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| Thursday, January 28, 2010 |
| Bharti Airtel - Highlights of Analyst Call |
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Here is what the Bharti Airtel Management Told us in Analyst Call,
- Bharti's long-term position for revenue growth remains strong and has 122 mn customers, as on December 31, 2009, across India
- TRAI recommendations on 2G spectrum allocation and M&A regulations are likely to come out in the next few weeks.
- The sector is currently witnessing peak competitive intensity; industry growth to be more secular in 2HCY10 once the new rollouts are over.
- The real customer addition (excluding multiple SIM subscribers) on a monthly basis is only ~10m vs reported additions of 17-19m.
- Actual wireless penetration in India is only 80% of the reported penetration of 43-44%.
- Sector is likely to witness major regulatory developments over the next few months.
- Migration of subscribers to the new tariff schemes will be over by 4QFY10.
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Published on Thursday, January 28, 2010 at 3:32 PM  |
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| Monday, January 18, 2010 |
| Reliance Infratel IPO to Help RCOM Raise Funds |
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RCOM's 95% subsidiary, RITL plans to raise money by diluting ~10% (postissue) equity. A successful IPO would help RCOM de-leverage its consolidated balance sheet, and may result in some valuation rerating.
This is a significant development post valuation of Aircel's Tower Business taken over by GTL Infra at Rs 8,000 cr for 17,500 towers which will help RCom raise its sagging fortunes and command better valuations. GTL Infra will earn blended monthly rental of Rs 27,600 per site from Aircel, escalated at 3% p.a. This is inline with Indus (~Rs29K).
We note that tower assets are getting higher valuation multiples than telecom services business, given tower demand from new wireless entrants, potential 3G deployments and lower risk profile of tower assets (more predictable cash flows). |
| Published on Monday, January 18, 2010 at 12:12 PM |
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| Wednesday, January 06, 2010 |
| 3G WCDMA + HSPA - Initial Plan by Operators |
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In the recently held Road Ahead for Indian Telecom conference, operators are quite optimistic about the future of Growth in India. Here is what they have set their initial rollout plans on 3G WCDMA and HSPA.
As the Drama over 3G continues far better than any Hindi serial, cut back in spectrum to be auctioned to three slots vs. four, if it occurs, would increase the pricing uncertainty around the auctions, especially for the incumbents.
Key applications for 3G could include browsing & searching, email and music. Location-based services, user generated content, surveillance are also other applications that could gain traction with the launch of 3G.
Handset prices remain a concern; however, uptake in 3G services should allow prices for handsets to trend lower. Other form factors, such as net-books, will start to gain better traction as mobile broadband and data applications take off. There is also likely to be a greater bundling of service and handset with 3G. Potential target customers include Corporates, Professionals and Youth from Affluent tech-savvy Families.
While WCDMA and HSPA would remain a voice and data service, the industry sees EV-DO and WiMAX emerging as a strong data service, given the low fixedline broadband penetration. |
| Published on Wednesday, January 06, 2010 at 5:41 PM |
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| Thursday, December 24, 2009 |
| Innovative Plans Lead to Surge in Mobile Connections |
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India registered the highest-ever net adds of 17.6mn subs in November 2009, up 6% month over month (MoM) and 71% year over year (YoY). We attribute this surge against average net adds of 14mn YTD to all operators launching innovative plans, especially the pay per second plan started by Tata and later launched by most operators at the end of October.
Bharti's net adds rose 4% MoM to 2.8mn with 22.9% wireless market share. RCOM's wireless net adds rose 30% MoM to 2.8mn subs. Tata Teleservices, which earlier launched its GSM operations with pay-per-use and pay-per-second plans, added 3.3mn subs. Vodafone added strong net adds of 2.8mn in Nov09. For the second consecutive month, Idea's net adds rose ~30% to a strong 1.9mn.
Revenue Market Share Is Key:Bharti further consolidated its leadership position, and we estimate the company improved its wireless revenue market share by 62bp to 30.3% while largely maintaining its wireless market share of 24%, thereby enhancing the gap between revenue and wireless market share to 5.7%. We estimate that Tata increased its revenue market share by 59bp to 7.2%, but this still lags its wireless market share of 18.6%. |
| Published on Thursday, December 24, 2009 at 11:38 AM |
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| Saturday, December 19, 2009 |
| Sistema Shyam (MTS) Strategy for India |
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Sistema Shyam (MTS) is one of the new operators at the forefront of the ongoing Telecom Tariff war. Recently the management interacted with the analysts and he is what they have to say about their strategy in India.
On the State of the Wireless Business in India, Management said,
Sistema Shyam has rolled out services in 8 circles. Network rollout is progressing according to plan and Mumbai and Maharashtra are the next launches. Overall, they acknowledge the double SIM phenomenon and believe a significant proportion of their subscribers fall into this category of users. While noting that the absolute fall in the overall market pricing levels is a concern, nevertheless, they are observing improvement in ARPUs. We think ARPUs are ~Rs100.
Will the company be around in another 12 months, if they continue to burn cash at this rate ?
CEO stated that they have a 10-15 year plan for India; and not just 1-2 years. They continue to target EBITDA breakeven in 3 years and see this as achievable with 30-35mn subscribers. The company is of the view that consolidation should occur within the top 6. Can Sistema Shyam (MTS) find a niche ?
Given the minimal differentiation afforded in voice, the company is trying to grow the data business (dongles). Their wireless broadband is priced at the same levels as other competitive offerings, however they have bundled free browsing for certain sites etc to offer better value. Additionally, they are focusing more on rolling out EVDO based Wireless broadband [MBlaze] and has partnered with some portals as well. Reminds me of the Dot Com boom when ISPs were partnering with Portals like IndiaWorld, recall the nostalgia ? |
| Published on Saturday, December 19, 2009 at 3:33 AM |
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| Thursday, December 17, 2009 |
| Bandwidth - Backhaul + Submarine Cable Link - Do we have enough ? |
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 With increasing broadband penetration and more enterprises [SMEs] being wired towards unified communications regime, Does India have enough backhaul to cater for data growth ? Yes, there are large trunk routes owned by BSNL, Bharti, Reliance, PowerGrid, RailTel, Tata, etc and the companies are constantly building more. Between the key cities, virtually every operator has their own pipes.
So it appears that most Indians will be connected and with the implementation of NIXI, internal data gets routed extremely efficiently. What about Global bandwidth connecting India ? Does India have enough submarine cable links? No, but this segment is growing. More and more cables are being laid at the moment and compression technologies are constantly improving.
Forecasting bandwidth growth has been a major challenege for everyone. At the Enterprise level, this is much easier to do, but at the consumer level, it is growing at a much faster rate than anticipate. And a 20% drop in bandwidth price YoY helps the end customers. However, the Intra-Asia rates remain high, an STM-1 pipe within US-Europe is around US$300-400k, vs US$2.5mn within Asia. |
| Published on Thursday, December 17, 2009 at 8:46 PM |
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| Wednesday, December 16, 2009 |
| Chinese Vs European Equipment - Government Dilemma |
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 There is political pressure against Chinese network equipment vendors which culminated this week in news of BSNL canceling an order to Huawei.
Huawei had at first won a contract from BSNL last year for the Northern region totalling nine million GSM lines. Afterwards, they had won a second contract for the Southern region for similar number of GSM lines. Since most most government communications occur over MTNL/BSNL networks, BSNL resisted giving out contracts to Chinese equipment manufacturers due to security concerns and have concomitantly preferred American and European vendors.
With the consolidation of the telecom equipment industry globally, there just 5 names - Nokia Siemens Network, Alcatel Lucent, Ericsson, Motorola and Nortel apart from the Chinese. Nortel and Motorola continue to have a presence in Southern India, however it is difficult for NSN and Ericsson to offer competitive prices in this region due to lack of scale.
The logic behind BSNL selecting Huawei in Southern region despite objections from Department of Telecom and Defense services on the grounds that there are no international boundaries in the South and it would be safe to use a Chinese vendor. And also Huawei was offering the lowest price.
It is High Time that India sets up a National Communications Security and Monitoring Agency headed by an able person such as Sam Pitroda to put an end to all the bias and also make the private Telecom operators comply with the new rules of this agency. |
| Published on Wednesday, December 16, 2009 at 6:16 PM |
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| Monday, December 07, 2009 |
| Time for Tata's to Consolidate Telecom Business |
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We are of the opinion that the Tata Group's telecom assets is needed to maximise synergies and enhance shareholder value. The group has all the pieces to create a single telecom entity - Tata Teleservices Maharashtra (TTML) and Tata Teleservices in wireless [GSM + CDMA] and fixed-line telecom, Tata Sky in DTH, and Tata Communications in wholesale voice. Its fragmented approach makes it tough for the group to compete with companies like Reliance Communications and Bharti, in our view.
For instance, lets consider the business case of Wireless Broadband by WiMax in which Tata Communications has taken a half hearted approach. Bharti Airtel after their announcement of managed services deal with Alcatel-Lucent are suggesting focus on the broadband business. Post this outsourcing arrangement we expect them to participate in Wimax auctions as they have more flexibility to deploy various technologies. Further the distribution structure in case of WiMax will be close to the structure for Direct to Home business and we believe that Bharti, already having presence in the DTH segment, will be better placed.
Aggressive WiMax participation will further stretch TCOM's balance sheet; we’re also concerned about its ability to scale up retail infrastructure. Besides WiMax, pricing pressure in the data business and flat volumes in the voice business drive our cautious view. |
| Published on Monday, December 07, 2009 at 10:54 AM |
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