>TELECOM SECTOR: Tepid quarter (RELIGARE SECURITIES)

Q3FY10 was yet another tepid quarter for the telecom industry led by hyper competition and falling tariffs, which kept revenues flat QoQ. Bharti Airtel and state-owned players, BSNL and MTNL, were losers on all fronts, shedding both subscriber and revenue market share. Vodafone and Idea Cellular were amongst the major gainers in terms of revenue market share. The Tatas, despite strong subscriber traction and increased market share following the successful launch of DoCoMo, lost adjusted gross revenue (AGR) market share by 28bps QoQ. Aircel captured more of the subscriber and gross revenue pie, but its AGR market share remained relatively flat.

Wireless revenue down 3.3% QoQ: With fierce competition and declining tariffs, the telecom sector witnessed flat sequential revenues of Rs 291bn (AGR) in Q3FY10, as per data released by telecom regulator TRAI. Strong growth in the AGR for wireline (up 6.3%) and long distance services (NLD: up 11.5% and ILD: up 11.7%), was negated by a fall in the wireless segment (down 3.3% QoQ). Wireless gross revenue (GR), which is inclusive of inter-operator payments, registered a marginal increase of 0.7% QoQ to Rs 265.6bn in Q3FY10. However, adjusted for these payments, net revenue or AGR dipped 3.3% to Rs 197.8bn. This is despite the wireless industry adding 53mn subscribers in Q3FY10, up 11.3% QoQ.

Market share highlights – Wireless segment

■ Bharti Airtel: Bharti witnessed a decline of 79bps, 97bps and 65bps QoQ in subscriber, gross and net revenue market share respectively. The company saw the steepest revenue market share erosion in ‘C’ category circles, from 45.7% to 41.3%, down 434bps. Business was partly affected by the ban on prepaid operations in Jammu & Kashmir (since 1 November, 2009) and late adoption of low per-second billing plans (w.e.f 1 November) vis-à-vis competition. GR for the J&K circle declined 19% QoQ from Rs 2.8bn in Q2FY10 to Rs 2.3bn in Q3FY10.

■ BSNL/MTNL: Subscriber, gross and net revenue market share for BSNL/MTNL fell by 55bps, 57bps and 79bps respectively QoQ. Capacity constraints and bureaucratic operations, amongst others, hinder the operating performance of state-owned players.

■ Vodafone: Despite a 16bps fall in subscriber market share, Vodafone’s gross and net revenue share improved by 39bps and 80bps respectively.

■ Idea Cellular: With a 6bps increase in subscriber market share, Idea witnessed a growth of 61bps and 73bps in gross and net revenue share respectively. Early adoption of low per-second price plans helped Idea and Vodafone to stimulate traffic growth.

■ Tata Group: With the launch of GSM (DoCoMo brand) services in July ’09, the Tata group has witnessed 54% growth in subscriber base from 37.1mn in Q1FY10 to 57.3mn in Q3FY10. But despite a 100bps improvement in subscriber market share in Q3FY10, its AGR market share declined 28bps QoQ.

■ Aircel: In Q3FY10, Aircel registered an improvement in subscriber and gross revenue market share by 45bps and 35bps respectively. However, its corresponding AGR gain was restricted to just 3bps.

■ Reliance Communications: Revenue market share for Rcom improved marginally although it shed 40bps of the subscriber pie.

To read the full report; TELECOM SECTOR