UNINOR 3QCY10: Improving revenue traction but EBITDA loss maintained;: Motilal Oswal

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 UNINOR 3QCY10: Improving revenue traction but EBITDA loss maintained; RPM at 15% discount

-          Telenor reported 3QCY10 results. Revenue traction has improved led by aggressive discounting and marketing of its “dynamic pricing plan” which offers 5-60% discount to subscribers on the base tariff of 1p/second.

-          However we note that 1) EBITDA loss remains flat QoQ despite more than 100% increase in revenue, 2) Uninor’s RPM is now at a 15% discount vs GSM incumbents, and 3) significant capex cut likely reflects lower aggression on coverage although it could be partially attributed to import restrictions on network equipment.

-          Overall, Uninor’s market share at 0.6% of industry revenue and 1.7% of subscribers remains low and is unlikely to result in significant market disruption.

-          We continue to believe that current low RPM levels are unsustainable for greenfield operators like Uninor.

Key highlights

-          Robust revenue growth at 111% QoQ to ~Rs1.6b driven by subscriber and ARPU growth led by aggressive discounting and promotions (dynamic pricing plan extended to several new circles).

-          EBITDA loss at ~Rs8.4b; flat QoQ.

-          RPM at Rs0.36; down 11% QoQ which a ~15% discount vs Idea’s 2QFY11 RPM of Rs0.42 (down 3.5% QoQ).

-          Active subscriber base (based on 30 day basis) stands at 7.9m v/s reported TRAI subscriber base of 11.3m.

-          MOU on active subscriber basis increased 22% QoQ to 254 minutes (vs 394 minutes reported by Idea).

-          ARPU on active subscriber basis increased 8% QoQ to Rs91 (vs Rs167 for Idea).

-          Capex at Rs1.5b; down 45% QoQ. 9MCY10 capex at Rs9.8b v/s CY10 guidance of Rs16-20b.

-          During the quarter, there have been changes in key positions in the Uninor management to transform the company from launch to an operational phase.

Management comments from Telenor’s quarterly release

“I am pleased to see promising development for Uninor in India this quarter with strong growth in subscriptions and increased average revenue per user. These improvements are a result of a focused market approach and other measures. Going forward we will continue our efforts to increase revenues and improve business processes.”