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UBS Investment Research
India Mobile Sector
B etter pricing = Sector re-rating
Bharti raises base tariff plans by 20% in 6 service areas
Bharti has raised the base tariff (on-net) of its per minute (60p/min vs 50p/min
earlier) and per second plans (1.2p/sec vs. 1p/sec earlier) by 20% in 6 service areas
(Delhi, AP, Gujarat, MP, Rajasthan & UP (E)). The hikes follow Tata DoCoMo’s
move of raising base tariffs for NLD and SMS.
5% price hike can impact Bharti/Idea/RCom FY12 EPS by 5%/17%/8%
We believe that the current mobile pricing in India is not sustainable and the recent
moves by operators suggest that prices can move up further in the coming months.
We are factoring in voice rev/min to decline to 35.6p/sec by FY12 before inching
up to 36.2p/sec in FY13. We believe there can be upside risk to our numbers if
pricing goes up faster than our expectations. Our sensitivity analysis suggests that
5% increase in tariff (from base case) can impact our FY12/FY13 earnings
estimates for – Bharti by 5.4%/5.4%, Idea by 17%/14.5% & RCom by 8.2%/6.3%.
Idea is our top pick; Reiterate Buy on Bharti, RCOM
Further there has been news (source Economic Times) that government may
consider exit options for new operators (2008 2G licensees) in new telecom policy
(NTP 2011). We have maintained that new operators have no business case in
India and view any steps by DoT to facilitate consolidation as positive given it will
lead to further re-rating of the sector. We expect more clarity on regulatory policy
by the end of 2011 as DoT comes out with NTP-2011. Idea is our top-pick in the
sector as it offers pure play exposure to India mobile sector. Based on our
sensitivity analysis, our PT for Bharti, Idea and RCom could increase by 3.5%, 6%
and 4% for 5% hike in tariffs from our base case voice rev per minute assumptions.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Mobile Sector
B etter pricing = Sector re-rating
Bharti raises base tariff plans by 20% in 6 service areas
Bharti has raised the base tariff (on-net) of its per minute (60p/min vs 50p/min
earlier) and per second plans (1.2p/sec vs. 1p/sec earlier) by 20% in 6 service areas
(Delhi, AP, Gujarat, MP, Rajasthan & UP (E)). The hikes follow Tata DoCoMo’s
move of raising base tariffs for NLD and SMS.
5% price hike can impact Bharti/Idea/RCom FY12 EPS by 5%/17%/8%
We believe that the current mobile pricing in India is not sustainable and the recent
moves by operators suggest that prices can move up further in the coming months.
We are factoring in voice rev/min to decline to 35.6p/sec by FY12 before inching
up to 36.2p/sec in FY13. We believe there can be upside risk to our numbers if
pricing goes up faster than our expectations. Our sensitivity analysis suggests that
5% increase in tariff (from base case) can impact our FY12/FY13 earnings
estimates for – Bharti by 5.4%/5.4%, Idea by 17%/14.5% & RCom by 8.2%/6.3%.
Idea is our top pick; Reiterate Buy on Bharti, RCOM
Further there has been news (source Economic Times) that government may
consider exit options for new operators (2008 2G licensees) in new telecom policy
(NTP 2011). We have maintained that new operators have no business case in
India and view any steps by DoT to facilitate consolidation as positive given it will
lead to further re-rating of the sector. We expect more clarity on regulatory policy
by the end of 2011 as DoT comes out with NTP-2011. Idea is our top-pick in the
sector as it offers pure play exposure to India mobile sector. Based on our
sensitivity analysis, our PT for Bharti, Idea and RCom could increase by 3.5%, 6%
and 4% for 5% hike in tariffs from our base case voice rev per minute assumptions.
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