The Ringtone feature: Mobile number portability – question of WHEN, not IF
The Indian telecom sector continues to be buffeted by multiple headwinds. Mobile
number portability (MNP) would arrive in India in the backdrop of already high
competitive intensity. Responses to the consultation paper on MNP floated by the
regulator are on predictable lines – new operators demanding low or no porting
charges. We are not sanguine that dominant operators will lose subscribers as
they have usually performed very well on customer satisfaction metrics. However
subscriber retention costs will increase leading to lower margins.
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LOCATED IN APPENDIX 1. MICA(P) 106/05/2009
Periodical
Table of contents
Feature ............................................................. Page 02
From the regulator's desk ................................ Page 04
What's new ...................................................... Page 05
Industry analysis............................................... Page 07
Global meeting room........................................ Page 11
DB India Telecom Index
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Sensex DB India Telecom Index
Wireless market share
Subscriber Revenue
(June 09) (June 09)
Bharti 24.0% 32.5%
Reliance 18.6% 11.1%
Vodafone 17.9% 20.0%
Idea 10.0% 11.7%
Tata 8.7% 6.8%
BSNL + MTNL 13.8% 13.4%
Aircel 5.1% 3.3%
Others 1.9% 1.1%
Wireless KPI - Q1FY10
Bharti RCom Idea
Subscribers (mn) 102.37 79.61 42.8
ARPU (Rs./month/sub) 278 210 232
MoU (min/month/sub) 478 365 399
RPM (Rs./min) 0.59 0.58 0.58
Total minutes (mn) 140,713 83,300 48,729
Net revenues (Rs. mn) 82,285 38,086 30,097
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but still a lot of ground to cover
03 Aug 09
Global Markets Research Company
1QFY10: Wireless revenues show declining growth trend
The recently released data by TRAI reveals that Adjusted Gross Revenue (AGR) for
the entire sector (wireless + wireline) has been flat on a QoQ basis. We hope that
by now it is clear to investors that subscriber additions is a meaningless metric – it
conveys less and confuses more. In 1Q10, subscriber growth stood at 9% vs
wireless AGR growth of 0.5% QoQ. Private wireless operators registered a 2.5%
QoQ growth in AGR while public sector (BSNL and MTNL) registered a QoQ
decline of 13.5%.
1QFY10 results – Falling ARPUs and MoUs slow down growth
While sector leader Bharti showed growth in Revenue and EBITDA (+1.2% and
+3.8% QoQ respectively), PAT declined by 8.4% on a QoQ basis. Reliance
Communications was able to post only a modest 1% QoQ growth in revenue even
though wireless revenues were up by 6.5%. Idea also registered a modest 1%
QoQ growth in revenue. ARPUs for all companies fell by 6-9% QoQ whereas
MoUs fell by 1-2% QoQ. However, all these companies reported a 100-150bps
improvement in EBITDA margins.
Valuation and risks
We use DCF (Rf of 8.1%, Rm of 5.4%, TGR of 4%) as our primary valuation
methodology for the sector due to the predictability of cash flows. Potential
upside risks to our valuation are: 1) higher-than-expected growth in subscription
and usage and 2) higher-than-anticipated gains from tower sharing. Downside risks
are: 1) regulatory overhang, 2) severe pricing pressure due to competition, and 3) a
slowdown in non-wireless businesses.