GSM incumbents gain minutes market share says HSBC

Indian telecoms
Highlights from the June 2010 performance indicator
report; GSM incumbents gain minutes market share
 We expect decline in subscriber net additions to continue
given the stringent subscriber verification norms
 B&C circles lead the robust minutes growth; GSM incumbents
gain minutes market share by c2% in June quarter
 Bharti (N(V), target price INR341) with its 23% market share is
best placed to benefit from tariffs stabilisation



In this report we discuss the key takeaways from the Telecom Regulatory Authority of
India (TRAI) June 2010 performance indicators report.
Rural subs decline, internet subscriber growth continues: The gross revenues for the
sector increased for the first time after falling for four consecutive quarters. The subscriber
net additions declined sequentially in June quarter (total net additions of 51m versus 57m
previous quarter). We expect this trend to continue given the stringent subscriber
verifications norms. Rural net additions were lower as compared to the urban net additions
at 33% and Idea with 48.9% of rural subscribers provides the best rural exposure in wireless
space. The internet and broadband subscriber’s growth continued during the quarter, the
compounded quarterly growth rate growth in internet and broadband subs is c9% and 4%
respectively; positive early signs for the 3G players. Further incumbents accounted for c80%
of the overall net additions, no pick-up yet from new telcos.
Dual SIM phenomenon distorting KPIs: Urban tele-density of c120% is driven by the
dual SIM phenomenon and validated by the fact that c30% of handsets sold in 1QFY10
were dual SIM handsets. Per our analysis, c49% of the subs in urban own multiple SIMs
after adjusting for the non-addressable urban market (Refer figure 2). Given this possible
disruption from MNP will only impact the post paid/high end subscriber base.
B and C circles gain minute market share: The usage growth witnessed by B and C
category circles outpaced the usage growth in the A and metro circles. Further, on a combined
basis, minute market share for B&C circles increased by 200bps as well (refer figure 3).
GSM incumbents Bharti (70bps), Vodafone (40bps) and Idea (120bps) gained minute
market share by 210bps: Further Bharti also gained revenue market share by 100bps this
quarter and retained minute market share leadership with 23% market share. Bharti
remains in our view the least unattractive share we cover in the Indian telecom space. We
highlight that Bharti with its c23% minute’s market share would benefit the most from
any possibilities of tariff stabilisation.