The great Indian Mobile Revolution

Despite the current economic gloom the mobile phones business in India is continues to surprise and continue to boom. Led by worlds lowest call rates and availibility of cheapest handsets this is one sector which promises continued growth in otherwise troubled times in Indian economy.

To give you some insight to the kind of acclerated growth being seen in India' mobile market, let me highlight some key numbers. In January of 09 alone a the mobile market added 15.4 million new wireless subscirbers the biggest monthly growth ever.

To see this magnitude of unprecedented expansion in the telecom sector in the midst of deep slowdown in consumer demand and cut-back in domestic spending is proof enough that there is tremendous potential for staying invested for the long term.

The Indian mobile market boasts the most fierce and cut-throat competition and at the same time offers the worlds lowest call rates . But this is no bad news. Afforadibility is seen as the single-most important catalyst which is fueling this rapid growth.

Customers pay less that 50 paise for a call and new handset can be bought for as little as Rs.750. It is no surprise that India has now surpassed China to be the worlds fastest growing cellular market.

>> The beginning of the mobile revolution
It is not just affluent indians who are buying mobile phones, but the real growth is driven by the poor; Labourers, maids, drivers and other lowly paid people in cities are now buying mobile phones too.

The mobile service providers are aggresively rolling out new networks, sharing infrastructure costs and aiming to drive the mobile revolution deeper in to India's poorer markets. In rural areas the farmers are using mobile phones to call other farmers to find out market price for crops and also to stay in touch with distant relatives more often than before. The rural market of India presents a new opportunity to expand growth further.

The key to this surge in rural mobile subscriptions is due to the fact that these people are not affected by the global crunch. They do not own shares, or real estate hence are not being hit by the US credit or mortgage crises. There is enough employment for all and the crops being produced are to a great extent being consumed by the domestic markets.

>>Opportunity for further Growth for Cellular Companies
Rural India accounts for 70% of the 1.1 billion total population. Till the end of January of the total population who own a telephone only 9% were situated in rural areas, hence it is obvious that the next acclerator for mobile growth will come from rural india.

Expected growth : The forecast for 2010 is for total mobile subscirbers to rise to 525 million , and rise further to 740 million in 2012. The telecom providers know this fact and are moving fast. Bharti Airtel, Reliance Communication and Idea Cellular are 3 top Private service providers, followed by BSNL and MTNL which are backed by the government.

BSNL also announced rollout for 3G services in 700 cities in India by July 2009. This is another encouraging piece of information which will allow added revenue from data services, email and more profitable Business and Enterprise customers.

Stocks to Watch out for:

• Bharti Airtel ( view quote ),
  
• Idea Cellular ( view quote ),
• MTNL (view quote )

Bharti is a very experienced player in the market and has the reach and financial backing to aggresively invest in newer markets, rural as well as Urban.

Idea already has good reach and is expanding on its customer base in rural India and is beginning to establish itself in urban towns and cities with pervasive advertising campaingns and publicity.

MTNL is backed by the state and is expanding is data networks bringing Internet to the rural areas which has good potential in the coming years.

I am not too optimistic about Reliance Communications due to continued hinderance caused by Mukesh Ambani Group. In my opinion the telecom sector will see M&A activity and ADAG-Mukesh Group standoff creates uncertainity which is not good for the stock price.

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The source for numbers and facts & figures provided in this article are coutesy: The Associated Press. The original article can be found at STOCKEZY.COM - India's Social Investing Community. You can connect with me at tushar@stockezy.com

Also I would like for you to check out http://stockezy.com/answers/

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Market outlook and Intraday tips for 6th March.

US markets tumble along with the European markets.
Asia has also opened weak.
I expect Indian markets to open weak.
Indian markets may go below 8K mark today itself.

The support for the Sensex is 7995 - 7890 and the resistance to the up move is at 8410

Nifty: (2576) the support for the Nifty is at 2450 - 2390 and the resistance to the up move is at 2674

Inflation fell down to 3.03%

Day Trading Ideas.

Reliance Industry
Buy above 1162 for targets of 1169 and 1175
Sell below 1132 for targets of 1125 and 1119

Idea Cellular
Buy above 45.10 for targets of 45.90 and 46.75
Sell below 43.25 for targets of 42.90 and 42.25

Unitech
Buy above 26.10 for targets of 26.85 and 27.45
Sell below 24.90 for targets of 24.25 and 23.90

Happy Investing.

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Q3 Earnings Update!

My 2 cents on what to expect of the earnigs being announced today.

Reliance Industries - A big question mark on Q3, but whatever the management has to say today will define how the indexes move. It is most weighted stock in Senex & Nifty and is bound to pull its weight

Ranbaxy Laboratories Ltd - Good scrip to look out for especially after
Japan company merger. I think Healthcare is recession proof.

Bharti Airtel - Is expected meet estimates for Q3. But Outlook will be worrying due to saturation in current markets. Newer market penetration will require capital expenditure which will be hard to come by in Q4.

Idea Cellular - I am a seller of this Telecom company. With too much competion and a price war looming, margins will be affected, it will be difficult to survice without a merger with one of the bigger companies or even 2 smaller partners working together.

Kotak Mahindra - One of the better investment and financial banks. They seem to have limited exposure to any toxic assets. I will be a buyer of this stock at these levels. Earnigs should be encouraging.

-- About Me --

I am Tushar Makhija, co-founder of stockezy.com and like contributing to IndianMoneyPlus.com. I like the open minded approach of the authors. Looking to participate more. If you guys are interested in meeting many such like-minded bloggers and people interested in investing, check out stockezy.com

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Citigroup has maintained its ‘hold’ rating on Idea Cellular.

Target price: Rs 56 

Citigroup has maintained its ‘hold’ rating on Idea Cellular while cutting its price target to Rs 56 from Rs 70 in line with an earnings down-grade for financial years 2009-11 by 1-3%. 

“Relatively weaker balance sheet compared to its larger peers reduces the funding flexibility in a tougher macro environment, thus constraining the valuation multiples,” the investment bank said in a report. 

“Estimated net debt of Rs 4,900 crore as of end-FY09 (Rs 3,200 crore as of September, ‘08) is under control though net debt/EBITDA (earnings before interest taxation depreciation and amortisation) will be 2.3-2.4 times in FY10-11E. While this will moderate Idea’s bidding intensity, on the flip side, its balance sheet is most vulnerable to 3G bidding risk,” Citi added. - ET

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Idea Cellular: Buy.

Investments with a two-year horizon may be considered in the shares of Idea Cellular (Idea), given the telecom operator’s strong pace of subscriber additions, entry into circles with higher realisations and synergies possible from Indus Towers.

Pressures on near term margins and earnings due to entry into new circles and high capital expenditure have seen the stock’s valuation being beaten down to a moderate 13 times forward earnings (estimated 2008-09). At Rs 48, the stock offers a good investment option for investors who are willing to look beyond the next few quarters, for appreciation over a 3-4 year time frame.

Once Idea’s capex in new circles tapers off (likely by mid 2010), its overall profitability would start to expand. Mobile number portability, on the anvil for 2009, may also work in Idea’s favour.

Idea’s profit margins over the last couple of quarters have come under strain, due to the capex for network rollout in Mumbai and Bihar, heavy rentals for tower infrastructure and marketing expenditure related to brand building. Though these forays are likely to remain in the investment phase for a while, the headway that Idea has made in capturing market share is impressive.

In Mumbai and Bihar, Idea has already managed to capture 18.5 per cent and 21 per cent share respectively in new subscriber additions within two months of launch. This is despite being the sixth or seventh operator in these circles. The subscriber churn rate in Idea’s existing 11 circles has declined.

Idea received an infusion of Rs 7,294.9 crore from TMI for a 14.9 per cent stake sale, and Rs 2,748 crore from Providence Equity for a 20 per cent stake sale in its subsidiary – Aditya Birla Telecom. This has ensured funds for Idea’s expansion in existing circles and entry into high-ARPU circles such as Tamil Nadu and Karnataka, where it is set to launch services over the next few months.

The acquisition of Spice Communications, apart from bringing in subscriber base, has given it access to the 900 Mhz band frequency in Karnataka, which entails lower expenses. The company has also improved its National Long Distance volumes and now carries 15 per cent of its own traffic. Over time, an increase here would drastically reduce access charges, aiding margins. Synergies from Indus Towers may aid quicker rollout and expansion in Tamil Nadu and Karnataka

From - TheHinduBusinessLine.Com

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