Friday, February 27, 2009

>Telecom Sector (INDIA INFOLINE)


January 2009 saw the highest monthly subcriber additions ever anywhere in the world. Reliance Communications powered wireless growth of over 15 mn subscribers with a 180% mom surge in user additions. This came on the back of its pan-India GSM foray from Jan'09. Idea-Spice combine added 2 mn subscribers, a jump of 34% mom, the best since Sep'08. Bharti maintained its 2.7 mn add rate, similar to levels seen in the past several months. However, smaller operators like Airtel continued to decline inpace of user additions on a monthly basis.

Although RCOM has doubled its share of subcriber additions, its ARPUs need to be watched for any adverse impact of such a spurt in subcriber growth. Retain bharti as the preferred BUY in the sector.

Rcom powers wireless growth; adds 5 mn subcribers in a month
From Jan'09, Rcom launched its GSM services in 14 circles, making it the first pan-India dual network operator. The company garnered nearly 5mn subcribers in a span of 30 days driven by aggresivepricing strategy. For instance, it offered free minutes and GSM SIM available at one-time charge of Rs 25 in the city of Mumbai. Rcom subcriber additions jumped 180% mom on its earlier run rate of about 1.75 mn/month. It represents the highest ever monthly wireless additions by an operator anywhere in the world except China.

ARPUs need to be watched for Rcom
Rcom almost doubled its share of user additions mom in Jan'09 and accordingly Bharti and Vodafone Essar together lost nearly 12ppts in their share of subscriber additions. Indeed every operator, barring Spice, reported a drop in its share of wireless growth. Incremental growth is likely to accrue from rural areas of most players. Hence, we believe, Q4 FY09 ARPUs for Rcom could indicateif a volume-based growth is coming at the expense of much lower revenue/user. Further, the impact of any significant migration from Rcom CDMA to its GSM platform remains to be seen.

To see full report: Telecom Sector