J M Financial :: Unitech Wireless: Key takeaways from Telenor’s conference call

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Key takeaways from Telenor’s conference call
􀂄 Uninor’s 3QCY10 revenues double, EBITDA loss flat: Sept’10 was the first
full quarter of Telenor’s Indian operations after Phase 2 launch in 5 service
areas (Gujarat, Kolkata, Maharashtra, Mumbai and WB) in June’10, taking its
count to 13/22 service areas. 3QCY10 revenues grew 108% QoQ to `1.6bn as
traffic increased 138% to 4.5bn min, offset by revenue per minute (RPM)
decline of 11%. However, EBITDA loss was flat at `8.4bn (despite RPM
declining 11%), presumably on the back of lower advertisement cost and opex
efficiency kicking in from older circles.
􀂄 RPM decline of 11% compared with 3-4% for industry: Uninor reported RPM
of 0.39p, down 11% QoQ. The decline is significantly sharper vs Idea - 3% and
Tata Teleservices Maharashtra Limited - 2.3%. Even on an absolute basis,
Uninor’s RPM is lower than Idea and TTML by 7%.
􀂄 Phase 2 circles contribute 46% to net-adds: As per TRAI, Uninor added
5.2mn subscribers in 3QCY10, of these, c.46% were from newly launched five
circles. Subscribers grew by 87% to 11.3mn.
􀂄 Active subscriber ratio increases from 51% to 70%: Due to high churn
owing to the prevailing multi-SIM standard in the Indian market, Uninor
counts its subscribers as active if there has been activity over the last 30
days. On this basis, active subscribers have increased from 51% in 1QCY10 to
70% in 3QCY10.
􀂄 Customer quality remains a concern: Though Uninor continues to increase
its share of subscriber net adds (13.5% in Sept’10 vs 3.3% in June’10) and
MOUs increased 22% along with a simultaneous improvement in proportion of
effective subscribers from 64% to 70%, the revenue generating ability of these
subscribers will be tested in the future as free minutes from the system are
taken out.
􀂄 EBITDA loss and capex guidance lowered: Management lowered its EBITDA
loss guidance for CY10 to c.`35bn from previously stated `35-40bn,
presumably due to delayed new launches. CY10 capex guidance is also
reduced to `11-15bn as no new launches happened during the quarter (no
spectrum in Delhi, security related import restrictions). The company had
earlier reduced CY10 capex guidance from `19-27bn to `15-20bn.