3,928
7,947
11,307
6,810
Non cash Adjustments
1,866
11,673
19,089
22,095
23,061
11,036
Changes in Working Capital
(1,088)
(8,291)
8,222
3,445
1,268
(101)
Tax paid
-65.7
-1724.5
-2122.9
-4770.5
-3627.1
-2793.2
1,328
4,510
29,116
28,716
32,009
14,952
Capex
(19,109)
(60,238)
(38,969)
(24,309)
(15,724)
(8,705)
Cash flow from operations
Other Inv esting activ ities
(31,925)
29,839
146
(5,397)
(4,432)
2,959
Cash flow from Investing
(51,033)
(30,400)
(38,824)
(29,706)
(20,156)
(5,747)
FCF
(17,780)
(55,728)
(9,853)
4,407
16,285
6,246
LT borrow ings taken
13,770
34,860
2,310
29,190
Repay ments of LT Borrow ings
(7,770)
(6,000)
(9,870)
(27,301)
Proceeds from ST borrow ings
1,092
10,974
(8,818)
2,220
2,236
(2,100)
Other Financing activ ities
50,090
1,759
(3,844)
(4,227)
(3,876)
(7,482)
Cash flow from financing activities
51,182
26,503
14,428
(5,697)
(11,510)
(7,693)
1,477
614
4,721
(6,687)
343
1,512
Opening cash & cash equivalents
0.5
1477.4
2091.1
6812
125.2
468.3
Closing cash & cash equivalents
1,477
2,091
6,812
125
468
1,981
Net increase/(decrease) in Cash &

cash Equivalents
Source: Company data, Bharti Infratel Prospectus
23
December 10, 2012
Appendix A-1
Analyst Certification
I, Sachin Gupta, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views about
any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was, is or will be
directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of my
compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc.,
Nomura International plc or any other Nomura Group company.
Issuer Specific Regulatory Disclosures

The term "Nomura Group" used herein refers to Nomura Holdings, Inc. or any of its affiliates or subsidiaries, and may refer to one or more
Nomura Group companies.
Materially mentioned issuers

Issuer
Bharti Airtel
Ticker
BHARTI IN
Price
INR 330
Bharti Airtel (BHARTI IN)
Price date
05-12-2012
Stock rating Sector rating Disclosures

Reduce
Not rated
INR 330 (05-12-2012) Reduce (Sector rating: Not rated)
Rating and target price chart (three year history)

Date
28-Nov-12
22-Aug-12
22-Aug-12
08-Aug-12
02-May-12
30-Apr-12
08-Feb-12
10-Jan-12
26-Jul-11
26-Jul-11
04-May-11
09-Feb-11
09-Feb-11
11-Nov-10
30-Sep-10
04-Aug-10
11-May-10
22-Jan-10
Rating
Target price
290.00
Reduce
210.00
280.00
295.00
290.00
382.00
390.00
Neutral
430.00
412.00
Buy
400.00
332.00
344.00
330.00
320.00
335.00
Closing price
326.70
248.65
248.65
274.35
317.95
310.50
354.00
330.35
424.60
424.60
369.75
332.15
332.15
316.75
366.30
323.15
284.70
322.15
For explanation of ratings refer to the stock rating keys located after chart(s)
Valuation Methodology We derive a DCF-based valuation of INR290, assuming a WACC of 9.5% and growth rate of 3%, with
cash flows discounted back to FY17F.
Risks that may impede the achievement of the target price Key upside risks: Greater-than-expected stability in pricing in
India, and faster-than-expected turnaround in Africa. Tower divestment could be an upside catalyst, too.
24
December 10, 2012
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25
December 10, 2012
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Bharti Airtel

December 10, 2012

Tower IPO another sentiment driver?

Unlocking valuenot realizing

Bharti Infratel IPO

We are relatively more bullish on towercos

but not every towerco is the same are Indians different?

Neeraja Natarajan - NSL

714,508 796,524 796,524 857,097 857,097 923,354 923,354

Reported net profit (mn)

Normalised net profit (mn)

FD norm. EPS growth (%)

Dividend yield (%)

FD normalised P/E (x)

Net debt/equity (%)

Source: Company data, Nomura estimates

See Appendix A-1 for analyst

Nomura | Bharti Airtel

December 10, 2012

Key data on Bharti Airtel

Relative performance chart (one year)

Valuation and ratio analysis

Source: ThomsonReuters, Nomura research

22.5 31.1 -12.9

18.1 31.3 -18.1

20.1 23.2 -34.1

Bharti Telecom Ltd

Source: Thomson Reuters, Nomura research

Earnings volatility should remain

Source: Company data, Nomura estimates

Nomura | Bharti Airtel

December 10, 2012

Cash flow outlook is strong, but

Source: Company data, Nomura estimates

Gearing levels are high at 2.6x

Source: Company data, Nomura estimates

Nomura | Bharti Airtel

December 10, 2012

Tower IPO another sentiment driver?

Fresh issue (146mn) and

Bharti Infratel Ventures

Source: Company reports, BIL IPO prospectus

Nomura | Bharti Airtel

December 10, 2012

Consolidated tow ers (as of Sep-12)

FY13F EBITDA (INR mn)

Implied EV/tow er (USD k)

Bharti's current market cap (INR mn)

Bharti's current market cap (USD mn)

Implied value per Bharti share (INR)

% value contribution to Bharti

Implied EV/EBITDA (FY13F)

Source: Press articles (Reuters, Bloomberg), Nomura research

Nomura | Bharti Airtel

December 10, 2012

Fig. 3: Nomuras Infratel valuation

NPV (US$ mn)

(in USD mn)

SHO at Infratel (mn) after lisiting

Infratel per share value (INR)

Value of minority stake of 21% (US$ mn)

Bharti SHO (mn)

Im plied value for Infratel per Bharti share (INR)