Indian Telecom Sector : GSM Operators

Transcription

1 May 28, 2012 Monthly Sector Update Indian Telecom Sector : GSM Operators Key Highlights During the month of April 2012, the GSM operators collectively added 6.49 mn subscribers, which is a growth of 1% as compared to the previous month to take the total GSM subscriber base in the country to mn. Bharti Airtel witnessed the highest subscriber addition during the month, adding 2.01 mn M-o- M, to take its total subscriber base to mn. Idea Cellular added 1.49 mn subscribers in April 2012, while Uninor continued to surprise with addition of 1.12 mn subscribers. Idea Cellular's total subscriber base increased to mn while Uninor's total subscriber base at the end of April 2012 stood at mn. Vodafone has disappointed during the month of April 2012 adding just 0.82 mn subscriber to take its total subscriber base to mn. While the subscriber addition continued to grow, the pick up in 3G business is still not very healthy. Industry continues to struggle to ramp-up the 3G business. Bharti Airtel recently reduced the tariffs in its 3G data plans by as much as 70%. We believe that soon other operators would also follow suit and perhaps it is good for the industry despite concerns of triggering another price war on the 3G front. Some regulatory clarity may come in the New Telecom Policy (NTP) which is expected to be announced soon. We expect the final NTP to be ready by June and could revive the industry fortunes. The 'B' and 'C' circles witnessed excellent subscriber addition during April Both these circle categories together contribute 54% of the total GSM mobile subscribers in India. The 'B' and 'C' circles added 4.14 mn subscribers during the month under review which is 64% of the total subscriber net addition. During the month of April 2012 Bharti Airtel witnessed 4 bps increase in subscriber market share, while Vodafone lost 10 bps in subscriber market share. Bharti Airtel's GSM subscriber market share stood at 27.33%, while Vodafone's subscriber market share at the end of April 2012 stood at 22.56%. Idea Cellular and Aircel witnessed gains of 6 bps in subscriber market share to 17.03% and 9.48% respectively, while Uninor added 11 bps rise in subscriber market share to 6.49 at the end of April Despite the recent fall in 3G data tariffs, we see the overall voice tariffs remaining stable for the incumbents, rather could improve marginally unless Telecom Regulatory Authority of India (TRAI) decides to regulate the pricing. Daryl Philip Senior Research Analyst Tel. : dphilip@finquestonline.com We remain bullish on mobile operators under our coverage (Bharti Airtel and Idea Cellular) despite such extreme regulatory uncertainty and flip-flops. We maintain our 'Buy' rating on both Bharti Airtel and Idea Cellular with the target price of Rs 495 and Rs 133 respectively. FINQUEST research also available on BLOOMBERG FSPL <GO> and REUTERS. For Private Circulation Only

2 Huge regulatory uncertainty created by the Telecom regulatory authority of India's (TRAI) recent recommendation on the reserve price for 2G spectrum auction and spectrum re-farming refuse to die down as the regulator and the Telecom Commission (TC) & Department of Telecommunication (DoT) deliberate the future course of action. The telecom industry has vigorously protested such high reserve price arguing that the same would increase the telecom tariff significantly. Despite protest by various operators (incumbents as well as new operators) TRAI has so far justified its recommendation and has argued that the higher reserve price would only increase the tariff by 4 to 6 paisa a minute. TRAI had recommended a reserve price of Rs bn for one megahertz of spectrum. The telecom industry has argued that the higher reserve price if completely passed on to the subscribers would increase the tariffs by at least 26 paisa a minute. Now the TC has put the onus of deciding the contentious issue of the base price for auction of 1,800 MHz of 2G band spectrum on the Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee. The good thing for the industry though is that the TC has decided to ask the regulator to take a re-look at the impact that the reserve price would have on tariffs as well as on the viability of investments made by the telcos and has said that an analysis needs to be made circle-wise on the impact of the reserve price on tariffs if the entire amount is passed on to consumers and viability of the investments made by telecom firms. Such high regulatory uncertainty and confusion has really taken the sheen out of the sector during the past few months. Nevertheless the industry continued to witness subscriber addition during the past several months and the growth continued in the month of April as well among the GSM operators. During the month of April 2012, the GSM operators collectively added 6.49 mn subscribers, which is a growth of 1% as compared to the previous month to take the total subscriber base to mn. The subscriber addition growth though fell 5.5% M-o-M. Bharti Airtel witnessed the highest subscriber addition during the month, adding 2.01 mn M-o-M to take its total subscriber base to mn. Idea Cellular added 1.49 mn subscribers in April 2012, while Uninor continued to surprise with addition of 1.12 mn subscribers. Idea Cellular's total subscriber base increased to mn while Uninor's total subscribers at the end of April 2012 stood at mn. Despite license calculation of Uninor and Videocon, these operators have witnessed handsome subscriber gain, while Vodafone has disappointed during the month of April 2012 adding just 0.82 mn subscriber to take its total subscriber base to mn. Videocon added 0.16 mn subscribers, while Aircel added 1.01 mn subscribers to take their respective subscriber count at the end of April to 6.11 mn subscribers and mn subscribers respectively. While the subscriber addition continued to grow, the pick up in 3G business is still not very healthy. Industry continues to struggle to ramp-up the 3G business. After having made such huge investments to acquire 3G spectrum in early 2011, the service ramp-up has been very slow, primarily due to high cost of 3G services and low penetration of 3G enabled handsets. In order to increase volumes, Bharti Airtel recently reduced the tariffs in its 3G data plans by as much as 70%. We believe that soon other operators would also follow suit and perhaps it is good for the industry despite concerns of triggering another price war on the 3G front. Some regulatory clarity may come in the New Telecom Policy (NTP) which is expected to come soon. We expect the final NTP to be ready by June and could revive the industry fortunes. The GSM operators have been adding impressive subscriber growth during the past several months especially from the tier II cities and rural markets where the mobile penetration is still low. The 'B' and 'C' circles witnessed excellent subscriber addition during April Both these circle categories put together contributes 54% of the total GSM mobile subscribers in India. The 'B' and 'C' circles added 4.14 mn subscribers during the month under review which is 64% of the total subscriber net addition. The 'A' circles which contributed 46% of the total subscriber base added 2.35 mn subscriber additions, which is 36% of the total subscriber net addition. Going ahead we see the trend to continue and the incumbent operators would take the lead in adding subscribers in the 'B' and 'C' circles. The gain in market share for the incumbents in the 'A' circles would come from porting. During the month of April 2012 Bharti Airtel witnessed 4 bps increases in subscriber market share, while Vodafone lost 10 bps in subscriber market share. Bharti Airtel's GSM subscriber market share stood at 27.33%, while Vodafone's subscriber market share at the end of April 2012 stood at 22.56%. Idea Cellular and Aircel witnessed gain of 6 bps in subscriber market share to 17.03% and 9.48% respectively, while Uninor added 11 bps rise in subscriber market share to 6.49% at the end of April

3 Despite the recent fall in 3G data tariffs, we see the overall voice tariffs remaining stable for the incumbents, rather could improve marginally unless Telecom Regulatory Authority of India (TRAI) decides to regulate the pricing. We expect the Broadband Wireless Access (BWA) launch by various operators by the end of the current calendar year and that perhaps would improve the blended average revenue per minute (ARPM) of leading operators going ahead. Nevertheless the subscriber acquisition cost and network operation & expansion cost is expected to be on the higher side. We remain bullish on mobile operators under our coverage (Bharti Airtel and Idea Cellular) despite such extreme regulatory uncertainty and flip-flop. We maintain our 'Buy' rating on both Bharti Airtel and Idea Cellular with the target price of Rs 495 and Rs 133 respectively. Sector Overview As per Telecom Regulatory Authority of India (TRAI) data, the total telecom subscribers in India (GSM + CDMA + Wire-line) at the end of March 2012 rose by 7.85 mn subscribers to mn as compared to February TRAI is yet to release the April 2012 data. The total wireless subscriber base (GSM + CDMA) in the metros and 'A' circle as at the end of March 2012 stood at mn as compared to mn during February 2012, while the total subscriber base in the 'B' and 'C' category circles stood at mn and mn respectively, up 3.75 mn M-o-M and 1.69 mn M-o-M respectively. As per the TRAI's data, India's total tele-density increased to 78.66% at the end of March as against 78.10% as at the end of February 2012, while the wireless tele density in the country as at the end of March 2012 rose to 76%, as against 75.42% at the end of February The urban wireless tele-density increased to %, while the rural wireless tele-density at the end of March 2012 increased to 38.33%. As per the TRAI's report, the number of actual active subscribers, based on the Visitor Location Register (VLR) at the end of March 2012, was mn, as against the total wireless subscriber base as on that date of mn. Broadband subscriber base increased marginally from mn in February 2012 to mn in March Total wireless GSM subscribers net additions & growth Source: TRAI, COAI, FQ Research 3

4 Circle wise wireless (GSM) subscriber numbers as at the end of Apr Circle Subscribers Net subscriber Growth in Growth in net (mn) Additions (mn) wireless subscriber (M-o-M) subscribers additions Apr-12 Apr-12 M-o-M % M-o-M Metro & 'A' Circle Delhi % % Mumbai % % Kolkatta % % Tamil Nadu % % Andhra Pradesh % % Karnataka % % Maharashtra % % Gujarat % 3.26% B' Circle Punjab % 45.05% Uttar Pradesh (East) % % Uttar Pradesh (West) % % Haryana % % Madhya Pradesh % % Kerala % % Himachal Pradesh % 84.34% Rajasthan % % West Bengal % % C' Circle Assam % % Bihar % -6.52% Jammu & Kashmir % 28.64% North East % 28.81% Orissa % 27.54% Total % -5.48% 4

5 GSM Operator's subscriber market share as at the end of Apr 2012 Source: TRAI, COAI, FQ Research GSM Operator-wise subscriber market share & net additions Service provider Subscribers Subscriber Net Additions Share of net Change in (mn) market share (mn) additions market share Apr-12 Apr-12 Apr-12 Apr-12 (M-o-M) Bharti % % 0.04% Vodafone % % -0.10% Rcom % % 0.00% Idea % % 0.06% Tata % % 0.00% BSNL % % -0.14% Aircel % % 0.06% Loop % % -0.01% Etisalat % % 0.00% HFCL % % 0.00% MTNL % % -0.02% Sistema % % 0.00% Stel % % 0.00% Unitech % % 0.11% Videocon % % 0.01% Total % % 5

6 Bharti Airtel Bharti Airtel added 2.01 mn subscribers in April 2012, as against 2.5 mn subscribers added in March 2012, thus taking its total wireless subscriber base to mn. The company added 0.81 mn subscribers in the metros and 'A' circle, while it added 0.60 mn and 0.61 mn subscribers in the 'B' and 'C' category circle. During the month of April 2012, for the company the percentage share of net addition was higher than the company's market share, thus resulting in 4 bps increase in subscriber market share to 27.33%. The percentage share of net addition in subscribers in April 2012 was 30.98% as compared to the company subscriber market share of 27.33%. In most of the major circles the company witnessed increase in subscriber market share during April 2012 as compared to the previous month. Lowering competitive intensity will help the company in terms of pricing power going ahead while we expect the company to witness further increase in subscriber market share in the 'B' and 'C' circles. Bharti Airtel's wireless subscribers net additions & growth Bharti Airtel's circle-wise monthly performance analysis (Apr 2012) Circle Subscribers Circle Rank in Change in No.of Apr-12 market share Circle market share operators/circle (Apr-12) (M-o-M) (Apr-12) Metro & 'A' Circle Delhi % % 9 Mumbai % % 12 Kolkatta % % 11 Tamil Nadu % % 11 Andhra Pradesh % % 11 Karnataka % % 12 Maharashtra % % 12 Gujarat % % 12 B' Circle Punjab % % 12 Uttar Pradesh (East) % % 11 Uttar Pradesh (West) % % 11 Haryana % % 12 Madhya Pradesh % % 12 Kerala % % 11 Himachal Pradesh % % 11 Rajasthan % % 12 West Bengal % % 10 C' Circle Assam % % 10 Bihar % % 13 Jammu & Kashmir % % 8 North East % % 10 Orissa % % 12 Total % % 15 6

7 Vodafone Vodafone's performance was disappointing; it added only 0.82 mn subscribers in April 2012 to take its total subscriber base to mn. In the 'Metro' and 'A' circles the company added 0.30 subscribers in April 2012 to take its total subscribers there to mn, while in the 'B' and 'C' category circles the company added 0.26 mn subscribers and 0.25 mn subscribers respectively to take the total subscribers there to mn and mn. The company lost subscriber market share in many of the major 'Metro' and 'A' circles, while it added marginal subscriber market share in Delhi, Mumbai, Kolkatta and Karnataka circles April Overall the company lost 10 bps subscriber market share in April 2012, to take its total GSM subscriber market share to 22.56%. Vodafone's percentage share of net addition in subscribers has remained very poor as compared to its subscriber market share during the past several months and during April 2012 it was just 12.62% as compared to the company subscriber market share of 22.56%. Vodafone's wireless subscribers net additions & growth Vodafone India's circle-wise monthly performance analysis (Apr 2012) Circle Subscribers Circle Rank in Change in No.of Apr-12 market share Circle market share operators/circle (Apr-12) (M-o-M) (Apr-12) Metro & 'A' Circle Delhi % % 9 Mumbai % % 12 Kolkatta % % 11 Tamil Nadu % % 11 Andhra Pradesh % % 11 Karnataka % % 12 Maharashtra % % 12 Gujarat % % 12 B' Circle Punjab % % 12 Uttar Pradesh (East) % % 11 Uttar Pradesh (West) % % 11 Haryana % % 12 Madhya Pradesh % % 12 Kerala % % 11 Himachal Pradesh % % 11 Rajasthan % % 12 West Bengal % % 10 C' Circle Assam % % 10 Bihar % % 13 Jammu & Kashmir % % 8 North East % % 10 Orissa % % 12 Total % % 15 7

8 Idea Cellular Idea Cellular has exhibited impressive performance during the past several months adding substantial number of subscribers on its network aided by the mobile number portability (MNP) and the recent 2G license cancellation. All these regulatory and legal issues seem to have benefited the company in mopping up the subscribers at much higher rate than its subscriber market share. The subscribers on the company's network increased by 1.49 mn in April 2012 to mn. Major subscriber addition for the company happened in the 'A' and 'B' circles where it added 0.39 mn subscribers and 1.01 mn subscribers to take the total subscribers there to mn subscribers and mn subscribers respectively. The company lost GSM subscriber market shares in the important circles of Maharashtra, Gujarat, Kerala and Mumbai during the month. Overall the GSM subscriber market share of the company in April 2012 rose 6 bps to 17.03% as at the end of April Idea Cellular's wireless subscribers net additions & growth Idea Cellular's circle-wise monthly performance analysis (Apr 2012) Circle Subscribers Circle Rank in Change in No.of Feb-12 market share Circle market share operators/circle (Apr-12) (M-o-M) (Apr-12) Metro & 'A' Circle Delhi % % 9 Mumbai % % 12 Kolkatta % % 11 Tamil Nadu % % 11 Andhra Pradesh % % 11 Karnataka % % 12 Maharashtra % % 12 Gujarat % % 12 B' Circle Punjab % % 12 Uttar Pradesh (East) % % 11 Uttar Pradesh (West) % % 11 Haryana % % 12 Madhya Pradesh % % 12 Kerala % % 11 Himachal Pradesh % % 11 Rajasthan % % 12 West Bengal % % 10 C' Circle Assam % % 10 Bihar % % 13 Jammu & Kashmir % % 8 North East % % 10 Orissa % % 12 Total % % 15 8

9 Other Developments Bharti Airtel forays into mobile advertising segment Bharti Airtel has forayed into India's mobile advertising segment. Airtel's m-advertising platform is designed to meet demands of advertisers such as inventory management, campaign management, reporting and analytics. Airtel will equip advertisers to connect with their potential customers in a personalized way through their mobile phones. Through this platform, advertisers will be able to leverage multiple communications outlets and tools such as mobile internet (WAP), messaging services and Airtel digital TV to engage their audiences. Bharti Airtel is also planning to roll out 3G services in Rwanda in the next quarter for which it has earmarked a capex of USD 100 mn. Bharti Airtel to acquire 49% stake in Qualcomm Bharti Airtel is set to acquire 49% stake in Qualcomm's Inc's fourth-generation (4G) broadband venture in the country for USD 165 mn. Bharti Airtel will buy a 26 per cent stake held by two Indian partners in the Qualcomm broadband venture and the remaining by subscribing to fresh equity. The company plans to take full control of the BWA entities by Qualcomm expects to provide technical assistance to Bharti in connection with network architecture and optimization, infrastructure and device testing, as well as continuing to develop and support the underlying technology and the LTE TDD ecosystem. The deal will give Bharti access to four telecoms zones, including the lucrative Delhi and Mumbai cities, where it does not have its own 4G airwaves. Idea cellular cuts 3G tariff by 70% Idea Cellular recently announced up to 70% tariff reduction in its 3G services following Bharti Airtel which also reduced its 3G data tariffs recently. Idea Cellular's prepaid and postpaid customers will now pay 3p/10 KB of data, 70 per cent less over the earlier tariff of 10p/10KB. 9

10 Annexure Circle-wise subscriber market share of operators (GSM) as on Apr 2012 Circle Bharti Vodafone Rcom Idea Tata BSNL Aircel Loop MTNL Others Metro & 'A' Circle Delhi 31.21% 30.77% 0.00% 16.85% 0.00% 0.00% 9.09% 0.00% 9.38% 2.69% Mumbai 16.53% 25.73% 0.00% 12.51% 0.00% 0.00% 5.67% 14.39% 12.53% 12.64% Kolkatta 24.79% 27.45% 0.00% 8.53% 0.00% 15.45% 12.09% 0.02% 0.00% 11.68% Tamil Nadu 21.44% 19.61% 0.00% 3.44% 0.00% 14.77% 34.92% 0.00% 0.00% 5.82% Andhra Pradesh 37.62% 12.80% 0.00% 20.65% 0.00% 17.90% 3.39% 0.00% 0.00% 7.63% Karnataka 40.71% 17.96% 0.00% 15.05% 0.00% 17.25% 3.31% 0.00% 0.00% 5.73% Maharashtra 19.89% 25.94% 0.00% 30.30% 0.00% 12.01% 2.13% 0.00% 0.00% 9.74% Gujarat 17.03% 39.03% 0.00% 20.00% 0.00% 9.65% 1.76% 0.00% 0.00% 12.53% B' Circle Punjab 30.81% 20.00% 0.00% 24.49% 0.00% 20.46% 4.15% 0.00% 0.00% 0.08% Uttar Pradesh (East) 25.88% 26.35% 0.00% 13.50% 0.00% 16.82% 4.85% 0.00% 0.00% 12.58% Uttar Pradesh (West) 17.20% 24.72% 0.00% 27.21% 0.00% 11.96% 5.46% 0.00% 0.00% 13.46% Haryana 16.07% 29.46% 0.00% 25.09% 0.00% 19.32% 3.69% 0.00% 0.00% 6.38% Madhya Pradesh 28.00% 11.91% 0.00% 40.40% 0.00% 13.06% 2.81% 0.00% 0.00% 3.83% Kerala 13.48% 22.30% 0.00% 28.20% 0.00% 25.56% 7.18% 0.00% 0.00% 3.28% Himachal Pradesh 32.63% 8.27% 0.00% 8.19% 0.00% 28.74% 12.85% 0.00% 0.00% 9.33% Rajasthan 41.10% 25.87% 0.00% 12.04% 0.00% 15.61% 5.24% 0.00% 0.00% 0.13% West Bengal 27.19% 34.69% 0.00% 6.62% 0.00% 10.38% 9.20% 0.00% 0.00% 11.91% C' Circle Assam 33.38% 19.75% 0.00% 2.84% 0.00% 10.31% 33.00% 0.00% 0.00% 0.71% Bihar 37.21% 12.77% 0.00% 12.07% 0.00% 12.06% 11.26% 0.00% 0.00% 14.63% Jammu & Kashmir 37.25% 12.63% 0.00% 3.31% 0.00% 17.13% 29.67% 0.00% 0.00% 0.00% North East 31.49% 12.61% 0.00% 2.87% 0.00% 19.65% 32.95% 0.00% 0.00% 0.43% Orissa 32.82% 13.30% 0.00% 5.34% 0.00% 21.92% 14.89% 0.00% 0.00% 11.73% Total 27.33% 22.56% 0.00% 17.03% 0.00% 14.12% 9.48% 0.49% 0.82% 8.17% Source: TRAI, COAI, AUSPI, FG Research 10

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