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UBS Investment Research
India Mobile Sector
H ealthy minutes growth likely to continue
Revenue growth to remain strong; Idea likely to out-perform peers
We expect Bharti and Idea to continue to post steady mobile revenue growth (4.0%
and 6.5%) during 1QFY12 on the back of healthy minutes growth. However, we
estimate voice rev per minute to decline to Rs0.36 (-2%) in the quarter. For RCom,
we expect mobile revenue growth to be less than 1% given it is still restructuring
its various tariff plans. We believe that Idea will continue to outperform its peers in
terms of revenue growth as 1) Idea gains traction in new service areas 2) Idea
brand seems to get better response as evidenced by MNP portings into Idea.
EBITDA margins expected to remain flat in the quarter
We expect mobile EBITDA margins of Idea to decline by 120bps QoQ as the
company benefitted from one off items in 4QFY11. For Bharti and RCom, we
expect EBITDA margins to remain flat in 1QFY12. We expect full impact of 3G
expenses such as D&A, interest expense to take place from next quarter onwards.
Idea is our top pick; Reiterate Buy on Bharti, RCOM
We expect more clarity on regulatory policy by the end of 2011 as DoT comes out
with new telecom policy (NTP-2011). We believe NTP 2011 is likely to 1) resolve
issues related to spectrum allocation and pricing and 2) facilitate consolidation in
the sector. As a result, we expect the sector to get pricing power from FY13
onwards. While the whole sector should benefit from these developments, Idea as a
pure play mobile operator stands to gain the most. We like Bharti given its
dominant position in the Indian mobile sector and expect it benefit from potential
consolidation. We believe at current levels RCom offers excellent risk reward for
investors with a higher risk appetite.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Mobile Sector
H ealthy minutes growth likely to continue
Revenue growth to remain strong; Idea likely to out-perform peers
We expect Bharti and Idea to continue to post steady mobile revenue growth (4.0%
and 6.5%) during 1QFY12 on the back of healthy minutes growth. However, we
estimate voice rev per minute to decline to Rs0.36 (-2%) in the quarter. For RCom,
we expect mobile revenue growth to be less than 1% given it is still restructuring
its various tariff plans. We believe that Idea will continue to outperform its peers in
terms of revenue growth as 1) Idea gains traction in new service areas 2) Idea
brand seems to get better response as evidenced by MNP portings into Idea.
EBITDA margins expected to remain flat in the quarter
We expect mobile EBITDA margins of Idea to decline by 120bps QoQ as the
company benefitted from one off items in 4QFY11. For Bharti and RCom, we
expect EBITDA margins to remain flat in 1QFY12. We expect full impact of 3G
expenses such as D&A, interest expense to take place from next quarter onwards.
Idea is our top pick; Reiterate Buy on Bharti, RCOM
We expect more clarity on regulatory policy by the end of 2011 as DoT comes out
with new telecom policy (NTP-2011). We believe NTP 2011 is likely to 1) resolve
issues related to spectrum allocation and pricing and 2) facilitate consolidation in
the sector. As a result, we expect the sector to get pricing power from FY13
onwards. While the whole sector should benefit from these developments, Idea as a
pure play mobile operator stands to gain the most. We like Bharti given its
dominant position in the Indian mobile sector and expect it benefit from potential
consolidation. We believe at current levels RCom offers excellent risk reward for
investors with a higher risk appetite.
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