Post on 16-Feb-2018
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
1/14
Report
On
Equity Research
Telecom Service
Providers
By
Abhishek Ghosh
B!TE"#$ B#%BA&ES'AR
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
2/14
(ated) *th+une$ ,-./
ContentsA. Fundamental Analysis
i. Factors Afecting Stock Movementsa.Bharti Airtelb.Idea Cellular
c.MTNd.!eliance Communicatione.Tata Communication". Tata Teleservices
ii. Table# Fundamental Analysis
overvie$iii. %hy is it necessary to kno$ the
"actors afecting the a"oresaid stock
movement in the ca&ital markets'iv. (resent Condition o" the Stocks
B. Technical Analysisi. Movements )stimating *iscounting
!ates $ith Beta Analysisii. Charts
a.)stimated *iscounted !atesb.Bottom+,& Betac.*ebt+)arnings !atiod.Com&arative Chart o" Stocks
o"Telecom Service (roviders -
S)NS) - Analysis
e.Sense/ !etreat
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
3/14
Fundamental Analysis
Factors Afecting Stock
Movements
Bharti Airtel
Net profts dropped by 41% rom US$470 million in 2009 to US$291 million
2010 due to a US$188 million increase in radio spectrum car!es in "ndia
and an increase o US$10# million in debt interest
n 18 ctober 201& 'irtel announced tat it ad ac(uired 100 percent
e(uity sares o )ireless *usiness Ser+ices ,ri+ate -imited or anundisclosed sum& ma.in! it a /olly o/ned subsidiary in te initial 'irtel
ad sta.es 0 49% /ic !a+e te company a 4 presence in te 18
circles& later to 1% sta.e and fnally 100%
"n 3ecember 2014& 'irtel can!ed its ser+ice terms or 2 and data
pac.s /it a car!e on usa!es /it a e/ oers some /it a +alidity o 28
days 5e 56'" cie 6aul ullar said tat 'irtel cannot be eld
responsible or +iolatin! net neutrality because "ndia as no re!ulation
tat demands net neutrality aced criticism on social net/or.in! sites li.e
aceboo.& 5/itter and 6eddit and later on 29 3ecember 2014& it /as
announced tat tey /ould not be implementin! planned can!es&pointin! out tat tere /ere reports tat 56'" /ould be soon releasin! a
consultation paper on te issue
'pproaced te !lobal debt mar.et on )ednesday to raise up to $1 billion
in a 10year bond sale pro!ramme
5e ea+ily indebted company ad it te ore: debt mar.et trice raisin!
more tan $2 billion
5e company ad posted a 0 per cent rise in net proft at 6s 1&2
crore or te ;arc (uarter dri+en by data re+enue *ut its 'rica business
continued to bleed /it increasin! losses and declinin! re+enue te loss
increased to 6s 1&18 crore rom 6s #4 crore in te same (uarter lastyear& /ile or anian 5elecommunications ?ompany -imited @55?-A
rom "ndiaBs mobile operator *arti'irtel in a transaction /ort $7 million
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
4/14
5e parent company o 'irtel Ni!eria& *arti 'irtel o "ndia& as secured a
fnancin! o up to $2 billion rom t/o top ?inese ban.s& te ?ina
3e+elopment *an. @?3*A and ?ommercial *an. o ?ina& as te company
aims to in+est urter in te !ro/t o its mobile data net/or.s
Sares o *arti 'irtel ended te day at 5e stoc. ended te day at 6s
420C up 98%
UDs Eodaone roup ,lc on 5ursday said tat it as sold its oldin! in
*arti 'irtel& "ndiaDs top telecom operator& or $200 million @6s1&280 croreA
to *arti =nterprises to conorm /it re!ulatory needs
'irtel is leadin! te broadband F /ired and /ireless F mar.et in "ndia in
;arc 201 /it 2219% second in /ired but topped in /ireless
broadband /it 208 million subscribers
Im&actsG
*arti 'irtel declined 12 percent in S=NS=H on 1st
Iune but !ained 09 percent at te close on )ednesday 't 2 pm te sare /as tradin! at 6s 42190&
as a!ainst 6s 4179 at close on 5uesday No/& on rdIune te closin! price o
te sares is 6s 4212 up by 0 ie& 079% increase rom te closin! on 21 st
;ay at 6s 400 5e trailin! ,J= o te company is at 02 as per te last
(uarter in te report and te company is in te top o 6e!ime o te 5elecom
Ser+ice ,ro+iders 5e =,S basin! on trailin! o 12 mont time is 1297 accordin!
to last (uarter
dea "ellular 0td "dea ?ellular& "ndiaBs tirdlar!est mobile operator& is reportedly /or.in!
on a "N678 billion @$12 billionA deal to sell its independent to/er
business in /ic te ;alaysiaBs ':iata and 'merican 5o/er ?orporation
@'5?A a+e e:pressed interest in te business& /ic comprises 11&000
to/ers also *arti "nratel is interested in te deal
"deaBs moneyraisin! sceme comes sortly ater "ndiaBs recent @and
e:pensi+eA spectrum auctions& in /ic "dea emer!ed as te bi!!est
spender& sellin! out about "N60 billion Debt-laden after the expensive spectrum auctions, top domestic telcos have been
seeking fresh capital-raising plans and value-unlocking moves.
"ndiaBs lar!est operator& 'irtel& raised $10 million in ebruary trou! a
sale o sares in *arti "nratel& /it te proceeds earmar.ed primarily or
debt reduction 'irtel remains te maKority sareolder in *arti "nratel&
o/e+er& /it a 72 per cent sta.e
'ditya *irla controlled"dea ?ellular reported a stron! set o numbers last
fscal& bac.ed primarily by data !ro/t
, -a.sminarayana& ?ie peratin! Lcer @?orporateA o "dea ?ellular&/as recently in ol.ata as "dea !ears up to launc its o/n ser+ice ere
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
5/14
"n an inter+ie/ to *usiness-ine& e spo.e about te companyBs
perormance& !ro/t o +oice data& mobile tari mo+ements and 4
ser+ices
M5e cape: plan or te company durin!
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
6/14
"ncome rom operations increased to 6s 87#42 crores durin! Ianuary
;arc (uarter o 20141 fscal a!ainst 6s 8417 crores in te
correspondin! period o te pre+ious year& te company said in a *S=
flin!
;5N-Ds total e:penses increased sarply to 6s 1&418#2 crores durin! te
ourt (uarter o last fscal rom 6s 7980 crores in te same (uarter in
20114 fscal
"ncome rom operations rose sli!tly to 6s &40008 crores in 20141
rom 6s &917 crores in te pre+ious year
"ntroduced unlimited ree local callin! at ni!t or its landline and
broadband customers to any net/or.& eecti+e rom ;ay 1
Union minister or communications and inormation tecnolo!y 6a+i
San.ar ,rasad con+eyed tat tey a+e +arious plans re+i+e te telecom
company rom its losses
Up!radin! 1080 sites in 3eli and ;umbai& and 82 2 sites in 3eli
and #1# 2 sites in ;umbai ,lannin! to come up /it )ii ser+ices in teir respecti+e cities /it initial
plan o mbps at prominent places or an yearly subscription o 6s 00
,lannin! to supply i! (uality 0 to 100 ;bps broadband at ome to
brin! i! speed ser+ices in all te buildin!s o ;umbai pro!ressi+ely
trou! 2 la. .m o fbre cables
5e tar!et is to a+e a million customers trou! reasonable and
ambitious pricin! ran!e o 100 * or 6s999
'dded 10&84 mobile subscribers in 'pril& 201 ollo/in! te addition&
companyBs total subscriber count stood at 44 la. /it a mar.et sare
o 048% Staterun ;5N- as said *arti 'irtelDs D>ero ratin! planD and 6?omDs
Dinternetor!D sceme deeat te basic concept o net neutrality and suc
pacts sould not be allo/ed as tey aect economic interests o small
telecom operators M"n 'irtel D>ero ratin! planD and 6eliance Dinternetor!D
tese operators a+e directly ne!otiated /it te application pro+iders
;5N- is o te +ie/ tat in any case& direct ne!otiations bet/een 55
players and 5S,s sould not be allo/ed&M te telecom operator said in its
counter comments submitted to sectoral re!ulator 56'"
M"n any o te cases& te basic concept o net neutrality ie DNo
discriminationJa+our or any specifc 55 ser+iceJs in terms o cost andaccess to subscribersD /ill be deeated&M ;5N- said
;5N- /it 114 million subscribers in /ired broadband connection
Im&acts
n Iune 04& 201& at 1G rs ;aana!ar 5elepone Ni!am /as (uotin! at 6s
1#& do/n 6s 00& or 02 percent 5e 2/ee. i! o te sare /as 6s
910 and te 2/ee. lo/ /as 6s 100 5e latest boo. +alue o te company
is 6s 408 per sare 't current +alue& te pricetoboo. +alue o te company
/as 04#
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
7/14
Reliance "ommunications
6eliance ?ommunications is pursuin! multiple dele+era!in! options&especially in noncore assets& /ic sould elp it lo/er net debtto
=*"53' ratio to almost by ;arc 2017& te companyDs mana!ement
said on 1stIune asset monetisin! plans @to/er assetsA to lo/er te debt
5e companyDs plans include a potential sta.e sale in its to/er unit& te
sale o its international business unit and real estate sales
6eliance ?ommunications& /ic posted a 4# percent Kump in ourt
(uarter proft elped by increased data usa!e by subscribers& also said it
/ould step up installation o to/er sites tis year to cater to te risin!
data potential in "ndia
"n+est about 6s 1&002&000 crore in te current fscal to increase its databusiness& a top oLcial as said as te company is in tal.s /it 6ussiaDs
Sistema or possible Koint +entures& said its total data customer base !re/
2#2 percent o+er last year& to 7 million
;ade 228 billion rupees in proft durin! te (uarter ended ;arc 1 201&
compared /it 1# billion rupees te same (uarter last year
5e 'nil 'mbanio/ned company& /ic /ants to sell its entire sta.e in
6eliance "nratel& may settle or a 1% sale at te least and as as.ed or
bids rom ban.ers includin! ;or!an Stanley& *an. o 'merica ;errill -ync
and I; inancial to run te process& people amiliar /it te matter said
6eliance "nratel& /it some 4&000 to/ers and o+er 120&000 .m o intraand intercircle fbre& trails "ndus 5o/ers and *arti "nratel in ran.in!s by
number o to/ers
6eliance ?ommunications /it 78 million subscribers in /ireless
broadband ser+ice pro+ider /it a sare o as 801 percent in te
broadband sector.
Im&acts#
6comDs i! le+era!e and strained li(uidity profle& tereby /ea.ly positionin! it
in its ratin! cate!ory but mana!ement as underta.en te monetisation Sare
prices dropped drastically rom 6s 181 on 22nd;ay to 8 on 4tIune& at
14G1# pm 5e all o te sare prices as been !oin! on or te last t/o monts&
it /as around 10 in te middle o 'pril "tBs 5railin! ,J= is si!nifcantly +ery lo/
or an industry li.e 6eliance as it /as u!ely debt ridden or te past couple o
years and te company is !oin! trou! a can!e in its capital structure li.e
monetisation o to/er assets to !et rid o debts but it ad a Kump in its (uarterly
profts o 4#% 5e ,rice to *oo. +alue is 020 lo/er tan its competitor *arti
'irtel and "dea ?ellular
Tata "ommunications
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
8/14
5ata ?omm aims 40% !ro/t rate in media bi> trou!
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
9/14
5ata 5eleser+icesB /oes continued /it te company reportin! a 6s &84#
crore loss in 20141 5ata Sons& te !roup oldin! company& inused 6s
1&02 crore on te last day o te fnancial year& so tat 5ata 5eleser+ices
could meet its fnancial obli!ations
5ata 5eleser+icesB re+enues increased mar!inally to 6s 10&944 crore rom
6s 10&42 crore in 20114& /en te 5ata !roup pumped in 6s 2&00
crore trou! compulsorily con+ertible preerence sares "n 20114& te
company made a record loss o 6s #&1## crore& /it its net /ort
completely eroded
5e company participated in auctions tis ;arc and /on spectrum in
'ndra ,rades& 3eli and Paryana by biddin! 6s 4&04 crore 5ata
5eleser+ices as paid 6s 1&09 crore in ad+ance to te Union !o+ernment
or te air /a+es
inance costs rose to 6s 2( crore in 20141 rom 6s 2&12 crore in te
prior year 5e companyBs debt rose to 6s 27&082 crore in 20141 rom 6s
24&0# crore in 20114 3ocomo as mo+ed te -ondon ?ourt o 'rbitration to orce te 5ataBs to
buy bac. its 2# per cent sta.e or 6s 7&200 crore 5e 5ataBs a+e sou!t
permission to buy te sares but te !o+ernment did not allo/ te
transaction& citin! a bar on predetermined +aluation
5ata 5eleser+ices lost spectrum in tree circles ater te Supreme ?ourt& in
ebruary 2012& cancelled 122 licences issued in 200809& /en ' 6aKa /as
te telecom minister in te United ,ro!ressi+e 'lliance !o+ernment 5e
company /as not allotted spectrum in te 3eli circle in spite o a+in!
paid or it
Im&acts#
n Iune 04& 201& 5ata 5eleser+ices @;aarastraA closed at 6s ##2& up 6s 012&
or 18 percent 5e 2/ee. i! o te sare /as 6s 140 and te 2/ee.
lo/ /as 6s #2 5e latest boo. +alue o te company is 6s 118 per sare 't
current +alue& te pricetoboo. +alue o te company /as 044
Fundamental Analysis overvie$
0*ata Based the on &eriod bet$een 11.23.1245+14+23+12436
)lements
Bharti
Airtel
imited
Idea
Cellular
imited
MTN
!eliance
Comm
imited
Tata
Comm
imited
Tata
Tele
ServicesCurrent BS)
(rice
40000 177 1780 181 4710 74
Current NS)
(rice
947 171 178 #4 48 7
31 %eek 7igh
BS)
427 209 91 1#9 049 140
31 %eek o$ BS) 2#7 1298 1# #9 181 71
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
10/14
31 %eek 7igh
NS)
427 204 89 172 08 141
31 %eek o$
NS)
2## 1298 1# #7 1 7
MarketCa&italisation
170&0094 #2&218
1&077
1#&8728 12&4478 1&821
Face 8alue 10 10 10 10)arnings (er
Share 01245+43
!e&ort6
1#1 09 12421 7 28#
(rice+)arning
!atio 01245+43
!e&ort6
242 4 014 7 28#
No. o" Shares0in
akhs6
9974 &19#
2
#&00 20&42748 19&4928 2&8000
BS) Sense/ 2#87 2#87 2#87 2#87 2#87 2#87NS) Ni"ty 81 81 81 81 81 81(9)0TTM6 02 781 228 287 22# NJ'
Industry (9) 1429 1429 14#2 1429 14#2 9#7*iv: #00% 400% 000% 000% 400% 000%
*iv ;ield : 04% 02% 000% 000% 109% (rice9Book 22 98 020 047 149
(9C 902 9# 28 7# 892 BS) Code 244 2822 0010
8
2712 0048 271
NS) Symbol *P'65"'65
-
"3=' ;5N- 6?; 5'5'?;
;
55;-
%hy is it necessary to kno$ the "actors afecting the
a"oresaid stock movement in the ca&ital markets'
's a stoc. trades /itin its 2/ee. price ran!e @te ran!e tat e:ists bet/een
te 2/ee. lo/ and te 2/ee. i!A& in+estors may so/ increased interest
as price nears eiter te i! or te lo/ ' popular strate!y used by stoc.
traders is to buy /en price e:ceeds its 2/ee. i!& or to sell /en price allsbelo/ its 2/ee. lo/ 5e rationale beind tis strate!y is tat i price brea.s
out rom te 2/ee. ran!e @eiter abo+e or belo/A tere /ill be enou!
momentum to continue te price mo+e in a a+ourable direction
'lternati+ely& anoter strate!y is to sell /en price reaces its 2/ee. i! on
te assumption tat price /ill recede& or to buy /en price reaces its 2/ee.
lo/ in anticipation o a +alue play 5raders and in+estors typically conduct
additional tecnical andJor undamental analysis or confrmation
(resent Condition o" the Stocks
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
11/14
5elecom stoc.s declined 5ata 5eleser+ices @;aarastraA @do/n 80#%A& 6eliance
?ommunications @do/n 82%A& ;aana!ar 5elepone Ni!am @do/n 44%A and
"dea ?ellular @do/n 02%A ed!ed lo/er
*arti 'irtel /as o 1% to 6s 41240 5e stoc. it a i! o 6s 4189 and a
lo/ o 6s 4090 so ar durin! te day 5e company announced beore tradin!ours on rd Iune 201& tat te company as approaced in+estors or issuance
o debt instruments in te orm o US dollar denominated Senior Unsecured
Notes 5e notes a+e an e:pected tenor 10 years 5e company /ill use te
proceeds or capital e:penditure in compliance /it enduse !uidelines set ort
in te ;aster ?ircular by te 6eser+e *an. o "ndia and all la/s and re!ulations
o "ndia applicable to te company 5e notes are e:pected to be listed on te
Sin!apore Stoc. =:can!e
Technical Analysis
)stimating *iscounting !ates $ith Beta
Analysis 011.23.1245+14+23+12436
Fig 4.4#=stimated 3iscounted 6ates
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
12/14
Fig 4.1#*ottomUp *eta @on te basis o 2 /ee. Pi!& 2 )ee. -o/A
' bottomup beta is estimated by startin! /it te businesses tat a frm
is in& estimatin! te undamental ris. or beta o eac o tese businesses
and ta.in! a /ei!ted a+era!e o tese ris.s
" lo/er tan one te ris. is lesser tan a+in! stoc. at more one beta orclose to one 's& 5ata 5eleser+ices ad a continuin! losses *arti Q "dea at
te top o te business and 5ata ?omm is te most balanced position in
te mar.et 6eliance is capitalisin! teir assets so teir beta a+era!e is
lo/er tan e:pected and on te oter and ;5N- is tryin! to re+i+e
temsel+es
Fig 4.
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
13/14
Fig 4.5G ?omparati+e ?art o Stoc.s o 5elecom Ser+ice ,ro+iders Q S=NS=H
Analysis#
"ndiaDs telecommunication net/or. is te second lar!est in te /orld based on
te total number o telepone users @bot f:ed and mobile poneA "t as one o
te lo/est call taris in te /orld enabled by te me!a telepone net/or.s and
ypercompetition amon! tem "t as te /orldDs tirdlar!est "nternet user
base *ut in te current scenario& te industry is acin! a diLcult time in te
telecom ser+ice pro+ider and can be /itnessed in te ?omparati+e cart tat is a
u!e +olatility in te mar.et /it alarmin! returns 5e contro+ersy re!ardin!
te net neutrality as ta.en a toll in te telecom industry& li.e 'irtel Rero 5e
bottommost !rap so/s number o +olumes traded and on /ic te in+estors
are interested to deal on te stoc.s Pi!er te +olume& Pi!er te in+estorsinterest or +ice +ersa tus increased demand 'nd te uctuation in te oter
!rap lines so/s tat te pricin! le+el o stoc.s& i! trade or lo/ trade *elo/
te at line o a+era!e trade is lo/ trade and more tan te at line is i!
trade
*arti 'irtel -td and "dea ?ellular -td are rallyin! on optimism te e:pense o
securin! spectrum or 20 years /ill pay o as te /orldBs secondlar!est /ireless
mar.et !ro/s Net incomes at te t/o companies a+e climbed at least se+en
times aster tan te broader mar.et o+er te past si: (uarters as smartpones
costin! less tan $200 spur a Kump in mobiledata use "n a i!ly +olatile trade&
te bencmar. *S= Sense: ell by 24 points to 2#&8142 on 4 t Iune amid
7/23/2019 03. Equity Research- Telecom Service Providers by Abhishek Ghosh_0 (1)
14/14
sustained orei!n und outo/s tri!!ered by defcient monsoon orecast& 6*"Bs
cautious stance on economic reco+ery and rupee slumpin! to 20mont lo/
Sense/ !etreatG @SourceG "ndiaBs Sur!in! ,one Stoc.s So/ $18 *illion )as
)ell SpentA
;oney mana!ers a+e been pilin! into telecom companies amid a /ea.enin!
outloo. or oter industries 5e SQ, *S= Sense:& one o 'siaBs best perormin!
stoc. inde:es in 2014& tumbled to a si:mont lo/ on 5ursday @7 t;ayA amid
!ro/in! concern about ,rime ;inister Narendra ;odiBs ability to pus trou!
economic reorms
Spendin! on te /ireless spectrum /as #8 percent i!er tan te base price
set by te !o+ernment& accordin! to auction results released ;arc 2# *arti&
"dea and te UBs Eodaone roup ,lc retained air/a+es tat /ere up or
rene/al /ile also !ainin! spectrum tat enables tem to boost ourt
!eneration oerin!sT
'ccordin! to 'Kay Sri+asta+a& te mana!in! director at 3imensions ?onsultin!
,ri+ate e:pressed tat costs are f:ed or te ne:t 20 years e+en as te mar.et
continues to !ro/