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Telecom Sector: GSM Net Subscriber Addition Momentum Improves
Telecom Sector: GSM Net Subscriber Addition Momentum Improves
Telecom Sector: GSM Net Subscriber Addition Momentum Improves
Telecom sector
GSM net subscriber addition momentum improves
Cellular Operators Association of India (COAI) reported modest GSM net subscriber addition data for February 2012. The subscriber base grew by 1.4% mom to 656.9mn. Net subscriber addition number stood modest at 8.8mn in February 2012 (highest in the past nine months), up 4.4% mom. GSM subscriber net addition was largely led by incumbents along with Uninor.
Operator-wise highlights
In February 2012, net GSM subscriber addition was led by Idea, which added whopping 2.6mn subscribers (30% of the total net subscriber addition), up substantially by 47.8% mom. This led to an increase in its overall subscriber market share to 16.9% in February 2012 from 16.7% in January 2012. Idea was followed by Uninor (whose net subscribers are growing aggressively since the past six months despite its licenses being cancelled in all the 22 circles), which added 2.3mn subscribers in February 2012. Bharti Airtel (Bharti) emerged as a positive surprise by showing a sharp uptick in its net subscriber addition to 1.8mn (highest since the past eight months), up 40.1% mom. Bharti has almost doubled its net subscriber addition run rate in the past two months and is possibly driven by the need to protect/increase its market share. Net subscriber addition of Vodafone and Aircel remained largely flat mom at 0.84mn and 0.80mn, respectively. To everyones surprise, there was no addition in the subscriber base of BSNL, S Tel and DB Etisalat and it was negligible in case of MTNL. Among new operators, other than Uninor, Videocon added 0.3mn subscribers but, according to media reports, Videocon is going to wind up its services in all circles excluding those having over 5lakh customers, following the cancellation of its licenses by the Supreme Court. Circles namely Tamil Nadu, Haryana, Gujarat, Mumbai and MP have the largest Videocon subscriber base.
Circle-wise highlights
In February 2012, net addition run rate of all circles (except Metro) was decent, the highest being for A circle, which reported addition of 3.6mn subscribers, up 29.7% mom, led by Uninor, which reported addition of 1.6mn subscribers, followed by Idea, Bharti and Vodafone, which reported net addition of 0.8mn, 0.4mn and 0.3mn subscribers, respectively. In Metro circle, 0.6mn subscribers were added in February 2012 as against 1.0mn in January 2012, taking its total subscriber base to 77.3mn. Net subscriber addition in Metro circle was led by Idea, which reported addition of 0.27mn subscribers. Subscriber addition run rate in B and C circles was largely flat mom at 3.3mn and 1.3mn, respectively.
Recommendation summary
Company Bharti Idea RCom Reco. Neutral Neutral Neutral CMP (`) 324 98 88 Tgt. price (`) Upside (%) FY2013E P/BV (x) 2.1 2.3 0.4 FY2013E P/E (x) 17.7 31.5 20.3 FY2011-13E EPS CAGR (%) 7.0 6.7 (18.0) FY2013E RoCE (%) 10.9 10.0 2.9 FY2013E RoE (%) 11.6 7.3 2.1
(mn)
Oct-11
May-11
Nov-11
Dec-11
Aug-11
Feb-12
Sep-11
Jun-11
Jan-12
Jul-11
28
30
32
34
36
39
41
(mn)
120 90 60 30
25 20 15 10 5 33 0 Aug-11 Sep-11 Oct-11 Stel Nov-11 Uninor Dec-11 Videocon Jan-12 Feb-12 Loop Mobile DB Etisalat 6 1 33 6 2 34 6 2 34 5 2 34 5 2 3 6 3 2 33 6 2
Aug-11
Sep-11 Bharti
Oct-11 Vodafone
Nov-11 Idea
Dec-11 BSNL
Jan-12 Aircel
Feb-12
(mn)
550
In February 2012, net GSM subscriber addition was again led by Idea, which added whopping 2.6mn subscribers (30% of the total net subscriber addition), up by whopping 47.8% mom, taking its total subscriber base to 110.7mn. Most of its subscriber additions came from UP, Andhra Pradesh, MP and Gujarat circles. Idea was followed by Uninor (whose net subscribers are growing aggressively since the past six months despite its licenses being cancelled in all the 22 circles), which added 2.3mn subscribers in February 2012, taking its total subscriber base to 41.1mn subscribers. Bharti emerged as a positive surprise by showing a sharp uptick in its net subscriber addition to 1.8mn (highest since the past eight months), up by 40.1% mom, taking its total subscriber base to 178.8mn. Most of its subscriber additions came from UP (E), Rajasthan, Bihar and Maharashtra circles. Bharti has almost doubled its net subscriber addition run rate in the past two months and is possibly driven by the need to protect/increase its market share. Net subscriber addition of Vodafone and Aircel remained largely flat mom at 0.84mn and 0.80mn, respectively. To everyones surprise, there was no addition in the subscriber base of BSNL, S Tel and DB Etisalat and it was negligible in case of MTNL. Among new operators, other than Uninor, Videocon added 0.3mn subscribers but, according to media reports, Videocon is going to wind up its services in all circles excluding those having over 5lakh customers, following the cancellation of its licenses by the Supreme Court. Circles namely Tamil Nadu, Haryana, Gujarat, Mumbai and MP have the largest Videocon subscriber base.
Oct-11 Vodafone
Nov-11 Idea
Dec-11 BSNL
Jan-12 Aircel
Feb-12
(%)
40
Ideas highest subscriber addition in February 2012 led to a jump in its overall subscriber market share to 16.9% in February 2012 from 16.7% in January 2012. Uninors overall subscriber market share also increased to 6.3% in February 2012 from 6.0% in January 2012.
(%)
40 20 0 Jul-11 Aug-11 Bharti Sep-11 Oct-11 Idea Nov-11 BSNL Dec-11 Jan-12 Vodafone Aircel Others
28.1
28.1
27.9
27.8
27.6
27.5
27.3
In February 2012, net addition run rate of all circles (except Metro circle) was decent, the highest being for A circle, which reported addition of 3.6mn subscribers, up 29.7% mom, led by Uninor, which reported addition of 1.6mn subscribers, followed by Idea, Bharti and Vodafone, which reported net subscriber addition of 0.8mn, 0.4mn and 0.3mn subscribers, respectively. In Metro circle, 0.6mn subscribers were added in February 2012 as against 1.0mn in January 2012, taking its total subscriber base to 77.3mn. Net subscriber addition in Metro circle was led by Idea, which reported addition of 0.27mn subscribers, followed by Bharti and Uninor, which reported net subscriber addition of 0.12mn subscribers each. Subscriber addition run rate in B and C circles have been largely flat mom at 3.3mn and 1.3mn, respectively.
(mn)
160 120 80 40 Jul-11 Aug-11 Metro Sep-11 A circle Oct-11 Nov-11 Dec-11 Jan-12 B circle C circle 74 91 92 93
87
75
88
74
89
74
90
75
76
77
(mn)
(%)
1.1 0.7 1.2
40 20 0 (20) Metro A circle B circle C circle 35.2 10.1 Jul-11 43.0 35.2 8.9 Aug-11 (7.1) Sep-11 33.1 3.1 Oct-11 29.2 10.4 Nov-11 37.8 33.0 11.4 Jan-12
1.1 1.0
9.9 Dec-11
(0.5)
Valuation
For Bharti and Idea, net subscriber additions were largely 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.
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