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Telecom Services-Wireless/Cellular
Vodafone Investor Event – Key
highlights
Vodafone’s India outlook - mixed bag
Vodafone’s global management team & top mgt. from India held discussions with
global investors in Mumbai. Based on our impressions, the good news for telecom
investors in India is that there is still room for penetration-led growth & regulatory
risks (spectrum re-farming & roaming abolition) seem unlikely to materialize over
next 6-12 mths. The bad news is that competitive intensity of the market remains
high (including among top 3); we think consensus optimism about continued
voice-tariff hikes may be overly optimistic. Maintain Neutral on Idea (Rs97.95, C-
2-9) and Bharti (Rs386.1, C-2-7).
India strategy – prima facie different from Bharti
In our view, key differences between Vodafone & Bharti include 1) higher reliance
by Vodafone on in-sourcing of customer management & technology needs;
2) lower subscriber churn likely supported by deep distribution controls, and
3) prima facie reluctance by Vodafone to adopt TD-LTE for wireless-broadband
delivery. Overall, we sense that Vodafone is highly focused on 1) high-value
customers, 2) network performance, & 3) process-controls for competitive
advantage.
Regulatory issues likely to linger-on
Vodafone sees the policy making process in India as elaborate, multi-level and
hence complex. The company foresees litigation and execution challenges around
policy proposals for spectrum re-farming and roaming abolition; it does not expect
quick resolution of the policy overhang. Although the draft NTP 2011 proposals
support M&A, lack of clarity on spectrum-related issues are likely to be a
hindrance to industry consolidation in the near-term.
Data uptake to be led by 2G; m-Paisa pilot commenced
Vodafone expects the initial phase of data experience in India to be led by 2G
(EDGE) with subsequent migration to 3G once customer experience matures.
Vodafone expects the current steep pricing gap between 2G and 3G data to
narrow over next few quarters. Meanwhile, as part of its non-voice strategy,
Vodafone has launched mobile banking (m-paisa) services in Rajasthan.
Business model for TD-LTE appears challenging
Vodafone said there is no visible progress yet towards any major TD-LTE rollout
by new or existing operators in India. The company believes that TD-LTE services
may initially focus on the niche segment of dongles/data-cards.
Indus Towers – robust outlook
Indus Towers’ (Vodafone’s 42% joint-venture for tower-sharing) expects to grow
its tenancy factor from ~1.9x currently to ~2.5x in 4 years and is consequently
aiming for strong margin expansion. Legal process for merger of tower assets is
e xpected to complete in 9-12 months.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Telecom Services-Wireless/Cellular
Vodafone Investor Event – Key
highlights
Vodafone’s India outlook - mixed bag
Vodafone’s global management team & top mgt. from India held discussions with
global investors in Mumbai. Based on our impressions, the good news for telecom
investors in India is that there is still room for penetration-led growth & regulatory
risks (spectrum re-farming & roaming abolition) seem unlikely to materialize over
next 6-12 mths. The bad news is that competitive intensity of the market remains
high (including among top 3); we think consensus optimism about continued
voice-tariff hikes may be overly optimistic. Maintain Neutral on Idea (Rs97.95, C-
2-9) and Bharti (Rs386.1, C-2-7).
India strategy – prima facie different from Bharti
In our view, key differences between Vodafone & Bharti include 1) higher reliance
by Vodafone on in-sourcing of customer management & technology needs;
2) lower subscriber churn likely supported by deep distribution controls, and
3) prima facie reluctance by Vodafone to adopt TD-LTE for wireless-broadband
delivery. Overall, we sense that Vodafone is highly focused on 1) high-value
customers, 2) network performance, & 3) process-controls for competitive
advantage.
Regulatory issues likely to linger-on
Vodafone sees the policy making process in India as elaborate, multi-level and
hence complex. The company foresees litigation and execution challenges around
policy proposals for spectrum re-farming and roaming abolition; it does not expect
quick resolution of the policy overhang. Although the draft NTP 2011 proposals
support M&A, lack of clarity on spectrum-related issues are likely to be a
hindrance to industry consolidation in the near-term.
Data uptake to be led by 2G; m-Paisa pilot commenced
Vodafone expects the initial phase of data experience in India to be led by 2G
(EDGE) with subsequent migration to 3G once customer experience matures.
Vodafone expects the current steep pricing gap between 2G and 3G data to
narrow over next few quarters. Meanwhile, as part of its non-voice strategy,
Vodafone has launched mobile banking (m-paisa) services in Rajasthan.
Business model for TD-LTE appears challenging
Vodafone said there is no visible progress yet towards any major TD-LTE rollout
by new or existing operators in India. The company believes that TD-LTE services
may initially focus on the niche segment of dongles/data-cards.
Indus Towers – robust outlook
Indus Towers’ (Vodafone’s 42% joint-venture for tower-sharing) expects to grow
its tenancy factor from ~1.9x currently to ~2.5x in 4 years and is consequently
aiming for strong margin expansion. Legal process for merger of tower assets is
e xpected to complete in 9-12 months.
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