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India: Telecom Services
Equity Research
Telcos conf takeaways; regulations to improve; reiterate BRTI CL-Buy
Return more optimistic on Bharti/Idea after GS Telcos Conference
Following our inaugural GS India Telcos Conference, we return more positive
on: (1) potential for the regulatory environment to improve; and (2) further
stabilization such improvement would bring on the competitive front. In next
couple of months we expect more clarity on regulatory issues (like excess
spectrum payments, license renewal and M&A policy) and believe any
potential impact from MNP would be behind us. We reiterate Buy on Bharti
(CL-Buy) and Idea. In this report, we highlight key takeaways from meetings
with industry participants at the conference. We also discuss: (1) insights from
panel discussions on MNP, 3G, LTE; (2) conclusions for Bharti Africa after
hosting an Africa industry participant; and (3) potential for a tablet market
which LTE rollout could create in the next 12 months.
Regulatory environment at a margin turning positive...
Based on commentary by Telcos Minister/DoT/TRAI we believe: (1) there could
be downside risk to one-off excess spectrum amount as DoT may not accept
TRAI’s recommendations in their current form; (2) There is room for M&A
norms relaxation in April 2011 when DoT is expected to announce the New
Telecom Policy (NTP) 2011; and (3) We see potential for reduction in spectrum
fee from a varying 6%-10% to a flat 6% in next 12-18 months.
MNP’s one-off impact behind us by 4Q end; competition stabilizing
No operator has introduced any aggressive tariffs in last 5-6 months and
competition has stabilized as per the operators. On MNP front, while the
incumbents are net gainers, our channel checks suggest that they have
renegotiated down their postpaid tariffs on a case by case basis to prevent
these subs from migrating to peers. We now model 3.8%/6.0% qoq decline
in RPM for Bharti/Idea in 4Q (vs. 1.0%/3.6% prior) but consider this as a
one-off impact as most of the renegotiations are largely behind us.
Bharti best positioned to benefit; Reiterate CL-Buy (32% upside)
We adjust our FY11E-FY13E EPS for BRTI/Idea/RCOM by an average 2%/5%/
19% due to higher than estimated MNP impact. For Idea, FY11E EPS
increases 19% as we defer 3G amortization and interest expenses to the
following quarter along with service launch. For RCOM, our EPS cuts reflect
disappointing 3Q results, higher financial leverage and a lower base effect.
We cut our 12-month SOTP based target prices for BRTI/Idea/RCOM by
2%/8%25% to Rs420/Rs77/ Rs115 on revised estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India: Telecom Services
Equity Research
Telcos conf takeaways; regulations to improve; reiterate BRTI CL-Buy
Return more optimistic on Bharti/Idea after GS Telcos Conference
Following our inaugural GS India Telcos Conference, we return more positive
on: (1) potential for the regulatory environment to improve; and (2) further
stabilization such improvement would bring on the competitive front. In next
couple of months we expect more clarity on regulatory issues (like excess
spectrum payments, license renewal and M&A policy) and believe any
potential impact from MNP would be behind us. We reiterate Buy on Bharti
(CL-Buy) and Idea. In this report, we highlight key takeaways from meetings
with industry participants at the conference. We also discuss: (1) insights from
panel discussions on MNP, 3G, LTE; (2) conclusions for Bharti Africa after
hosting an Africa industry participant; and (3) potential for a tablet market
which LTE rollout could create in the next 12 months.
Regulatory environment at a margin turning positive...
Based on commentary by Telcos Minister/DoT/TRAI we believe: (1) there could
be downside risk to one-off excess spectrum amount as DoT may not accept
TRAI’s recommendations in their current form; (2) There is room for M&A
norms relaxation in April 2011 when DoT is expected to announce the New
Telecom Policy (NTP) 2011; and (3) We see potential for reduction in spectrum
fee from a varying 6%-10% to a flat 6% in next 12-18 months.
MNP’s one-off impact behind us by 4Q end; competition stabilizing
No operator has introduced any aggressive tariffs in last 5-6 months and
competition has stabilized as per the operators. On MNP front, while the
incumbents are net gainers, our channel checks suggest that they have
renegotiated down their postpaid tariffs on a case by case basis to prevent
these subs from migrating to peers. We now model 3.8%/6.0% qoq decline
in RPM for Bharti/Idea in 4Q (vs. 1.0%/3.6% prior) but consider this as a
one-off impact as most of the renegotiations are largely behind us.
Bharti best positioned to benefit; Reiterate CL-Buy (32% upside)
We adjust our FY11E-FY13E EPS for BRTI/Idea/RCOM by an average 2%/5%/
19% due to higher than estimated MNP impact. For Idea, FY11E EPS
increases 19% as we defer 3G amortization and interest expenses to the
following quarter along with service launch. For RCOM, our EPS cuts reflect
disappointing 3Q results, higher financial leverage and a lower base effect.
We cut our 12-month SOTP based target prices for BRTI/Idea/RCOM by
2%/8%25% to Rs420/Rs77/ Rs115 on revised estimates.
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