>INDIAN TELECOM REVENUE INSIGHTS (HSBC)

Bharti gains revenue market share

■ Bharti increases revenue market share by 80 bps; strong gains in “C” category circles

■ Vodafone (India) posted the highest gains( 90 bps) , state owned BSNL saw the largest decline ( 120bps)

■ Tamil Nadu, Bihar, UP East, and Madhya Pradesh circles post sequential revenue growth despite reduction in termination charges

As per TRAI’s financial data for the quarter ended June 2009, Bharti’s revenue market share increased by c80 bp to c34% q-o-q, while Idea’s revenue market share (including Spice) improved by c30bp sequentially. The key highlight of Bharti’s performance was its gain in revenue market share in ‘C’ circle, highlighting its focus on rural areas. Reliance Communications (RCOM) saw a marginal decline (10bps) in revenue market share (c12%) despite a marginal increase (c10 bps) in subscriber market share (c19%) this quarter. BSNL lost revenue market share across the country, with major declines taking place in B and C circle. Vodafone emerged as the biggest gainer as its revenue market share jumped by c90 bps on a sequential basis.

In Q1 FY 2010, 18 circles saw a negative q-o-q revenue growth, resulting in a c2% decline in pan-India revenues. We attribute the lower growth to the decline in termination charges, implemented from the start of this quarter. However, despite that, service areas like Tamil Nadu, Bihar, UP East, and Madhya Pradesh posted positive revenue growth.

With the Indian wireless space passing through one of its most peculiar phases, we believe investors are better placed to focus on revenue market share and revenue generating subscribers. We define revenue earning customers as subscribers that are active and contribute to revenues at the end of the service provider. At present, the Indian regulator does not prescribe any standard for reporting subscribers, allowing each operator to form its own definition for subscriber churn and reporting subscriber numbers. We believe rising competitive intensity and the lack of subscriber reporting norms are leading to double counting of subscribers and hence investors must focus on revenue generating customers and revenue market share.

To see full report: TELECOM REVENUE