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June 15th, 2012, Vol:1
 

Editor's Words

By Sridhar Pai, ceo, Tonse Telecom

June 15, 2012

India- Telecom Operators performance update -Q4 FY 2012

  • Revenue from mobile services -India was INR 105,100 Mn, up 3.3% qoq- positively impacted by the slight increase in VAS share to 14.4% in 4Q FY 2012 from 14.3% in 3Q FY 2012.
  • 5.1% qoq growth in overall network traffic
  • 2.8% qoq increase in minutes of usage (MOU) to 431min.
  • But again in 4Q, ARPM declined by 1.7% qoq to INR 0.44/min due to Airtel's intent to increase subscriber market share. Airtel price hikes of 20% for on-net prepaid calls for all its 22 circles in 2Q, pushed ARPM to INR 0.45/min in 3Q from INR 0.43/min in 2Q.
  • 1.1% qoq growth in ARPU to INR 189/month.
  • Bharti reported 5.1% qoq growth in overall network traffic, after two quarters of subdued traffic growth. Traffic growth was led by pricing intervention and strong net subscriber additions (5.63 Mn) during the quarter.
  • EBITDA margin for mobile business grew qoq to 34.0%. EBITDA margin of all other business segments such as telemedia services and passive infrastructure services increased qoq to 41.0% and 38.6%, respectively.

  • Idea reported consolidated revenue of INR 53,700 Mn, up 6.7% qoq. The mobility segment's revenue also posted healthy 6.5% qoq growth to INR 53,150 Mn
  • Revenue for established service areas (ESA) stood at INR 47,784 Mn, up 5.8% qoq; however, EBITDA margin of ESA declined qoq to 28.6%. Revenue from new service areas (NSA) grew by 13.5% to INR 6,250 Mn. EBITDA losses of NSA declined to INR 1,600 Mn in 4Q from INR 1,720 Mn in 3Q.
  • Total network minutes grew strongly by 9.1% qoq to 124bn min, but its ARPM declined by 2.5% qoq to INR 0.42/min from INR 0.433/in in 3Q, due to market place battle and overcapacity.
  • MOU during the quarter increased by 2.9% qoq to 379 min from 269 min in 3Q.
  • ARPU was flat qoq at INR 160/month during the quarter.
  • Idea has consistently been able to increase its VAS as a share of total revenue since the past four quarters. Idea's VAS share increased to 14.3% in 4Q from 13.7% in 3Q.
  • Idea reported highest net subscriber addition of 6.3mn subscribers in 4Q with subscriber growth of 5.9% qoq leading to subscriber base of 112.7mn EoP. Industry wise net subscriber additions have been cooling off. This will result in scale up total traffic on the network.
  • Idea will be impacted by lot of regulatory uncertainties after the cancellation of its licenses in 9 circles. To regain its licenses in the auction, the company will have to incur additional costs, which will, in turn, hamper the overall profitability of the company.
  • EBITDA margin declined qoq to 25.3%. EBITDA margin of the company was impacted by one-off provision created by the company for certain regulatory (revenue sharing) charges of INR 1,500 Mn, which resulted in license fee and WPC charges increasing to 13.7% of revenue in 4Q from 11.2% of revenue in 3Q.
  • New technologies like AMR (adaptive Multi-Rate) being implemented for the vertical expansion to increase site capacities.
  • Idea incurred capex of INR 8.4 Bn in 4Q2 (INR 9.5 Bn excluding impact of forex fluctuation). FY12 capex stood at INR 42.5 Bn. FY13 capex guidance has been introduced at INR 35 Bn.
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  • RCom reported modest revenue growth of INR 53,100 Mn, up 5 % qoq. Wireless revenue came in at INR 45,060 Mn, up 1.3% qoq
    Operational expenses increased due to a 23% qoq increase in network-related expenses and maintenance expenses during the quarter.
  • ARPM witnessed 2.2% qoq reduction because of increased competitive intensity in the industry
  • 1.3% qoq growth in MOU to 227 min
  • ARPU declined by 1.0% qoq to INR 99 in 4Q from INR100 in 3Q. RCOM is trying to slash free minutes in the network to aid the overall ARPU growth.
  • RCom hiked voice tariffs on both on-net and off-net calls for GSM subscribers; and on CDMA, the company raised tariffs on only off-net calls. Since the hike has been undertaken largely on the GSM subscriber base, as the company is primarily CDMA based the impact on ARPU was less as compared to its peers.
  • Overall EBITDA margin declined by 30.7%. PAT came in at INR 3,300, up 77.4% qoq, primarily aided by tax write-back of INR 1,190 Mn in 4Q vs. tax expense of INR 140 in 3Q and gain on minority interest front of INR 1,290 Mn in 4Q vs. expense of INR 550 in 3Q.

Could it be that the forecasted government deficit expected over the next couple of years in the face of a weak economy, demand a healthy sector be raised to the sacrificial altar? Other bleeding sectors such as mining and airlines have little sheen left to fleece. Telecom is still attracting investment and broadband was until now considered the next big growth zone. Could it be that arbitrary spectrum pricing is being arrived to best offset national economic deficit over a period of 5 - 7 years? Further, it is bizarre that without even defining spectrum trading, it is expected to be treated as collateral for securing bank credit. And the rationing of 5MHz in auction reminds one of the more recent television commercials where an operator is shown serving a meal in tea spoons.

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The DoT has done well to reject some of TRAIs requests including powers to award and retract licenses for potential MVNOs and reduction in foreign direct investment in tower sector. The industry hopes that wisdom will prevail within the Department and there should be no hesitation in rejecting these recommendations if it means to save the Telcos, financial and vendor community, thousands of jobs and millions of consumers.
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Sridhar T Pai | Contributing Analyst- Heavy Reading
Sridhar Pai runs Tonse Telecom, a Bengaluru-based telecom research and consulting house that is a research partner to Light Reading India.

 
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Tonse Telecom is a research, consulting and advisory services organization focusing on the India telecom sector. Tonse Telecom enables telecom equipment vendors, ISVs, infrastructure developers and investors for success in the Indian telecom marketplace.

Tonse Telecom has onboard, a team of reputed senior industry executives and consultants who provide advisory services on specific projects. Tonse covers a broad spectrum of telecom technologies that include Wi-Fi /BWA / WiMAX, IMS, FMC and Triple Play, VoIP, Mobile VAS, End-device Applications and Mobile Content.

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