IDirect_TelecomMonthly_Feb2013

7/29/2019 IDirect_TelecomMonthly_Feb2013

1/5ICICI Securities Ltd.|Retail Equity Research

February 21, 2013e-tracker February

Subscriber addition returns!!!

Growth in subscriber additions

After falling drastically for two straight months, the subscriber base for the

GSM industry grew marginally in January by 0.4 million. The subscribersadded by the top 3 incumbents viz. Bharti, Idea and Vodafone were

almost cancelled out by subscribers lost by Aircel, Uninor and others. The

subscriber base of the GSM industry stood at 657.6 million.

Idea, Airtel top net adds; Vodafone almost flat

Idea added the highest number of subscribers in January at 2.5 million.

The company also has the best visitor location register (VLR) ratio in the

industry. Airtel followed by adding 2.3 million subscribers while Vodafone

added a marginal 0.2 million. These three operators were the only

incumbents to see substantial growth in their subscriber base. We believe

with stricter Trai norms in place and reduction of free/discounted minutes

by operators, the growth in subscriber base would be largely active.

Uninor loses subscribers; trend to continue in February

Having won spectrum in only six circles, Uninor lost 1.5 million

subscribers overall. In its six circles of current operations, the company

added 0.3 million subscribers. The company has closed down operations

in Mumbai after the Supreme Court ordered operators with cancelled

licenses to shut down operations in circles where they did not participate

in the November auctions. Uninor has 1.9 million subscribers in Mumbai,

which would reflect as subscribers lost in the subscriber data for

February.

Aircel & others

Aircel continued its trend of losing subscribers for the third straight

month. After having lost 1.5 million and 2.0 million subscribers in

November and December 2012, respectively, it lost 1.8 million subscribers

in January 2013. The subscriber base of Aircel stood at 61.6 million. Other

operators cumulatively lost 1.4 million subscribers.

Industry Outlook

The addition of subscribers by incumbents post adherence to stricter KYC

norms by Trai is a positive sign as majority of the subscribers added are

expected to be active. Also, with incumbents reducing free/discounted

minutes, an ARPM expansion for the industry is in sight.

The Telecom Commission has recommended that operators with BWA

spectrum in 2300 MHz be permitted to offer voice along with data

services for a payment of license fees of | 1650 crore. This move would

be beneficial for Reliance Jio Infocomm, which has pan-India BWA

spectrum. However, this move could attract litigation from other

operators as at the time of BWA spectrum auctions, the spectrum was

only allowed to be used for data. Now with voice being allowed, the

spectrum would be considerably cheaper than 3G spectrum.

Any competition from Reliance in the voice market would be a risk to our

call of ARPM expansion for the industry and an expected industry wide

tariff hike to combat the spectrum related outgo for all operators. We

maintain our target price of | 385, | 120 and | 69 on Bharti, Idea andRCom and rate them as STRONG BUY, HOLD and HOLD, respectively.

ctor Outlook

er weight

ce performance...

1M 3M 6M 12M

arti Airtel -12.6 -1.5 16.2 -12.9OM -12.6 23.5 30.4 -30.2

a -6.9 16.6 44.9 19.9

bscriber growth

0.0

2.2

-2.8

-3.4

1.3

0.2

0.1

-11.7

-15.0 -10.0 -5.0 0.0 5.0

Airtel

Vodafone

BSNL

Idea

Aircel

Uninor

Others*

Industry

%

urce: COAI, ICICIdirect.com Research

thers include MTNL, BPL, Videocon,

x-Reliance Telecom and TTSL

ce movement

10

60

110

160

210260

310

360

410

Feb-13Nov-12Aug-12Jun-12Mar-12

000

000

000

000000

000

000

Bharti RCom Idea Nifty (L.H.S)

alysts namearan [email protected]

nil Shenoy

[email protected]


2/5ICICI Securities Ltd.|Retail Equity Research Page 2

Exhibit 1:Operator wise net addsSubscribers-net adds Jun' 12 Jul' 12 Aug' 12 Sep' 12 Oct' 12 Nov' 12 Dec' 12 Jan' 13

Bharti Airtel 2.0 1.5 (1.9) (1.0) 0.5 (2.8) (1.7) 2.3

Vodafone Essar 1.2 1.2 (1.6) (0.7) 0.5 (2.4) (3.3) 0.2

BSNL - - 1.6 - 0.9 - - -

IDEA 1.2 0.5 (1.6) (0.5) 0.2 (1.6) (0.2) 2.5

Aircel Cellular 0.5 0.3 0.8 0.7 0.2 (1.5) (2.0) (1.8)

Uninor 0.5 (1.1) (2.4) 0.0 (1.1) (0.4) 0.9 (1.4)

Others* (0.8) (0.7) (0.4) (0.4) (0.0) (0.4) (0.4) (1.4)

Total 4.6 1.7 (5.5) (1.9) 1.1 (9.0) (6.6) 0.4

* - Others include MTNL, BPL, Videocon (STel & DB Etisalat excluded)

Source: COAI, ICICIdirect.com Research

Exhibit 2:Total GSM subscribersCompany Jun' 12 Jul' 12 Aug' 12 Sep' 12 Oct' 12 Nov' 12 Dec' 12 Jan' 13

Bharti Airtel 187.3 188.8 186.9 185.9 186.4 183.6 181.9 184.2

Vodafone Essar 153.7 154.9 153.4 152.7 153.1 150.8 147.5 147.7

BSNL 94.7 94.7 96.3 96.3 97.2 97.2 97.2 97.2

IDEA 117.2 117.6 116.0 115.5 115.7 114.1 113.9 116.4

Aircel Cellular 64.9 65.2 66.0 66.6 66.8 65.3 63.3 61.6

Uninor 45.6 44.5 42.1 42.1 41.0 40.6 41.5 40.1

Others* 14.0 13.4 13.0 12.6 12.5 12.2 11.8 10.4

Total 677.4 679.1 673.6 671.7 672.8 663.8 657.2 657.6



Exhibit 3:Subscriber market shareShare in net adds Jun' 12 Jul' 12 Aug' 12 Sep' 12 Oct' 12 Nov' 12 Dec' 12 Jan' 13

Bharti Airtel 27.7 27.8 27.7 27.7 27.7 27.7 27.7 28.0

Vodafone Essar 22.7 22.8 22.8 22.7 22.8 22.7 22.4 22.5

BSNL 14.0 13.9 14.3 14.3 14.4 14.6 14.8 14.8

IDEA 17.3 17.3 17.2 17.2 17.2 17.2 17.3 17.7

Aircel Cellular 9.6 9.6 9.8 9.9 9.9 9.8 9.6 9.4

Uninor 6.7 6.6 6.3 6.3 6.1 6.1 6.3 6.1

Others* 2.1 2.0 1.9 1.9 1.9 1.8 1.8 1.6

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0



Exhibit 4:Circle-wise subscribersCircle Jun' 12 Jul' 12 Aug' 12 Sep' 12 Oct' 12 Nov' 12 Dec' 12 Jan' 13

Metro 76.9 77.4 77.3 77.2 77.0 75.8 75.2 75.0

A' Circle 235.2 235.8 233.6 233.2 234.1 229.9 227.8 227.8

B' Circle 269.1 269.3 267.2 266.1 266.3 262.9 259.5 259.9C' Circle 96.1 96.5 95.5 95.2 95.4 95.2 94.6 94.9

Total 677.4 679.1 673.6 671.7 672.8 663.8 657.2 657.6




Exhibit 5:Revenue share30.1 30.5 31.2

22.3 22.1 21.7

15.2 15.1 14.5

6.5 6.9 6.8

30.530.931.831.132.0

20.8 21.1 20.4 21.1 21.4

13.4 13.8 14.114.0 14.3

8.1 8.3 7.9 7.7 6.9

0

5

10

15

20

25

30

35

Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13

%

Airtel Vodafone Idea BSNL

Source: Trai, ICICIdirect.com Research



ICICIdirect.com coverage universe (Telecom)

CMP M Cap

(|) TP(|) Rating (| Cr) FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E

Bharti Airtel (BHATE) 304 385 SB* 115,413 11.2 7.0 12.9 27.1 43.4 23.5 7.6 7.2 6.2 8.4 7.8 9.4 8.4 5.0 8.6

Idea Cellular (IDECEL) 109 120 Hold 36,121 2.2 2.9 3.7 49.9 38.0 29.8 9.4 7.8 7.0 8.5 9.9 11.1 5.5 6.8 8.0

OnMobile (ONMGLO) 37 46 Hold 417 7.2 3.9 4.4 5.1 9.5 8.4 2.1 1.3 0.8 5.8 5.5 5.7 9.4 4.8 5.2

RCom (RELCOM) 73 69 Hold 15,016 4.5 2.5 4.1 16.2 29.3 17.6 8.9 8.0 7.0 2.4 3.4 4.0 2.5 1.4 2.2

Sector / Company

RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)

* - Strong BUY

Source: Company, ICICIdirect.com Research



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Sector view:Over weight compared to index

Equal weight compared to index

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ndex here refers to BSE 500

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Mumbai 400 [email protected]

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IDirect_TelecomMonthly_Feb2013

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