• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
Download
 
www.kredent.com research@kredent.com
Result Update – Indian Telecom Sector (Sept-09)
Overall Outlook
OVERALL OUTLOOK:
•
The three major Telecom Operators Bharti Airtel, Reliance Communications & Idea Cellular came out withtheir Q2FY10 results in October 2009.
•
While Bharti Airtel & Idea cellular came out with results around analysts expectations RelianceCommunications posted figures which were way below street expectations
•
The companies witnessed muted growth on top line front with sales not growing as analysts expected. Thiswas due to less than expected growth in subscribers and with a decline in ARPU’s and MOU’s over the lastfive quarters
•
Among the key revenue segments Wireless services registered a less than expected increase with PassiveInfrastructure(towers) business registering a healthy increase The companies witnessed muted growth inEBITDA margins but PAT margins registered a healthy increase mainly on account of cost cutting anddecreasing interest costs
•
The current outlook of the telecom operators looks bleak considering growth which was a major factor for thevaluations which the companies used to command is bottoming out because we are witnessing teledensity of more than 100% in the major metros which are major revenue drivers, intensifying competition because of entry of new players like MTS, Tata DOCOMO and with companies like Uninor, Swan, Loop due to startoperations existing operators do have to slug it out to fight competition of falling call rates and subscriber churn
•
Increasing competition and muted growth has made telecommunication a matured play and with the ruralmarket being a low margin segment the rural growth story will not command higher valuations and with newservices like 3G and Wimax being delayed due to regulatory hurdles the present outlook for the industrydoesn’t looks favorable and with Mobile Number Portability (MNP) due to come there would be a churn insubscriber base making it all the more difficult for the existing players
•
Our analysis concludes that declining sources of revenue, a declining trend witnessed in ARPU’s and MOU’S,saturation of urban customer base, increasing competition and regulatory hurdles makes telecom anunfavorable play to be in at the moment and until there is a clear picture on revenue front which would comeout after 3G auctions and with the regulatory hurdles sorted out any valuations made for these companieswould be unjustified so we would suggest staying away from this sector even though all major players haveseen their stock price tumbling by 30-50% and with most of the damage already being discounted
•
We strongly believe that Bharti Airtel is the only stock in the sector which is to some extent suited toinvestment and one can add the stock to their portfolio since it would benefit with entry into the 3G spectrum(largest 2G subscriber base) and value unlocking from Bharti Infratel and Indus Towers
 
www.kredent.com research@kredent.com
Result Update – Indian Telecom Sector (Sept-09)
 Average Revenue per User (ARPUs)
 
ARPUs (Rs.) 30-Sep-08 31-Dec-08 31-Mar-09 30-Jun-09 30-Sep-09
Bharti Airtel 331 324 305 278 252Reliance Comm. 271 251 224 210 161Idea Cellular 263 268 255 232 209
Source: Company Filing
Minutes of Usage (MOUs)
 
MOUs 30-Sep-08 31-Dec-08 31-Mar-09 30-Jun-09 30-Sep-09
Bharti Airtel 526 505 485 478 450Reliance Comm. 423 410 372 365 340Idea Cellular 421 416 402 399 375
Source: Company Filing
Market Share
Market Share 30-Sep-08 31-Dec-08 31-Mar-09 30-Jun-09 30-Sep-09
Bharti Airtel 24.60% 24.70% 24.00% 24.00% 23.50%Reliance Comm. 18.10% 18.00% 18.80% 18.97% 18.50%Idea Cellular 15.20% 14.50% 14.50% 12.90% 12.40%
Source: Company Filing
Operating Margin
 
EBITDA Margin 30-Sep-08 31-Dec-08 31-Mar-09 30-Jun-09 30-Sep-09
Bharti Airtel 40.29% 40.09% 39.32% 40.56% 40.78%Reliance Comm. 39.60% 38.33% 35.48% 36.80% 33.00%Idea Cellular 26.33% 25.52% 27.61% 28.90% 27.22%
Source: Company Filing
o
ARPUs havedeclinedcontinuously withincreasingcompetition leadingto price wars
o
MOUs have alongbeing declining withsaturation of highusage metro circleand entry into thelow usage ruralcircles
o
Bharti and Idea’smarket share hasdeclined andRelianceCommunication’shas increased.However this ismainly on accountof entry into theGSM spectrum
o
All of this has leadto a slowdown inrevenue growth,however theoperating marginsare maintained onaccount ofreduction inadvertisingexpenses andinterest cost
Fact Sheet
 
www.kredent.com research@kredent.com
Result Update – Indian Telecom Sector (Sept-09)
Bharti Airtel Limited
BSE : 532454NSE : BHARTIARTLBloomberg : BHARTI INCMP : Rs 299.95Sector : TelecomView : Neutral
Market Data as on 26.10.2009
LISTINGNSE/ BSEMARKET CAP (Cr.)Rs. 115518.952-WEEK HIGHRs. 99052-WEEK LOWRs. 280.05BETA0.8668CURRENT PE (TTM)12.87INDUSTRY PE (x)11.78
PRICE PERFORMANCE (%) as on 3
rd
November 2009
Time PeriodStockNifty 501 MONTH-27.79%-7.56%3 MONTH-28.68%2.8%1 YEAR-7.49562.86%
FINANCIALS
Q2 2009 Q2 2008 Growth10,355.16 8,923.57
16.04%
0.00 0.0010,355.16 8,923.57 16.04%
6,132.60 5,328.44 15.09%
4,222.56 3,595.13 17.45%40.78% 40.29%
48.9bps
1,499.68 1,102.18 36.06%
2,722.88 2,492.95 9.22%26.29% 27.94%
-164.2bps
2,722.88 2,492.95 9.22%
37.90 29.16 29.97%159.10 1,099.56 -85.53%
2,601.68 1,422.55 82.89%
296.08 -292.10 -201.36%Minority Interest 50.90 46.53 9.39%
2,254.70 1,668.12 35.2%21.77% 18.69%
308.0bps
5.94 4.39 35.27%Other Operating IncomeTotal Expenditure
EBIDTANPM (%)
Diluted EPSOther Income
Profit Before Tax
Tax Provision
Net Profit
Fig in Crores 
Operating Profit
Interest
EBIT
Depreciation
EBIDTA Margin (%)EBIT Margin (%)ParticularsTotal IncomeNet Sales
 
Bharti Airtel Limited declared its second quarter result onOctober 30
th
, 2009.The results came marginally above thestreet expectations. The net sales were up by around16.04% over the Bloomberg estimates while net profit wasup by 32.54%
RESULT HIGHLIGHTS:
•
Bharti Airtel’s consolidated net sales for Q2FY09-10 grew byaround 16.04%, YoY to Rs.10355.16 cr. This was mainly onaccount of a increase in revenues from Mobile services
•
The company’s consolidated EBITDA was at Rs 4222.56 cr up by 17.45% over the FY08-09 figure
•
Key Segmental revenue Growth:
o
Revenue from mobile services stood at Rs 8123.04cr up 11% over the FY08 figure of Rs 7299.38 cr 
o
Revenues from Telemedia services remained flat atRs 855.50 cr up 1.5% over FY08 figure of Rs843.60 cr 
o
Revenues from Enterprises segment stood at Rs2158.35 cr up 4 % over the FY08 figure of Rs2077.48 cr 
o
Passive Infrastructure witnessed a jump inrevenues by 35% standing at Rs 1664.20 cr upfrom FY08 figure of Rs 1227.87 cr 
o
Revenues from Other services stood at Rs 130.47cr up 41% over the FY08 figure of Rs 92.56 cr 
•
Its EBITDA margin stood at 40.78% up 48.9 bps comparedto the same quarter a year ago
•
Operating profit of the company witnessed a muted growthof just below 10% whereas because of a decline of 85% inInterest costs over previous year the company was able topost a healthy net profit of Rs 2254.70 cr up 35.2% over previous year whereas net profit margins have increased by308 bps over previous year 
•
EPS increased by 35.27% in FY09 over the previous year and stood at Rs 5.94
•
The company witnessed an increase in subscriber base by7.83 % q-o-q and is India’s biggest operator in terms of subscriber base and revenues with its subscriber base as on30
th
Sep 09 at 110.51 million with a market share of 23.5%
•
The telemedia business of the company did not grow muchwith current subscriber base at 2.92 million growing by 3.5% q-o-q
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...