telecom sector result updated

8/2/2019 Telecom Sector Result Updated

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Please refer to important disclosures at the end of this report 1

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 itssubscriber 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.

Ankita Somani

+91 22 3835 7800 Ext: 6819

[email protected]

Telecom sector

GSM net subscriber addition momentum continues

GSM subscriber analysis | Telecom

February 24, 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



GSM subscriber analysis | January 2012

February 24, 201 2

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

11.1

9.5

8.6

7.6

5.3

6.57.1

6.7

7.6

8.4

4

5

6

7

8

9

10

11

12

350

400

450

500

550

600

650

700

A p r - 1 1

M a y - 1 1

J u n - 1 1

J u l - 1 1

A u g - 1 1

S e p - 1 1

O c t - 1 1

N o v - 1 1

D e c - 1 1

J a n - 1 2

( m n )

( m n )

Total GSM subscribers Total net addi tions


Exhibit 2: Total GSM subscribers – Incumbents

171 172 173 174 175 176 177

143 144 145 146 147 148 149

96 98 100 102 104 106 108

90 91 91 92 92 93 93

59 59 60 60 61 62 62

30

60

90

120

150

180

210

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

( m n )

Bharti Vodafone Idea BSNL Aircel


Exhibit 3: Total GSM subscribers – New players

3 3 3 3 3 3 34 3 3 4 4 4 3

27 28 30

3234

3639

7 6 6 6 5 5 6

1 1 2 2 2 2 2

0

5

10

15

20

25

30

35

40

45


( m n )

Loop Mobile Stel Uninor Videocon DB Etisalat





February 24, 201 3

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 143.0 144.1 145.0 145.9 146.8 147.7 148.6BSNL 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


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

0.0

0.5

1.0

1.5

2.0

2.5


( m n )

Bharti Vodafone Idea BSNL Aircel





February 24, 201 4

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


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

19.8 21.514.3 13.3 14.4 12.7 15.4

19.5 21.2

13.0 13.0 13.9 12.0 10.1

13.1

43.6

26.6 23.032.5

31.620.7

23.2

7.3

6.97.2

8.35.6

10.2

8.0

11.3

9.26.9

10.19.1

9.7

16.4

(5.0)

29.936.6

20.8 29.0 33.9

(20)

0

20

40

60

80

100


( % )

Bharti Vodafone Idea BSNL Aircel Others


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 5

Exhibit 8: Operator-wise subscriber market share

28.1 28.1 27.9 27.8 27.6 27.5 27.3

23.6 23.6 23.5 23.3 23.2 23.1 22.9

15.8 16.1 16.2 16.3 16.5 16.6 16.7

14.9 14.8 14.7 14.6 14.6 14.5 14.4

9.7 9.7 9.7 9.6 9.6 9.6 9.6

7.9 7.8 8.0 8.3 8.5 8.7 9.0

0

20

40

60

80

100


( % )

Bharti Vodafone Idea BSNL Aircel Others


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

74 75 74 74 75 76 77

208 211 213 215 217 220 223

238 240 243 246 249 252 255

87 88 89 90 91 92 93

40

80

120

160

200

240

280


( m n )

Metro A circle B circle C circle Source: Company, Angel Research




February 24, 201 6

Exhibit 10: Circle-wise subscriber net additions

0.8

0.5

(0.4)0.2

0.7 0.7

1.0

2.6 2.3

1.9

2.4

2.0

2.9

2.82.7

2.0

3.23.4

2.9

2.9

3.4

1.3

0.6 0.8

1.1 1.1 1.1 1.2

(0.5)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


( m n )

Metro A circle B circle C circle


Exhibit 11: Circle-wise share of net additions

10.1 8.9

(7.1)3.1 10.4 9.9 11.4

35.2 43.0

35.2 33.129.2

37.8 33.0

36.836.5

57.348.3 43.4

38.3 40.8

17.911.6 14.7

15.6 16.9 14.0 14.8

(20)

0

20

40

60

80

100


( % )

Metro A circle B circle C circle


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 7

Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com

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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

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February 24, 201 8

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