Description
This is a presentation describing about telecom sector, compares various telecom companies by subscribers, financials and market capitalization. It alos provides SWOT analysis of Bharti Airtel, Idea cellular, Reliance Communications, Tata Communications
Sector Analysis - Telecom
Telecom Timeline
2005-11 2000-05 1990-2000
1980-90
2003: 1991: 1981:
Contracts with a French company to merge with the stateowned ITI, to set up 5 million lines per year 1985: DoT 1986: VSNL & MTNL Telecom equipments manufacturing deregulated 1992: VAS opened to private sector 1994: NTP 94 1997: TRAI 1999: NTP 99 2000: TDSAT Unified Access Service License(UASL), Interconnect Usage Charges(IUC) & Calling Party Pays(CPP)
2006:
DoT criteria for additional spectrum
1947-80
2007:
Cap on number of players in a circle removed
1947:
Posts & Telegraphs set up
2004:
Broadband Policy; universal licensing regime & intra-circle M&A rules
2008:
DoT grants new licenses
1950:
Telephone Exchanges taken over from the Princely states
2010:
3G & BWA spectrum auctioned
2011:
MNP launced pan-India
Market Overview
• Use of advanced technologies like GSM, CDMA to 3G in mobile phones • Sector is broadly classified into Fixed Line and Mobile Telephony • Non-govt. players have more than 70% market share
Market Structure
• Divided into 23 circles – 4 metros – 19 circles (Further divided into A, B and C category
based on economic parameters and revenue potential )
• Each circle has a licenses – Four operators per circle are allowed – Licenses are saleable
Demand
Current stats(Aug 2011) • 865 Mobile Phone Users (2nd) • 112 Million Internet User (3rd) • Rural tele-density at 35% • 12.69 mil broadband users Future Demand (as per NTP 2011) • 175 mil broadband users by 2017 and 600mil 2020 • Rural tele-density 60% by 2017 and 100% by 2020
Supply
• 15 Service Providers (June 2011) • Top 4 have 80% market share
• High Competition caused price wars which have resulted in lowest telecomm prices in the world
Business Model
• Started of as a high fixed cost and low variable cost model, hence economies of scale arose • Currently, in-house maintenance of Sale and Finance, and outsourcing of all other operations • Towers are maintained by captives or by independent infra companies • This caused a shift from high fixed cost to a high variable cost model • Lower fixed cost results in low prices • Reduction on economies of scale and ability to concentrate on better quality services
A Few Statistics
Particulars
Total subscribers Total Net addition % of monthly growth
Wireless
865.71 7.34 0.86%
Wire line
34.07 -0.11 -0.33%
Total
899.78 7.23 0.81%
Urban subscribers
Rural subscribers Tele density Urban teledensity
570.54
295.17 72.12% 157.76%
25.73
8.34 2.84% 7.11%
596.27
303.51 74.96% 164.87%
Rural teledensity
34.10%
24.48%
33.73%
Revenue & usage Parameters Average Revenue per User (ARPU) GSM Service Rs 98
Average Revenue per User (ARPU) CDMA Full Mobility Service
Minutes of usage (MoU) GSM service Minutes of usage (MoU) CDMA full mobility service
Rs 64
344 minutes 238 minutes
Indian Telcos – By Market Cap
Company
Bharti Airtel Limited Idea Cellular Limited Reliance Communications Ltd. Tata Communications Limited Tata Teleservices (Maharashtra) Limited Tulip Telecom Limited
Market Capitalization (m) P/E Excl Extra, LFY
150,952 32,699 15,171 5,336 2,827 1,937 24.95 36.42 11.70 35.23 7.08
Mahanagar Telephone Nigam Limited
GTL Infrastructure Limited
1,647
814
-
Indian Telcos – By Subscribers
300 250 200 150
Number of Subscribers as of Oct 2011 (in millions) 246.13
215.11
100
50 0
74.36
89.8
Metro
A Circle
B Circle
C Circle
3.00 2.50 2.00 1.50 1.00
Subscriber Additions in (millions)
2.67 1.74 1.64 0.940.95 0.92 0.85 1.92
September October
Number of Subscribers Additions in Oct 2011 (in Millions)
8 7.12
0.50
0.00 -0.50
0.60 0.450.51 0.49 0.03 0.03 -0.11-0.20 0.06 0.04 0.01 0.04 0.01 0.05
6
4 2.35 2 0.22 0 Metro A Circle B Circle C Circle Total 1.11 3.44
Vodafone
IDEA
BSNL
Aircel
Uninor
Videocon
MTNL
Stel
Loop
Etisalat
Airtel
Indian Telcos – By Financials
Company LFY Gross Revenues Margin (In Rs. (%) Millions)
594,672.00 220,777.91 154,383.98 119,319.90 37,459.46 23,510.50 22,655.90 13,708.30 4,901.22 66.05 57.98 35.72 38.21 86.61 35.00 50.99 27.94 68.73
Net EBITDA Operatin Net Profit Income Interest Margin g Margin Margin (In Rs. Expense (%) (%) (%) Millions)
33.58 39.20 24.45 11.46 -21.85 36.81 28.03 14.96 60.65 16.41 6.57 6.43 -5.80 -68.03 17.29 2.52 7.00 -26.17 60,467.00 13,456.50 8,987.07 -7,769.00 -27,699.56 802.30 3,064.07 562.10 -1,392.89 10.17 5.82 5.80 -6.38 -68.80 13.03 2.51 4.06 -26.17 20,554.00 9,023.50 4,902.64 5,697.70 4,534.11 766.89 3,167.40 655.30 2,463.35
Bharti Airtel Limited Reliance Communications Ltd. Idea Cellular Limited Tata Communications Limited Mahanagar Telephone Nigam Limited Tulip Telecom Limited Tata Teleservices (Maharashtra) Limited Spanco Ltd GTL Infrastructure Limited
Bharti Airtel - SWOT
Strengths
* Well integrated operations * Strategic alliances and partnerships * Strong brand image
Weaknesses
* Decreasing ARPU in India * Relatively low scale of global operations
Bharti
* Growth of Indian telecom mark * Launch of 3G services * Acquisition of African operations will be the drivers of growth * Focus on mobile commerce services
* Intense competition * Regulations * Exchange rate fluctuations
Opportunites
Threats
Idea - SWOT
Strengths
* Flexible plans * Good advertising * High brand visibility * Celebrity brand ambassadors
Weaknesses
* Price competition * Service centre issues * Untapped Rural Market * Price Higher than BSNL and MTNL * Unable to connect to customers very well
Idea
* Fast expanding cellular market * Latest and low cost technology * Untapped rural market * New entrant's low price offering * Saturation point in Basic telephony service * Mobile Number Portability
Opportunites
Threats
Reliance Communications - SWOT
Strengths
* Well integrated operations * Strong brand recognition * Significant operations of Reliance Globalcom and Reliance Communications Infrastructure
Weaknesses
* Decreasing ARPU * Concentrated geographic operations * Significant debt
RCom
* Low penetration rates * Growth of pay-TV market * Launch of 3G services
* Increasing competition * Regulations
Opportunites
Threats
Tata Communications - SWOT
Strengths
* Comprehensive Offering * Market Leadership Position * Comprehensive Network Coverage & Infrastructure
Weaknesses
* Declining Profitability * Substantial Debt
Tata Communications
* Growing Cloud Computing Markets * Strategic Geographic Expansion * Strategic Growth Initiatives * Growth in Telecommunications Services
* Stiff Regulations * Falling Tariffs * Rapid Technological Changes * Intense Competitiontions
Opportunites
Threats
Indian Telcos – M&As
• GTL Infra - Aircel Towers (July 2010): $1.8Bn deal brought GTL Infra to the 3rd position in terms of number of mobile towers – 33000. • Reliance Industries - Infotel (June 2010): Reliance Industries bought 95% stake in Infotel for Rs.4,800 Cr. Infotel won pan-India BWA spectrum license for 22 circles for around Rs. 12,848 Crs ($2.7Bn)
• Bharti - Zain (March 2010): Bharti Airtel acquired African operations of Kuwait-based Zain Group for $10.7Bn
FDI
• FDI of Rs.48,220 Crs in the last 11 years – 8% of the total • FDI up to 49% is permitted under automatic route; and 49%-74% under Foreign Investment Promotion Board (FIPB) • Ownership details revealed by nine bidders for the 3G auctions revealed that the average FDI holding is just below 40% (39.7%) • Recently, Vodafone pushed for 100% FDI in Telecom stating that “forcing the foreign companies enter into a JV with a local partners puts the former into a disadvantage”
Tower Companies
• 6 major tower firms • Operator owned tower companies have more than 90% of the market share • 2008, DOT issued guidelines for active infrastructure sharing was implemented • No licensing yet • TRAI proposed to charge 6% of revenue as license fee
Risks & Concerns
• Increased debt pressures on telcos after 3G auctions • Rupee falling against the dollar would adversely affect the interest cost and repayments • Idea to be least affected
Towers • Diesel pilferage (15-20%) • Pollution (2 Billion liters of diesel) • No pressures on towers companies to shift to renewable sources • IPO’s will have few takers in the current market
Policies in Action – NTP’99
• Revenue sharing instead of fixed license fee • Extension of license period from 10 to 20 yrs
• Multi poly instead of duo poly
• Uniform license conditions for different servers
NTP’99 Contd.
• Govt. to mandatorily seek TRAI recommendations for – no. of players and timing of their entry – terms and conditions of licenses
• TRAI to resolve disputes between service providers
• TRAI to resolve differences between licensor and licensee • Govt. to retain policy making function
Other Telecom Regulations
• Pricing of ‘Regulatory Assets’ • Technology – Wireless network, private sector involvement
• Restrictive regulation – Equipment Suppliers – 74% cap on FDI
Key Proposals of NTP’2011
• • • • One nation – one license De-link all future spectrum from license Uniform license fee across all service areas DOT will appoint external agencies to conduct regular audit to determine efficient usage of airwaves MnA • Operators with 35% combined market or revenue share can merge • Case-wise approval possible if joint share up to 60%; over 60% cannot merge • Merged entity will be allowed to own up to 25% of spectrum allotted (typically 14-18MHz) in a circle • Does away with the old rule that a minimum of 6 operators should be left in a circle post merger
Future
• 4G • Launch of BWA
• Low cost tablets
• Hikes in tarrifs • MnA to gain momentum post NTP 2011
THANK YOU
doc_176453031.pptx
This is a presentation describing about telecom sector, compares various telecom companies by subscribers, financials and market capitalization. It alos provides SWOT analysis of Bharti Airtel, Idea cellular, Reliance Communications, Tata Communications
Sector Analysis - Telecom
Telecom Timeline
2005-11 2000-05 1990-2000
1980-90
2003: 1991: 1981:
Contracts with a French company to merge with the stateowned ITI, to set up 5 million lines per year 1985: DoT 1986: VSNL & MTNL Telecom equipments manufacturing deregulated 1992: VAS opened to private sector 1994: NTP 94 1997: TRAI 1999: NTP 99 2000: TDSAT Unified Access Service License(UASL), Interconnect Usage Charges(IUC) & Calling Party Pays(CPP)
2006:
DoT criteria for additional spectrum
1947-80
2007:
Cap on number of players in a circle removed
1947:
Posts & Telegraphs set up
2004:
Broadband Policy; universal licensing regime & intra-circle M&A rules
2008:
DoT grants new licenses
1950:
Telephone Exchanges taken over from the Princely states
2010:
3G & BWA spectrum auctioned
2011:
MNP launced pan-India
Market Overview
• Use of advanced technologies like GSM, CDMA to 3G in mobile phones • Sector is broadly classified into Fixed Line and Mobile Telephony • Non-govt. players have more than 70% market share
Market Structure
• Divided into 23 circles – 4 metros – 19 circles (Further divided into A, B and C category
based on economic parameters and revenue potential )
• Each circle has a licenses – Four operators per circle are allowed – Licenses are saleable
Demand
Current stats(Aug 2011) • 865 Mobile Phone Users (2nd) • 112 Million Internet User (3rd) • Rural tele-density at 35% • 12.69 mil broadband users Future Demand (as per NTP 2011) • 175 mil broadband users by 2017 and 600mil 2020 • Rural tele-density 60% by 2017 and 100% by 2020
Supply
• 15 Service Providers (June 2011) • Top 4 have 80% market share
• High Competition caused price wars which have resulted in lowest telecomm prices in the world
Business Model
• Started of as a high fixed cost and low variable cost model, hence economies of scale arose • Currently, in-house maintenance of Sale and Finance, and outsourcing of all other operations • Towers are maintained by captives or by independent infra companies • This caused a shift from high fixed cost to a high variable cost model • Lower fixed cost results in low prices • Reduction on economies of scale and ability to concentrate on better quality services
A Few Statistics
Particulars
Total subscribers Total Net addition % of monthly growth
Wireless
865.71 7.34 0.86%
Wire line
34.07 -0.11 -0.33%
Total
899.78 7.23 0.81%
Urban subscribers
Rural subscribers Tele density Urban teledensity
570.54
295.17 72.12% 157.76%
25.73
8.34 2.84% 7.11%
596.27
303.51 74.96% 164.87%
Rural teledensity
34.10%
24.48%
33.73%
Revenue & usage Parameters Average Revenue per User (ARPU) GSM Service Rs 98
Average Revenue per User (ARPU) CDMA Full Mobility Service
Minutes of usage (MoU) GSM service Minutes of usage (MoU) CDMA full mobility service
Rs 64
344 minutes 238 minutes
Indian Telcos – By Market Cap
Company
Bharti Airtel Limited Idea Cellular Limited Reliance Communications Ltd. Tata Communications Limited Tata Teleservices (Maharashtra) Limited Tulip Telecom Limited
Market Capitalization (m) P/E Excl Extra, LFY
150,952 32,699 15,171 5,336 2,827 1,937 24.95 36.42 11.70 35.23 7.08
Mahanagar Telephone Nigam Limited
GTL Infrastructure Limited
1,647
814
-
Indian Telcos – By Subscribers
300 250 200 150
Number of Subscribers as of Oct 2011 (in millions) 246.13
215.11
100
50 0
74.36
89.8
Metro
A Circle
B Circle
C Circle
3.00 2.50 2.00 1.50 1.00
Subscriber Additions in (millions)
2.67 1.74 1.64 0.940.95 0.92 0.85 1.92
September October
Number of Subscribers Additions in Oct 2011 (in Millions)
8 7.12
0.50
0.00 -0.50
0.60 0.450.51 0.49 0.03 0.03 -0.11-0.20 0.06 0.04 0.01 0.04 0.01 0.05
6
4 2.35 2 0.22 0 Metro A Circle B Circle C Circle Total 1.11 3.44
Vodafone
IDEA
BSNL
Aircel
Uninor
Videocon
MTNL
Stel
Loop
Etisalat
Airtel
Indian Telcos – By Financials
Company LFY Gross Revenues Margin (In Rs. (%) Millions)
594,672.00 220,777.91 154,383.98 119,319.90 37,459.46 23,510.50 22,655.90 13,708.30 4,901.22 66.05 57.98 35.72 38.21 86.61 35.00 50.99 27.94 68.73
Net EBITDA Operatin Net Profit Income Interest Margin g Margin Margin (In Rs. Expense (%) (%) (%) Millions)
33.58 39.20 24.45 11.46 -21.85 36.81 28.03 14.96 60.65 16.41 6.57 6.43 -5.80 -68.03 17.29 2.52 7.00 -26.17 60,467.00 13,456.50 8,987.07 -7,769.00 -27,699.56 802.30 3,064.07 562.10 -1,392.89 10.17 5.82 5.80 -6.38 -68.80 13.03 2.51 4.06 -26.17 20,554.00 9,023.50 4,902.64 5,697.70 4,534.11 766.89 3,167.40 655.30 2,463.35
Bharti Airtel Limited Reliance Communications Ltd. Idea Cellular Limited Tata Communications Limited Mahanagar Telephone Nigam Limited Tulip Telecom Limited Tata Teleservices (Maharashtra) Limited Spanco Ltd GTL Infrastructure Limited
Bharti Airtel - SWOT
Strengths
* Well integrated operations * Strategic alliances and partnerships * Strong brand image
Weaknesses
* Decreasing ARPU in India * Relatively low scale of global operations
Bharti
* Growth of Indian telecom mark * Launch of 3G services * Acquisition of African operations will be the drivers of growth * Focus on mobile commerce services
* Intense competition * Regulations * Exchange rate fluctuations
Opportunites
Threats
Idea - SWOT
Strengths
* Flexible plans * Good advertising * High brand visibility * Celebrity brand ambassadors
Weaknesses
* Price competition * Service centre issues * Untapped Rural Market * Price Higher than BSNL and MTNL * Unable to connect to customers very well
Idea
* Fast expanding cellular market * Latest and low cost technology * Untapped rural market * New entrant's low price offering * Saturation point in Basic telephony service * Mobile Number Portability
Opportunites
Threats
Reliance Communications - SWOT
Strengths
* Well integrated operations * Strong brand recognition * Significant operations of Reliance Globalcom and Reliance Communications Infrastructure
Weaknesses
* Decreasing ARPU * Concentrated geographic operations * Significant debt
RCom
* Low penetration rates * Growth of pay-TV market * Launch of 3G services
* Increasing competition * Regulations
Opportunites
Threats
Tata Communications - SWOT
Strengths
* Comprehensive Offering * Market Leadership Position * Comprehensive Network Coverage & Infrastructure
Weaknesses
* Declining Profitability * Substantial Debt
Tata Communications
* Growing Cloud Computing Markets * Strategic Geographic Expansion * Strategic Growth Initiatives * Growth in Telecommunications Services
* Stiff Regulations * Falling Tariffs * Rapid Technological Changes * Intense Competitiontions
Opportunites
Threats
Indian Telcos – M&As
• GTL Infra - Aircel Towers (July 2010): $1.8Bn deal brought GTL Infra to the 3rd position in terms of number of mobile towers – 33000. • Reliance Industries - Infotel (June 2010): Reliance Industries bought 95% stake in Infotel for Rs.4,800 Cr. Infotel won pan-India BWA spectrum license for 22 circles for around Rs. 12,848 Crs ($2.7Bn)
• Bharti - Zain (March 2010): Bharti Airtel acquired African operations of Kuwait-based Zain Group for $10.7Bn
FDI
• FDI of Rs.48,220 Crs in the last 11 years – 8% of the total • FDI up to 49% is permitted under automatic route; and 49%-74% under Foreign Investment Promotion Board (FIPB) • Ownership details revealed by nine bidders for the 3G auctions revealed that the average FDI holding is just below 40% (39.7%) • Recently, Vodafone pushed for 100% FDI in Telecom stating that “forcing the foreign companies enter into a JV with a local partners puts the former into a disadvantage”
Tower Companies
• 6 major tower firms • Operator owned tower companies have more than 90% of the market share • 2008, DOT issued guidelines for active infrastructure sharing was implemented • No licensing yet • TRAI proposed to charge 6% of revenue as license fee
Risks & Concerns
• Increased debt pressures on telcos after 3G auctions • Rupee falling against the dollar would adversely affect the interest cost and repayments • Idea to be least affected
Towers • Diesel pilferage (15-20%) • Pollution (2 Billion liters of diesel) • No pressures on towers companies to shift to renewable sources • IPO’s will have few takers in the current market
Policies in Action – NTP’99
• Revenue sharing instead of fixed license fee • Extension of license period from 10 to 20 yrs
• Multi poly instead of duo poly
• Uniform license conditions for different servers
NTP’99 Contd.
• Govt. to mandatorily seek TRAI recommendations for – no. of players and timing of their entry – terms and conditions of licenses
• TRAI to resolve disputes between service providers
• TRAI to resolve differences between licensor and licensee • Govt. to retain policy making function
Other Telecom Regulations
• Pricing of ‘Regulatory Assets’ • Technology – Wireless network, private sector involvement
• Restrictive regulation – Equipment Suppliers – 74% cap on FDI
Key Proposals of NTP’2011
• • • • One nation – one license De-link all future spectrum from license Uniform license fee across all service areas DOT will appoint external agencies to conduct regular audit to determine efficient usage of airwaves MnA • Operators with 35% combined market or revenue share can merge • Case-wise approval possible if joint share up to 60%; over 60% cannot merge • Merged entity will be allowed to own up to 25% of spectrum allotted (typically 14-18MHz) in a circle • Does away with the old rule that a minimum of 6 operators should be left in a circle post merger
Future
• 4G • Launch of BWA
• Low cost tablets
• Hikes in tarrifs • MnA to gain momentum post NTP 2011
THANK YOU
doc_176453031.pptx