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S u b s c r i b e r a d d i t i o n o n a f r e e f a l l …
Subscriber addition falls again…
Subscriber addition in the telecom industry fell for the sixth straight
month with a significant fall in August. The industry added just 5.3 million
GSM subscribers in August 2011 as against 7.6 million in July 2011. The
total GSM subscribers for the industry stood at 611.8 million. In CY10, the
average subscriber addition per month was 13.6 million.
Idea – Star Performer
Idea was the star performer in August 2011, adding the highest number of
subscribers and being the only one in the top 5 to see growth in net adds
as compared to July 2011. Net adds for Idea grew 132.4% to 2.3 million
subscribers from 1.0 million in July 2011. The share in net adds for Idea
stood at a mammoth 43.6%.
Bharti, Vodafone – disappointing; BSNL – woeful!
Bharti Airtel and Vodafone both saw a decline in their subscriber addition
with net adds of 1.2 million and 1.1 million, respectively, as against 1.5
million each in July 2011. However, due to a bad overall industry
performance, Bharti and Vodafone saw an increase in the share of net
adds from 19.8% and 19.5% to 21.5% and 21.2%, respectively. BSNL,
saw the greatest slide in net adds with subscriber addition of just 0.4
million as against 1.8 million in July 2011. Share in net adds also fell
drastically from 23.2% in July 2011 to 7.3%.
Others
The subscriber addition for Aircel stayed flat at 0.6 million subscribers as
against July 2011 whereas Uninor saw a significant fall in net adds from
1.1 million to 0.3 million. Other operators in the industry were the most
affected as they saw their subscriber base reducing by 11.5 million
subscribers as against an addition of 2.6 million in July 2011.
Industry outlook
The net adds have declined to very low levels indicating possible peaking
out of competitive intensity. The recent price hike by telcos would aid
ARPM expansion, going ahead. We expect 2-3 paisa improvement in
ARPM by FY13 across players on the back of the recent price hike. ARPM
expansion would aid the margins but rising fuel cost, 3G rollout and rising
interest cost would exert downward pressure on profitability. The new
telecom policy is expected to be a balanced one, which would help the
incumbents in the long run. Nonetheless, one-time spectrum cost and
spectrum re-framing (if implemented) remain a concern. With imminent
consolidation in the industry, we expect larger players to further
consolidate their dominance in the industry.
Among our coverage stocks, both Bharti Airtel and Idea Cellular have so
far remained clear of any allegations, which is also reflected in their price
performance vis-à-vis the broader market and their peers. Both Airtel and
Idea have appreciated significantly in 12 months while Reliance
Communication has declined 50.8% and the benchmark index has
declined by 14.5%. With the expected turnaround in African operations
and strongest key metrics among Indian telcos, Bharti Airtel remains our
top pick in the sector.
Recent events
ƒ BSNL to shell out | 6000 crore for 15 million GSM connections
BSNL will be shelling out around | 6000 crore in the form of staggered
payments to equipment suppliers in order to obtain 15 million GSM
lines upon achievement of fixed milestones. The company will hold a
“reverse auction” model for the selection of vendors.
ƒ Aircel restructures businesses to reduce headcount
As a measure to boost efficiencies and cut cost, Aircel has restructured
its business into two divisions. The operating division will be handling
the company’s go-to-market strategy, branding exercise and subscriber
additions whereas the networking division will be overseeing the
company’s active infrastructure. In doing so, Aircel is expected to
reduce its head count by 10%.
ƒ Vodafone signs pact with Conexus
Vodafone has formed a partnership with the Conexus Mobile Alliance,
which is expected to boost the company’s market presence around the
world. The partnership will expand the roaming experience of the
company to a subscriber base of over 600 million.
ƒ Bharti, Idea and Vodafone plan tower holding company
The three top telecom operators, Bharti, Vodafone and Idea are working
on creating a holding company structure that is likely to house the
entire passive infrastructure owned by the companies. The proposed
holding company is likely to have four subsidiaries – Bharti Infratel,
Indus towers and the tower assets of Vodafone and Idea outside the
Indus towers joint venture.
ƒ Bharti Launches online payment system in Africa
The African arm of Bharti Airtel has launched an online payment system
– PayOnline that will allow its mobile subscribers to use handsets to
make purchase online along with Standard Chartered Bank and
MasterCard Worldwide. PayOnline has been launched in Kenya and will
soon be made available across Africa.
ƒ Bharti Airtel, Idea begin charging SMS termination fee
Bharti Airtel and Idea Cellular have started charging SMS termination
fee of 10 paisa for every text message to other operators. Vodafone has
also followed suit. All the SMSs from April 1 2011 will be charged. The
operators are allowed to legally impose termination charges for SMS
provided that the levy is imposed uniformly and non-discriminatorily to
all players.
This move will affect the operators with a small subscriber base the
most as with a small subscriber base they are likely to have more
outgoing SMSs than incoming ones. Small operators are forced to sign
the deal. However, Uninor has raised the matter with Trai stating that
the charge was unjustified since the real cost of terminating an SMS is
only 2 paisa
ƒ RCom bags order worth | 1400 crore from HDFC
Reliance Communications has bagged an order worth | 1400 crore from
HDFC for building and maintaining its data centre. The deal would span
a period of 15 years wherein RCom will build a new facility creating
space of over 350,000 square feet. The first phase of 100,000 square
feet is expected to be complete in a year and the complete data centre
in two years.
ƒ Airtel’s entry into Rwanda sees spurring price wars
Bharti Airtel commenced its telecom operation in the African country of
Rwanda. Bharti’s entry is expected to begin price wars, which would
mean lower tariffs and a rise in the subscriber base of the telecom
industry in Rwanda.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
S u b s c r i b e r a d d i t i o n o n a f r e e f a l l …
Subscriber addition falls again…
Subscriber addition in the telecom industry fell for the sixth straight
month with a significant fall in August. The industry added just 5.3 million
GSM subscribers in August 2011 as against 7.6 million in July 2011. The
total GSM subscribers for the industry stood at 611.8 million. In CY10, the
average subscriber addition per month was 13.6 million.
Idea – Star Performer
Idea was the star performer in August 2011, adding the highest number of
subscribers and being the only one in the top 5 to see growth in net adds
as compared to July 2011. Net adds for Idea grew 132.4% to 2.3 million
subscribers from 1.0 million in July 2011. The share in net adds for Idea
stood at a mammoth 43.6%.
Bharti, Vodafone – disappointing; BSNL – woeful!
Bharti Airtel and Vodafone both saw a decline in their subscriber addition
with net adds of 1.2 million and 1.1 million, respectively, as against 1.5
million each in July 2011. However, due to a bad overall industry
performance, Bharti and Vodafone saw an increase in the share of net
adds from 19.8% and 19.5% to 21.5% and 21.2%, respectively. BSNL,
saw the greatest slide in net adds with subscriber addition of just 0.4
million as against 1.8 million in July 2011. Share in net adds also fell
drastically from 23.2% in July 2011 to 7.3%.
Others
The subscriber addition for Aircel stayed flat at 0.6 million subscribers as
against July 2011 whereas Uninor saw a significant fall in net adds from
1.1 million to 0.3 million. Other operators in the industry were the most
affected as they saw their subscriber base reducing by 11.5 million
subscribers as against an addition of 2.6 million in July 2011.
Industry outlook
The net adds have declined to very low levels indicating possible peaking
out of competitive intensity. The recent price hike by telcos would aid
ARPM expansion, going ahead. We expect 2-3 paisa improvement in
ARPM by FY13 across players on the back of the recent price hike. ARPM
expansion would aid the margins but rising fuel cost, 3G rollout and rising
interest cost would exert downward pressure on profitability. The new
telecom policy is expected to be a balanced one, which would help the
incumbents in the long run. Nonetheless, one-time spectrum cost and
spectrum re-framing (if implemented) remain a concern. With imminent
consolidation in the industry, we expect larger players to further
consolidate their dominance in the industry.
Among our coverage stocks, both Bharti Airtel and Idea Cellular have so
far remained clear of any allegations, which is also reflected in their price
performance vis-à-vis the broader market and their peers. Both Airtel and
Idea have appreciated significantly in 12 months while Reliance
Communication has declined 50.8% and the benchmark index has
declined by 14.5%. With the expected turnaround in African operations
and strongest key metrics among Indian telcos, Bharti Airtel remains our
top pick in the sector.
Recent events
ƒ BSNL to shell out | 6000 crore for 15 million GSM connections
BSNL will be shelling out around | 6000 crore in the form of staggered
payments to equipment suppliers in order to obtain 15 million GSM
lines upon achievement of fixed milestones. The company will hold a
“reverse auction” model for the selection of vendors.
ƒ Aircel restructures businesses to reduce headcount
As a measure to boost efficiencies and cut cost, Aircel has restructured
its business into two divisions. The operating division will be handling
the company’s go-to-market strategy, branding exercise and subscriber
additions whereas the networking division will be overseeing the
company’s active infrastructure. In doing so, Aircel is expected to
reduce its head count by 10%.
ƒ Vodafone signs pact with Conexus
Vodafone has formed a partnership with the Conexus Mobile Alliance,
which is expected to boost the company’s market presence around the
world. The partnership will expand the roaming experience of the
company to a subscriber base of over 600 million.
ƒ Bharti, Idea and Vodafone plan tower holding company
The three top telecom operators, Bharti, Vodafone and Idea are working
on creating a holding company structure that is likely to house the
entire passive infrastructure owned by the companies. The proposed
holding company is likely to have four subsidiaries – Bharti Infratel,
Indus towers and the tower assets of Vodafone and Idea outside the
Indus towers joint venture.
ƒ Bharti Launches online payment system in Africa
The African arm of Bharti Airtel has launched an online payment system
– PayOnline that will allow its mobile subscribers to use handsets to
make purchase online along with Standard Chartered Bank and
MasterCard Worldwide. PayOnline has been launched in Kenya and will
soon be made available across Africa.
ƒ Bharti Airtel, Idea begin charging SMS termination fee
Bharti Airtel and Idea Cellular have started charging SMS termination
fee of 10 paisa for every text message to other operators. Vodafone has
also followed suit. All the SMSs from April 1 2011 will be charged. The
operators are allowed to legally impose termination charges for SMS
provided that the levy is imposed uniformly and non-discriminatorily to
all players.
This move will affect the operators with a small subscriber base the
most as with a small subscriber base they are likely to have more
outgoing SMSs than incoming ones. Small operators are forced to sign
the deal. However, Uninor has raised the matter with Trai stating that
the charge was unjustified since the real cost of terminating an SMS is
only 2 paisa
ƒ RCom bags order worth | 1400 crore from HDFC
Reliance Communications has bagged an order worth | 1400 crore from
HDFC for building and maintaining its data centre. The deal would span
a period of 15 years wherein RCom will build a new facility creating
space of over 350,000 square feet. The first phase of 100,000 square
feet is expected to be complete in a year and the complete data centre
in two years.
ƒ Airtel’s entry into Rwanda sees spurring price wars
Bharti Airtel commenced its telecom operation in the African country of
Rwanda. Bharti’s entry is expected to begin price wars, which would
mean lower tariffs and a rise in the subscriber base of the telecom
industry in Rwanda.
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