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| Tuesday, June 30, 2009 |
| Revenue + ARPU + Penetration of Wireless Companies |
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We did an analysis on how Telcos will expand and serve in the near future. Out study suggests that South India has relatively low penetration and above average ARPUs, and represents the best opportunity for near-term growth for telcos in the near term. This helps explain why several new entrants [Tata DoCoMo, Aircel etc] have chosen to initially expand operations from the South.
Bharti Airtel relies heavily on the South, with three states accounting for 32% of company revenues. These circles will likely see the greatest incremental competition in the near term.
The following Graph [Click to Enlarge] shows the distribution of ARPUs Vs Penetration across all circles in India.
Despite new entrants, the top two operators in each circle in terms of revenue and market share have remained fairly constant over the past two years, with leaders widening the gap. We believe this is largely because initial entrants typically get the cream of the population in each circle. The implementation of mobile number portability could cause churn to increase in this high-value base, which is the biggest risk to the current market leaders.
3G Auction Bidding Hints ?
Based on revenue potential and ARPUs, we expect the metros and southern circles to see the highest interest from bidders in the upcoming 3G auction, followed by Punjab, Maharashtra and Gujarat. |
Published on Tuesday, June 30, 2009 at 11:04 AM  |
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| Thursday, June 25, 2009 |
| Reliance MobiTV service for GSM users |
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Telecom services major Reliance Communications (RCom) will launch 35 television channels for its GSM consumers in the near future. The company will introduce MobiTV service by using Mimobi - a technological platform developed by Apalya Technologies.
For playing video, Mimobi technology uses progressive download technique that initially downloads some part of video and later starts playing the same. RCom is in advanced talks with Apalya Technologies to increase its width of the usage.
Presently RCom offers 13 news and other TV channels to its CDMA users by using real-time streaming technology. |
| Published on Thursday, June 25, 2009 at 10:53 AM |
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| Friday, June 12, 2009 |
| 3G Spectrum to Get Pricey + More Players |
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The tussle between the Department of Telecommunications (DoT) and the finance ministry on pricing of the third generation (3G) spectrum may result in both the ministries taking a middle path.
According to the 3G policy released by the DoT prior to the elections, the reserve price for pan-India 3G spectrum was set at Rs 2,020 crore and a maximum of five players were to be accommodated per circle. However, the finance ministry had objected to both the price of spectrum and number of players to be accommodated.
The finance ministry, at that time, wanted DoT to double the reserve price for 3G auction and accommodate 10 players in each circle. The proposals of finance ministry were aimed at raising the revenue from the auction. However, the issue could not be resolved then and the auction was postponed.
The DoT is now understood to be agreeing for a middle approach and is likely to convey to the Union Cabinet that it was ready to hike the reserve price of spectrum to Rs 3,540 crore and auction up to eight slots of 3G spectrum in each circle. This stance of DoT would be kind of a compromise position between its earlier stand and that of finance ministry and the Cabinet may therefore approve the same.
The finance ministry may not also push the issue further as some of the concerns raised by the finance ministry have been addressed by changing economic situation. The view of the finance ministry early in the year was that due to economic slowdown, enough number of players may not be available in the auction, resulting in poor pricing of the scarce spectrum. However, the economic recovery witnessed over last quarter or so and the robust performance of the telecom industry despite slowdown have to a large extent addressed concerns of finance ministry. |
| Published on Friday, June 12, 2009 at 10:31 AM |
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| Monday, June 08, 2009 |
| RCom GSM Strategy + MNP Impact |
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Reliance Communications will soon enter into the postpaid GSM business, for which they have started mass media advertising for the first time. The company has plans of launching corporate offerings and utilizing its cross leveraging with its data card business.
New offer launches in the roaming business, strong brand positioning, selling its own equipments and handsets will add to RCOM's advantage. Taking this discussion further, we believe the company is well poised for the launch of 3G, as wireless business of RCOM functions on EDGE platform and the cost required for converting an EDGE network to 3G is estimated to be lesser than the cost required for other companies to convert their 2G network to 3G. In this fashion, RCOM is expected to save a lot in 3G deployment.
We also believe the impact of MNP will be felt lesser on RCOM, as the company has a huge chunk of low end GSM customers, who may switch to another operator even before MNP is implemented. As far as CDMA business is concerned, the management believes that MNP will require changing of handsets if a CDMA customer wants to switch to GSM. This will make customers reluctant to change their networks. Nevertheless, we believe the cost of retention per subscriber will increase post MNP, which may impact margins up to some extent. |
| Published on Monday, June 08, 2009 at 11:09 AM |
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| Wednesday, May 20, 2009 |
| Election Impact + Telecom Policy |
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We do not expect meaningful deviations on the policy front from the government’s earlier term. The government may however provide clarity/ take decisions on the following.
3G auctions - 3G auctions could not materialize during the planned Jan 2009 month due to delays in procedure clarifications. We believe that 3G auctions may materialize in CY2009.
Concessional license fees and increase in spectrum charges - DOT had issued notification for concessional license fees of 2% of AGR in non-Metro circles in case any operator reaches coverage of 95% of developmental blocks in a circle. The DOT had also proposed increased in spectrum charges of 1-3% of AGR depending on the quantum of spectrum usage. Both these events were not notified by the Cabinet and did not materialize into law. If taken together, these would be neutral for the sector.
TDSAT's ruling on excess allocation of spectrum by DOT - The TDSAT had recently ruled that the GSM operators are not entitled to 2G spectrum grant beyond the 6.2MHz permitted in their UAS (Universal Service Access) license. The ruling does not suggest any actions on operators who have been granted excess spectrum (beyond 6.2 MHz). Potential actions could be a one-time spectrum charge levied on operators holding excess spectrum and /or a recurring excess spectrum levy. We expect the government to step in and take remedial action. |
| Published on Wednesday, May 20, 2009 at 9:18 AM |
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| Wednesday, May 06, 2009 |
| Mobile Marketing Association Council Established in India |
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The Mobile Marketing Association (MMA) today launched its India Local Council to serve the growing needs of the mobile marketing communities in the country.
Local Council membership includes representation from 34 leading organisations in the field such as Admob, BDA Connect, Google, Group M, Hungama, Microsoft, mKhoj, Nokia, Reuters, Vodafone, Tata Teleservices, Yahoo! and others.
Rohit Dadwal, Managing Director, MMA Asia Pacific said,
The Indian mobile market is growing at a staggering rate. Over 380 million people in the country now own mobile phones representing a significant opportunity for operators. With mobile penetration and adoption reaching a critical mass, it is only natural that the mobile experience is now about enriching content and media with the convenience of converged services. The India Local Council is poised to lead the implementation of guidelines and best practices and to drive awareness and networking initiatives in one of the world’s most vibrant mobile economies. MMA has set the following immediate goals,
- Adoption of MMA best practices and guidelines
- Promote Mobile as an important marketing platform
- Educating and networking with Telcos, Brands, Corporates and others
- Establish metrics and create advertising tools for the industry
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| Published on Wednesday, May 06, 2009 at 8:00 AM |
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| Thursday, April 30, 2009 |
| RCom Struggling Wireless + Hopes of GSM Revenue Recovery |
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Reliance Communications Wireless Operations were Patchy. Minutes growth of only 3.7%qoq (lowest among peers) and mobile revenue growth of 2%qoq surprised negatively as free minutes on GSM were expected to show up more. Termination cost on free mins (net revenues down 2%qoq) and higher nenetwork opex led to flat mobile EBITDA sequentially; margins, however, were in-line and relatively steady at 36.9%, as SG&A (no additional costs for GSM) and employee costs were stable.
FY09 capex came in at Rs194bn (vs. Rs250bn) and FY10E guidance was lowered to Rs100bn (vs.Rs150bn). As a result, FY10E net debt stands reduced to Rs343 bn (3x EBITDA) from Rs415bn; strategy seems to be to sweat the existing assets and conserve for 3G.
- Wireless Revenues - QoQ decline from higher access and interconnect charges
- ARPU + MoU reach new low of Rs 224 and 372. Lackluster usage trend despite offer of
free mins, management confident of a pickup in 1QFY10 - Revenue per Minute of Rs 0.60 is stable and surprising.
- NLD - 9 bn minutes higher than Industry peers.
- Broadband revenue growth continues with launch of Reliance Netconnect + 3G Wireless Services
- ARPU of Broadband Subscriber increases to Rs 1,735 connecting 929,600 buildings
- Reliance Communication GSM Net adds Slowdown in March.
The battle for Wireless supremacy in India has entered a stage of bloodbath as new operators bleed while incumbents struggle to survive with positive cash flow they have enjoyed by diversifying into other areas of Telecom. |
| Published on Thursday, April 30, 2009 at 12:30 PM |
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| Thursday, April 09, 2009 |
| Understanding IMEI Number for Handsets |
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Department of Telecommunications (DoT) has asked operators to disconnect services to handsets that do not have an International Mobile Equipment Identity (IMEI) number and estimates ~25 mn handsets to be out of service from Apr 15.
What is the IMEI number and what does it have to do with illegal handsets?
IMEI is a British standard which is gaining popularity in the world. It is a 16 digit code that is addressed to each handset, which helps in tracking the location of the handset and the user. When a call is originated or terminated on an IMEI phone, along with the flashing SIM card mobile number, one can then track the phone through satellite networks.
What is at stake?
In October the Indian DoT had issued a directive to operators to ban non IMEI mobile phones, both existing in the network and new phones getting into the country's network; with an objective of increased National Security and ease in tracking down the user from the channel he bought the physical handset. Our discussion with the government suggests that they plan to implement the directive as soon as possible; though operators have asked for additional time to track down the non-IMEI phones.
We estimate handsets not having a valid IMEI number to constitute ~6% of India’s wireless subscribers and ~4% and 1% of the country's wireless revenues and EBITDA respectively. While these numbers are small, operators do not want to lose the customers and hence are keen to stretch the deadline. [We feel Government must not budge and enforce it strictly from April-15th] |
| Published on Thursday, April 09, 2009 at 10:06 AM |
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