India set to have 1 bn mobile users by 2014

One of the most important reasons for Bharti to emerge as a frontrunner for equity stake in MTN is its leadership position in India projected to be the world’s ranking telecom market in just a few years.

DoT, in a first ever forecast of mobile penetration across India for the next six years, has projected a billion mobile phones by 2014. This forecast is part of a spectrum committee report prepared by the DoT that is expected to be made public after the new telecom minister takes office.

It is well established that India has had one of the most remarkable growths in mobile phones since the sector was first opened to private investment in 1994. From two operators in each circle in 1995 the country now has 12 to 13 operators. Of these, about six to seven are fully functional, offering the Indian consumer unprecedented choice and low tariffs.

India has also been breaking all types of records on new subscriber additions in the last two years by adding up to 8 to 10 million phones a month, sometimes more. The latest report of the DoT put together by its committee shows that India will reach the half a billion mobile mark by 2010 and within four years reach 1 billion mobile subscribers.

In 2014, India’s population is expected to be 1.26 billion, with mobile penetration of 1.01 billion the mobile teledensity would be 80% above. It would mean 8 out of every 10 Indians will have access to a mobile device.

This probably reflects the world’s largest new growth opportunity over the next five years, surpassing China’s potential. China is already at nearly 700 million mobile phones as compared to India’s 400 million. The fact that India will add more than 600 million new subscribers must rate as the biggest subscriber adds for any country in the world.

Some of the imperatives to reach this figure would include redefining spectrum allocation and pricing policies, early 3G auctions, and reviewing the M&A norms.

It is clear that no country in the world can sustain a fragmented telecom market of 12 to 13 players per circle. In the end, the market will have to consolidate to between three to four national players and two or three regional players with an average subscriber base of approximately 150 million each by 2014.

Source - Economic Times.

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Mobile Subscribers added during Jan.

Recliance Communication added 5 million subscribers in Jan. Indias second largest mobile operator added such a huge number after it started its GSM operation nation wide.
Airtel added 2.73 million users and Vodafone added 2.4 million users.

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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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Though its recession more telecom industries are trying to enter in India.

Many new telecom companies want to start operations in India.

This shows how profitable telecom sector can be.

Going by a simple logic that more and more subscribers are adding on in the subscriber base count this is a place to park money for long term.

Three players — Japan’s NTT DoCoMo, Norway’s Telenor and UAE’s Etisalat — have recently entered the Indian market.

More international players seeking an India entry include the Kuwait-based Zain Group, Qatar Telecom, Bahrain Telecom, Italy-based Telecom Italia SpA and South Africa ’s MTN Group.

Stocks to look out in telecom industry.

Bharti Airtel , RCom., TTML , Idea and GTL Infra.

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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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