Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Telecom Services
Equity Research
Channel checks on 3G: Slow uptake now, but significant potential
3G uptake inflexion point 9-12 months away...
Following our channel checks on 3G/data uptake, we believe the uptake of
3G is lower than our initial estimates mainly due to: 1) higher price points on
3G tariffs; 2) patchy 3G networks; 3) limited 3G handset sales; and 4) bill
shock. We note that operators are currently not aggressively migrating their
existing 2G subs to 3G (as they do not want the customer experience on 3G
to be poor) and believe that the current 3G uptake is more due to “customer
pull” rather than “operator push”. However, given the steady development
of the 3G ecosystem, we believe that we will see a healthy data uptake in
next 9-12 months (and hence meaningful contribution to operators’
financials). We consider incumbent operators like Bharti/Idea to be best
positioned to capitalize on this opportunity and reiterate our Buy ratings.
3G opportunity of US$1.8 bn by FY15; low risk of price war
We estimate the number of 3G subs in India to increase from 16 mn (1.7%
of total mobile subs) in FY12 to 117 mn by FY15 (8.9% of total subs) led by
increasing affordability, falling tariffs and handset prices and improving
content. We estimate the incremental ARPU contribution of 3G to be
around Rs65 by FY15, translating the entire 3G market size to US$1.8 bn,
which is c. 8%-9% of the total cellular market size in FY15, as per our
estimates. We see low risk of a price-war on 3G, as we believe that
operators like RCOM, Tata DoCoMo which were aggressive (and primarily
initiated price-cuts in the 2G space) cannot be as aggressive on 3G as they
risk cannibalizing their dongle revenues on the CDMA platform.
3G likely to drive consensus upgrades; Idea better positioned
We consider Idea as the best positioned operator (followed by Bharti) to
capitalize on the 3G opportunity given that it has the maximum overlap
between its 2G and 3G footprint (76% for Idea; 69% for Bharti) and
therefore better placed to up-sell 3G services to its existing 2G subs. We
note that 3G ARPU is an add-on on 2G ARPUs as the subscriber needs to
pay an additional amount for data over its existing voice package.
Operators indicated that current ARPU of 3G subs is US$ 4-5 (vs. 2G ARPU
of US$3-4) and EBITDA margins for 3G are higher than that of 2G as most
of the costs/overheads are shared with 2G. Our sensitivity analysis shows if
10% of Bharti/Idea’s subs move to 3G by FY13, at ARPU of US$ 4.5-5, then
our FY13 EPS would increase by 4.5%/8.9% respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Telecom Services
Equity Research
Channel checks on 3G: Slow uptake now, but significant potential
3G uptake inflexion point 9-12 months away...
Following our channel checks on 3G/data uptake, we believe the uptake of
3G is lower than our initial estimates mainly due to: 1) higher price points on
3G tariffs; 2) patchy 3G networks; 3) limited 3G handset sales; and 4) bill
shock. We note that operators are currently not aggressively migrating their
existing 2G subs to 3G (as they do not want the customer experience on 3G
to be poor) and believe that the current 3G uptake is more due to “customer
pull” rather than “operator push”. However, given the steady development
of the 3G ecosystem, we believe that we will see a healthy data uptake in
next 9-12 months (and hence meaningful contribution to operators’
financials). We consider incumbent operators like Bharti/Idea to be best
positioned to capitalize on this opportunity and reiterate our Buy ratings.
3G opportunity of US$1.8 bn by FY15; low risk of price war
We estimate the number of 3G subs in India to increase from 16 mn (1.7%
of total mobile subs) in FY12 to 117 mn by FY15 (8.9% of total subs) led by
increasing affordability, falling tariffs and handset prices and improving
content. We estimate the incremental ARPU contribution of 3G to be
around Rs65 by FY15, translating the entire 3G market size to US$1.8 bn,
which is c. 8%-9% of the total cellular market size in FY15, as per our
estimates. We see low risk of a price-war on 3G, as we believe that
operators like RCOM, Tata DoCoMo which were aggressive (and primarily
initiated price-cuts in the 2G space) cannot be as aggressive on 3G as they
risk cannibalizing their dongle revenues on the CDMA platform.
3G likely to drive consensus upgrades; Idea better positioned
We consider Idea as the best positioned operator (followed by Bharti) to
capitalize on the 3G opportunity given that it has the maximum overlap
between its 2G and 3G footprint (76% for Idea; 69% for Bharti) and
therefore better placed to up-sell 3G services to its existing 2G subs. We
note that 3G ARPU is an add-on on 2G ARPUs as the subscriber needs to
pay an additional amount for data over its existing voice package.
Operators indicated that current ARPU of 3G subs is US$ 4-5 (vs. 2G ARPU
of US$3-4) and EBITDA margins for 3G are higher than that of 2G as most
of the costs/overheads are shared with 2G. Our sensitivity analysis shows if
10% of Bharti/Idea’s subs move to 3G by FY13, at ARPU of US$ 4.5-5, then
our FY13 EPS would increase by 4.5%/8.9% respectively.
No comments:
Post a Comment