Telecom Monthly Report by mnmgroup

VIEWS: 16 PAGES: 8

									                                                                                                    GSM subscriber analysis | Telecom
                                                                                                                        February 24, 2012


                                                                                                Ankita Somani
 Telecom sector                                                                                 +91 22 3835 7800 Ext: 6819
                                                                                                ankita.somani@angelbroking.com
 GSM net subscriber addition momentum continues
 GSM’s net subscriber addition data reported by Cellular Operators Association of
 India (COAI), which is demonstrating a recovery since the past couple of months,
 grew by 1.3% mom in January 2012. Net subscriber addition number stood
 modest at 8.4mn in January 2012, up 11.8% mom, taking the total GSM
 subscriber base to 648.1mn. GSM subscriber net addition was led by incumbents
 along with Uninor and Videocon.

 Operator-wise highlights
 In January 2012, net GSM subscriber addition was again led by Uninor, which
 added whopping 2.5mn subscribers, up 17.3% mom. This led to a jump in its
 subscriber market share to 6.0% in January 2012 from 5.7% in December 2011.
 On an overall basis, net subscriber addition in January 212 was led by
 incumbents, with Idea Cellular (Idea) again maintaining its lead position (after
 Uninor) in terms of absolute net addition number by adding 1.7mn subscribers;
 however, relatively, on mom basis, net subscriber addition number of Idea
 declined by 26.8% mom (2.4mn subscribers added in December 2011). Bharti
 Airtel (Bharti) reported addition of 1.3mn subscribers, up 35.5% mom, which was
 a positive surprise. BSNL again regained its position in the top telecom operators,
 after five months of underperformance, by adding 0.9mn subscribers, up 103.3%
 mom. Vodafone and Aircel reported addition of 0.9mn and 0.8mn subscribers,
 taking their total subscriber base to 148.6mn and 62.5mn, respectively.

 Among new operators, other than Uninor, Videocon also emerged as a pleasant
 surprise by adding 0.4mn subscribers (highest in the last 10 months); Videocon
 was consistently reporting a decline in its subscriber base since the past six
 months. Other new operators continued to struggle to gain market share in their
 net subscriber addition numbers. S Tel again reported a net decline of 0.12mn
 subscribers in its subscriber base during the month. Net subscriber addition of
 Loop Mobile and Etisalat DB was also very weak at 0.01mn and 0.02mn,
 respectively.

 Circle-wise highlights
 In January 2012, net addition run rate of all circles (except A circle in which net
 subscriber addition was almost flat mom) reported a decent increase, the highest
 being for Metro circle, which reported addition of 1.0mn subscribers, up 28.9%
 mom, led by Idea, which reported addition of 0.35mn subscribers, followed by
 Uninor and Aircel, which reported net subscriber addition of 0.25mn and
 0.16mn, respectively. Subscriber addition in A, B ad C circles stood modest at
 2.8mn, 3.4mn and 1.2mn, respectively, in January 2012.
 Recommendation summary
 Company           Reco.              CMP       Tgt. price   Upside     FY2013E     FY2013E        FY2011-13E      FY2013E       FY2013E
                                        (`)            (`)        (%)    P/BV (x)     P/E (x)     EPS CAGR (%)     RoCE (%)       RoE (%)
 Bharti Airtel     Neutral             342               -          -        2.2       18.8                 7.0        10.9         11.6
 Idea Cellular     Neutral              93               -          -        2.2       29.9                 6.7        10.0          7.3
 RCom              Neutral              94               -          -        0.5       21.5               (18.0)         2.9         2.1
 Source: Company, Angel Research

Please refer to important disclosures at the end of this report                                                                         1
                                                                                                                                                             GSM subscriber analysis | January 2012



                                                                                        Incumbents uphold net subscriber addition market share
                                                                                        In January 2012, the total GSM subscriber base touched 648.1mn, up 1.3% mom.
                                                                                        Net subscriber addition stood decent at 8.4mn.

                                                                                        Exhibit 1: GSM subscriber base and net additions – Pan India
                                                                                                700         11.1                                                                                                                                           12

                                                                                                650                                                                                                                                                        11
                                                                                                                      9.5
                                                                                                                                                                                                                                                           10
                                                                                                600
                                                                                         (mn)   550
                                                                                                                                         8.6                                                                                                        8.4 9




                                                                                                                                                                                                                                                                (mn)
                                                                                                                                                         7.6                                                                    7.6                     8
                                                                                                500                                                                                             7.1
                                                                                                                                                                                     6.5                                                                   7
                                                                                                                                                                                                                     6.7
                                                                                                450
                                                                                                                                                                                                                                                           6
                                                                                                                                                                      5.3
                                                                                                400                                                                                                                                                        5
                                                                                                350                                                                                                                                                        4




                                                                                                                                                                                           Oct-11
                                                                                                                                                                            Sep-11




                                                                                                                                                                                                            Nov-11
                                                                                                                      May-11


                                                                                                                                    Jun-11




                                                                                                                                                                                                                           Dec-11


                                                                                                                                                                                                                                             Jan-12
                                                                                                             Apr-11




                                                                                                                                                   Jul-11


                                                                                                                                                                 Aug-11
                                                                                                                                Total GSM subscribers                                    Total net additions

                                                                                         Source: Company, Angel Research



Exhibit 2: Total GSM subscribers – Incumbents                                                                          Exhibit 3: Total GSM subscribers – New players
       210                                                                                                                     45
                                                                                                                                                                                                                                                       39
                             172             173          174              175          176           177                      40                                                                                                       36
       180   171                                                                                                                                                                                                     34
                                                                                                                               35                                                              32
                                               145          146             147           148            149                                                                 30
       150    143              144                                                                                                            27               28
                                                                                                                               30
                                                                                          106               108                25
                                                                                                                        (mn)
(mn)




       120                         98              100          102          104
                   96
                                                                                                                               20
                    90              91              91           92              92             93           93
       90                                                                                                                      15
                        59                           60               60                         62            62                                7
                                        59                                         61                                          10                                 6              6                  6                                                       6
       60                                                                                                                                                                                                             5                     5
                                                                                                                                         34                 33            33               34                 34                    3                 33
                                                                                                                                5                                                                       2                  2            4
                                                                                                                                                     1                1              2                                                          2               2
       30                                                                                                                       0
              Jul-11          Aug-11          Sep-11       Oct-11           Nov-11       Dec-11          Jan-12                              Jul-11         Aug-11        Sep-11            Oct-11             Nov-11               Dec-11            Jan-12
                         Bharti              Vodafone            Idea            BSNL           Aircel                                               Loop Mobile            Stel           Uninor             Videocon                  DB Etisalat

Source: Company, Angel Research                                                                                         Source: Company, Angel Research




February 24, 201                                                                                                                                                                                                                                                    2
                                                               GSM subscriber analysis | January 2012



                   Exhibit 4: Total GSM subscribers
                   Company (mn)           July-11     Aug-11     Sep-11    Oct-11        Nov-11        Dec-11       Jan-12
                   Bharti                  170.7       171.8     172.8       173.7        174.7         175.7       177.0
                   Vodafone                143.0       144.1     145.0       145.9        146.8         147.7       148.6
                   BSNL                     90.2        90.6       91.1          91.6      92.1           92.6       93.4
                   Idea                     96.1        98.4     100.2       101.8        104.0         106.4       108.1
                   Aircel                   58.6        59.2       59.8          60.3      61.0           61.6       62.5
                   MTNL                      5.3         5.3        5.3           5.4          5.4            5.4        5.5
                   Loop Mobile               3.2         3.2        3.2           3.2          3.2            3.2        3.2
                   S Tel                     3.5         3.4        3.5           3.5          3.6            3.5        3.4
                   Uninor                   27.4        27.7       29.7          32.3      34.2           36.3       38.8
                   Videocon                  7.0         6.4        6.3           6.1          5.5            5.4        5.8
                   DB Etisalat               1.4         1.5        1.5           1.6          1.6            1.7        1.7
                   Total                   606.4       611.8     618.3       625.4        632.1         639.6       648.1
                   Source: Company, Angel Research


                   In January 2012, net GSM subscriber addition was again led by Uninor, which
                   added whopping 2.5mn subscribers, taking its total subscriber base to 38.8mn.
                   Most of its subscriber additions came from UP, Bihar, Andhra Pradesh, TN,
                   Karnataka and Maharashtra circles. On an overall basis, net subscriber addition in
                   January 212 was led by incumbents, with Idea again maintaining its lead position
                   (after Uninor) in terms of absolute net addition number by adding 1.7mn
                   subscribers, taking its total subscriber base to 108.1mn. Most of its subscriber
                   additions came in from Delhi, Karnataka, UP, MP, Bihar and Rajasthan circles.
                   Amongst other incumbents, Bharti, Vodafone, BSNL and Aircel added 1.3mn,
                   0.9mn, 0.9mn and 0.8mn subscribers, taking their total subscriber base to
                   177.0mn, 148.6mn, 93.4mn and 62.5mn, respectively. Among new telecom
                   players, other than Uninor, Videocon also emerged as a pleasant surprise by
                   adding 0.4mn subscribers (highest in the last 10 months); Videocon was
                   consistently reporting a decline in its subscriber base since the past six months.
                   Other new operators continued to struggle to gain market share in their net
                   subscriber addition numbers.

                   Exhibit 5: GSM subscriber net addition – Incumbents
                          2.5


                          2.0


                          1.5
                   (mn)




                          1.0


                          0.5


                          0.0
                                 Jul-11    Aug-11       Sep-11      Oct-11        Nov-11        Dec-11          Jan-12

                                             Bharti      Vodafone         Idea          BSNL         Aircel

                   Source: Company, Angel Research




February 24, 201                                                                                                           3
                                                              GSM subscriber analysis | January 2012




                   Exhibit 6: Operator-wise net subscriber additions
                   Company (mn)           July-11   Aug-11     Sep-11      Oct-11      Nov-11         Dec-11         Jan-12
                   Bharti                    1.5       1.2        0.9         0.9             1.0           1.0            1.3
                   Vodafone                  1.5       1.1        0.8         0.9             0.9           0.9            0.9
                   BSNL                      1.8       0.4        0.5         0.5             0.6           0.4            0.9
                   Idea                      1.0       2.3        1.7         1.6             2.2           2.4            1.7
                   Aircel                    0.6       0.6        0.6         0.5             0.7           0.7            0.8
                   MTNL                      0.0       0.0        0.0         0.0             0.0           0.0            0.1
                   Loop Mobile               0.0       0.0        0.0         0.0             0.0           0.0            0.0
                   S Tel                     0.2      (0.1)       0.1         0.0             0.0          (0.0)          (0.1)
                   Uninor                    1.1       0.3        1.9         2.7             1.9           2.1            2.5
                   Videocon                 (0.1)     (0.7)      (0.1)       (0.2)        (0.6)            (0.0)           0.4
                   DB Etisalat               0.1       0.1        0.0         0.1             0.0           0.1            0.0
                   Total                     7.6       5.3        6.5         7.1             6.7           7.6            8.4
                   Source: Company, Angel Research


                   Uninor’s highest subscriber addition in January 2012 led to a jump in its net
                   subscriber addition market share to 29.5% from 28.1% in December 2011. The
                   company’s overall subscriber market share also increased to 6.0% in January
                   2012 from 5.7% in December 2011.

                   Exhibit 7: Operator-wise market share in net additions
                     100
                                            11.3
                                  16.4       7.3                                  20.8
                                                       29.9                                         29.0            33.9
                         80       8.0                               36.6
                                                                                  10.1
                                            43.6        9.2                       8.3               9.1
                                  23.2                                                                              9.7
                         60                             6.9         6.9                             5.6
                                                                    7.2                                             10.2
                                  13.1                                            32.5
                   (%)




                         40                            26.6         23.0                            31.6
                                                                                                                    20.7
                                  19.5      21.2
                         20                            13.0         13.0          13.9              12.0            10.1
                                  19.8      21.5                                                                    15.4
                                                       14.3         13.3          14.4              12.7
                          0                (5.0)
                                 Jul-11   Aug-11      Sep-11      Oct-11         Nov-11        Dec-11              Jan-12
                         (20)             Bharti    Vodafone     Idea     BSNL       Aircel     Others

                   Source: Company, Angel Research


                   Subscriber market share of Bharti, Vodafone and BSNL declined slightly to 27.3%,
                   22.9% and 14.4% in January 2012 from 27.5%, 23.1% and 14.5% in December
                   2011, respectively; however, subscriber market share of Aircel remained almost
                   constant mom at 9.6% in January 2012. Idea and Uninor, on the back of strong
                   subscriber additions, managed to inch up their subscriber market share to 16.7%
                   and 6.0% in January 2012 from 16.6% and 5.7% in December 2011, respectively.




February 24, 201                                                                                                             4
                                                                     GSM subscriber analysis | January 2012



                   Exhibit 8: Operator-wise subscriber market share
                     100
                                 7.9               7.8         8.0              8.3              8.5             8.7            9.0
                                 9.7               9.7         9.7              9.6              9.6             9.6            9.6
                          80
                                 14.9          14.8            14.7            14.6          14.6               14.5            14.4

                          60     15.8          16.1            16.2            16.3          16.5               16.6            16.7




                   (%)
                          40     23.6          23.6            23.5            23.3          23.2               23.1            22.9


                          20
                                 28.1          28.1            27.9            27.8          27.6               27.5            27.3

                          0
                                Jul-11        Aug-11          Sep-11        Oct-11         Nov-11           Dec-11          Jan-12

                                          Bharti         Vodafone          Idea         BSNL           Aircel          Others

                   Source: Company, Angel Research


                   In January 2012, net addition run rate of all circles (except A circle) reported a
                   modest increase, the highest being for Metro circle, which reported addition of
                   1.0mn subscribers, up 28.9% mom, taking its total subscriber base to 76.8mn.
                   This led to an increase in net subscriber addition market share of Metro circle to
                   11.4% from 9.9% in December 2011. Net subscriber addition in Metro circle was
                   led by Idea, which reported addition of 0.35mn subscribers, followed by Uninor
                   and Aircel, which reported net subscriber addition of 0.25mn and 0.16mn,
                   respectively.

                   In January 2012, 2.8mn subscribers were added in A circle as against 2.9mn in
                   December 2011, taking its total subscriber base to 222.7mn. In A circle, Uninor
                   reported the highest net subscriber addition of 1.03mn subscribers, followed by
                   Idea BSNL, Aircel and Bharti, which added 0.46mn, 0.44mn, 0.30mn and 0.29mn
                   subscribers, respectively. Subscriber addition run rate of B and C circles improved
                   by 19.0% and 17.6% mom to 3.4mn and 1.2mn in January 2012 as against
                   2.9mn and 1.1mn in December 2011, respectively.

                   Exhibit 9: GSM subscriber base – Circle wise
                          280
                                                                                                  249             252            255
                                                    240            243            246
                                     238
                          240
                                                                               215           217                220             223
                                 208           211             213
                          200
                   (mn)




                          160

                          120
                                        87               88           89              90               91              92             93
                                74            75              74            74             75               76              77
                           80

                           40
                                 Jul-11        Aug-11         Sep-11           Oct-11       Nov-11              Dec-11      Jan-12

                                                     Metro          A circle          B circle          C circle

                   Source: Company, Angel Research




February 24, 201                                                                                                                           5
                                                                                                                                GSM subscriber analysis | January 2012



Exhibit 10: Circle-wise subscriber net additions                                                         Exhibit 11: Circle-wise share of net additions
       4.0                                                                                                     100
                                                                                                                                11.6     14.7                                 14.0    14.8
                                                            3.4                                  3.4                                                 15.6          16.9
       3.5                                     3.2                                                                    17.9
                                                                                    2.9     2.8                 80
       3.0      2.7
                                                                          2.9     2.9                                           36.5
              2.6                                                                                                                                                             38.3
                           2.3                          2.4                                                           36.8               57.3                                         40.8
       2.5                                                                                                      60                                   48.3          43.4
                               2.0                                   2.0
(mn)




       2.0                                1.9




                                                                                                         (%)
                                                                                                                40
                   1.3
       1.5                                                    1.1          1.1                     1.2                          43.0
                                                                                       1.1 1.0                        35.2                                                    37.8    33.0
                                                                                                                                                                   29.2
       1.0                       0.6            0.8                              0.7                            20                       35.2        33.1
                                                                    0.7
                         0.5
       0.5                                            0.2                                                             10.1       8.9                               10.4        9.9    11.4
             0.8                                                                                                 0                                   3.1
                                       (0.4)                                                                                             (7.1)
       0.0                                                                                                            Jul-11   Aug-11   Sep-11      Oct-11    Nov-11        Dec-11   Jan-12
              Jul-11       Aug-11        Sep-11        Oct-11       Nov-11       Dec-11     Jan-12
   (0.5)                                                                                                       (20)
                               Metro      A circle      B circle      C circle                                                 Metro     A circle       B circle          C circle

Source: Company, Angel Research                                                                          Source: Company, Angel Research


                                                                                 Valuation

                                                                                 For Bharti and Idea, net subscriber additions were along expected lines, thus our
                                                                                 estimates remain unchanged. The Indian telecom sector is currently experiencing
                                                                                 heat due to a number of policy uncertainties related to spectrum and license fee
                                                                                 payments. Also, INR has depreciated by 9-11% against USD in the past five
                                                                                 months, which has increased the liabilities of telecom companies such as Bharti
                                                                                 and RCom in INR terms due to huge forex debt in their books. The driving force for
                                                                                 the overall sector is higher tariff as well as increasing use of value-added services,
                                                                                 which will lead to higher ARPUs for all players, thereby aiding profitability.

                                                                                 We prefer Bharti amongst telcos due to its low-cost integrated model (owned tower
                                                                                 infrastructure), potential opportunity to scale up in Africa, established leadership in
                                                                                 revenue and subscriber market share, and relatively better KPIs. However, overall,
                                                                                 due to the risk of increasing license and spectrum charges, slowing voice growth
                                                                                 and higher debt/interest burden (adjusted for forex movement), we remain Neutral
                                                                                 on the sector.




February 24, 201                                                                                                                                                                              6
                                                                                           GSM subscriber analysis | January 2012



  Research Team Tel: 022 - 3935 7800                E-mail: research@angelbroking.com                     Website: www.angelbroking.com

  DISCLAIMER

  This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
  decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
  such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
  referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
  risks of such an investment.

  Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make
  investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
  document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

  Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
  trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
  fundamentals.

  The information in this document has been printed on the basis of publicly available information, internal data and other reliable
  sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
  document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
  responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
  Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,
  nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
  Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,
  compliance, or other reasons that prevent us from doing so.

  This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
  redistributed or passed on, directly or indirectly.

  Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or
  other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in
  the past.

  Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
  connection with the use of this information.

  Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please
  refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and
  its affiliates may have investment positions in the stocks recommended in this report.




 Disclosure of Interest Statement
                         Analyst ownership     Angel and its Group companies    Angel and its Group companies'         Broking relationship
                           of the stock            ownership of the stock       Directors ownership of the stock      with company covered
 Bharti Airtel                  No                          No                                No                                No
 Idea Cellular                  No                          No                                No                                No
 RCom                           No                          No                                No                                No

  Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors



 Ratings (Returns):              Buy (> 15%)                      Accumulate (5% to 15%)                   Neutral (-5 to 5%)
                                 Reduce (-5% to 15%)              Sell (< -15%)


February 24, 201                                                                                                                              7
                                                                                                                                                                                            GSM subscriber analysis | January 2012


                     6th Floor, Ackruti Star, Central Road, MIDC, Andheri (E), Mumbai - 400 093. Tel: (022) 39357800

Research Team
Fundamental:
Sarabjit Kour Nangra                                                                   VP-Research, Pharmaceutical                                                                               sarabjit@angelbroking.com
Vaibhav Agrawal                                                                        VP-Research, Banking                                                                                      vaibhav.agrawal@angelbroking.com
Shailesh Kanani                                                                        Infrastructure                                                                                            shailesh.kanani@angelbroking.com
Bhavesh Chauhan                                                                        Metals, Mining                                                                                            bhaveshu.chauhan@angelbroking.com
Sharan Lillaney                                                                        Mid-cap                                                                                                   sharanb.lillaney@angelbroking.com
V Srinivasan                                                                           Research Associate (Cement, Power)                                                                        v.srinivasan@angelbroking.com
Yaresh Kothari                                                                         Research Associate (Automobile)                                                                           yareshb.kothari@angelbroking.com
Hemang Thaker                                                                          Research Associate (Capital Goods)                                                                        hemang.thaker@angelbroking.com
Nitin Arora                                                                            Research Associate (Infra, Real Estate)                                                                   nitin.arora@angelbroking.com
Ankita Somani                                                                          Research Associate (IT, Telecom)                                                                          ankita.somani@angelbroking.com
Varun Varma                                                                            Research Associate (Banking)                                                                              varun.varma@angelbroking.com
Sourabh Taparia                                                                        Research Associate (Cement, Power)                                                                        sourabh.taparia@angelbroking.com

Technicals:
Shardul Kulkarni                                                                       Sr. Technical Analyst                                                                                     shardul.kulkarni@angelbroking.com
Sameet Chavan                                                                          Technical Analyst                                                                                         sameet.chavan@angelbroking.com
Sacchitanand Uttekar                                                                   Technical Analyst                                                                                         sacchitanand.uttekar@angelbroking.com

Derivatives:
Siddarth Bhamre                                                                        Head - Derivatives                                                                                        siddarth.bhamre@angelbroking.com

Institutional Sales Team:
Mayuresh Joshi                                                                         VP - Institutional Sales                                                                                  mayuresh.joshi@angelbroking.com
Hiten Sampat                                                                           Sr. A.V.P- Institution sales                                                                              Hiten.Sampat@angelbroking.com
Meenakshi Chavan                                                                       Dealer                                                                                                    meenakshis.chavan@angelbroking.com
Gaurang Tisani                                                                         Dealer                                                                                                    gaurangp.tisani@angelbroking.com
Akshay Shah                                                                            Sr. Executive                                                                                             akshayr.shah@angelbroking.com

Production Team:
Simran Kaur                                                                            Research Editor                                                                                           simran.kaur@angelbroking.com
Dilip Patel                                                                            Production                                                                                                dilipm.patel@angelbroking.com




CSO & Registered Office: G-1, Ackruti Trade Centre, Rd. No. 7, MIDC, Andheri (E), Mumbai - 400 093.Tel.: (022) 3083 7700. Angel Broking Ltd: BSE Sebi Regn No: INB010996539 / PMS Regd Code: PM/INP000001546 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / NSE Sebi Regn Nos: Cash: INB231279838 / NSE
F&O: INF231279838 / Currency: INE231279838 / MCX Currency Sebi Regn No: INE261279838 / Member ID: 10500 / Angel Commodities Broking Pvt. Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302



 February 24, 201                                                                                                                                                                                                                                                                               8

								
To top