News Digest: MyFM, RCOM, Shaadi, IRCTC, TringMe, Nokia, SBI, IRDA, FrontLine, Tejas, Swan, TechM

From http://www.medianama.com/2009/08/223-news-digest-db-groups-myfm-rcom-shaadicom-irctc-tringme-nokia-sbi-irda-frontline-tejas/ on August 25, 2009

By Preethi J

MyFM To Raise 15.2M

Synergy Media Entertainment Ltd, DB Group’s FM radio division, will raise Rs. 1.52 crore through preferential allotment of fully paid up equity shares. It has received approval from the Foreign Investment Promotion Board (FIPB). Synergy runs 94.3 MyFM in 17 cities.

Related: Dainik Bhaskar IPO Filing: Digital Kiosks; IndiaInfo.com; I Media Corp

RCOM Launches Antakshari

Reliance Mobile launched a new VAS – Antakshari -  on its R-World platform which will allow the subscriber to play antakshari with anyone. Charges are Rs.30 per month with 30 minutes free usage. This service is being launched on both GSM and CDMA networks. (TelecomIndia Online)

IRCTC’s Online Sales Boom

Around 34% of the 880,000 tickets sold daily by the Indian Railways are booked online, ticket sale data between April and July 2009 by the IRCTC reveals. This is not all – online booking of the tickets is also popular amongst low income groups. An thumping 63% of online tickets were booked by them. (Business Standard)

Our Take: IRCTC continues to be the poster boy of Indian e-commerce. We only wish it were more efficient – instead of spending hours standing in a queue, we now spend hours on the website – logging back in due to jittery timeouts and searching for train names and numbers.

Related: IRCTC Does $102 Million In Online Transactions In August; Payment Trends; HDFC, ICICI, Cash Cards Significant

TringMe

This Bangalore based 2007 startup has a platform that helps developers create voice-enabled widgets for the Internet. Tringme hosts some 22 million call minutes per month and expects this to soar to 40 million in the next 3-4 months. One of its clients is Indiamart. (Moneycontrol)

Our Take: Such a platform could spark off more apps and options in the VoIP domain – so far ruled by Skype and Fring. Ofcourse there is still the regulatory hurdle to cross before VoIP usage picks up.

Strike At Nokia’s Manufacturing Plant in TN

Nokia employees at its handset manufacturing factory in Sriperumbudur have demanded a wage increase of €21 for all employees. (Evertiq)

M-Banking Adoption
State Bank of India has added 20,000 mobile-banking customers in 2 months, taking the total to 33,000. M-banking is rising in popularity for small value transactions. (PTI)

All Mobile Banking posts

Shaadi.com Stats

The site has 300m page views a month. 6,000 new profiles are added every day. (Guardian)

Insurance Inst Opts For Online Exams

Complaints of malpractices has led the Insurance Institute of India to make entrance exams for insurance agents online. The institute will be aided in setting up the online examinations by NSEiT, a subsidiary of the National Stock Exchange and Insurance Regulatory and Development Authority. (ET)

HomeShop18 To Raise Funding

The retail TV channel and online site is in discussion with prospective financial and strategic partners to raise money in the next year. It has outlined three priorities – be visible in every television household; to invest in customer experience; and, to reward loyal customers. Network18 owns 65% of HomeShop18. (VCCircle)

PE Firm Frontline Strategy Picks Up Stake In Tejas

The amount and stake are not known, and the stake was picked up by Frontline through a secondary transaction. Tejas has been backed by Battery Ventures, Cascade Capital Management, Mayfield Fund, Intel Capital, Goldman Sachs and Sandstone Private Investments. (VCCircle)

Change In Regulations Deferred: DoT

International telcos in India have been dealt a poor hand by the Indian government. The Department of Telecom (DoT) has postponed plans to remove the double taxation they currently have to comply with for offering long distance calls. They pay license fees twice to the government – for bandwidth which they purchase off domestic operators and again when they resell it to enterprises and their customers. (ET)

Etilsalat Awards IT Contract To Tech Mahindra

Following the move by other telcos to outsource their IT operations, Etisalat DB, which runs new telco Swan Telecom (renamed to Etisalat DB Telecom India), may award the majority of its Rs 150 million outsourcing project to Tech Mahindra. (ET)

Other telco-IT company relationships are: Unitech Wireless – Wipro ; Idea Cellular – IBM ; Bharti Airtel – IBM; Aircel – Wipro

2G allocation: DoT to seek more time

Thomas K Thomas in The Hindu Business Line on June 13, 2009

New Delhi, June 12 The Department of Telecom will seek more time from the telecom tribunal to decide on the policy for allocating 2G spectrum for mobile operators.

The deadline to decide on the policy is today, according to a judgment given by the Telecom Dispute Settlement Appellate Tribunal in its order of March 31, 2008.

The tribunal had asked the DoT to finalise the policy one month after the spectrum committee submits its report. Since the spectrum panel submitted its proposals on May 13, the DoT would have to take its final decision by June 13, according to the directions of the TDSAT. The DoT had, therefore, put on hold fresh allocation of spectrum till the policy was finalised.

However, the DoT has taken a view that it needed more time to review the recommendations of the committee, which mooted sweeping changes in the way spectrum is allocated.

Differences over policy

There are differences between the spectrum panel and the Communications Ministry on the policy. While the panel suggested giving spectrum through an open auction, the Telecom Ministry is in favour of continuing with the existing subscriber-linked criteria. “Since it is not possible to take a final decision with one month in view of wide ranging implications and report being reformist in nature we may request TDSAT to grant more time for Government decision on the report,” said a top DoT source.

The DoT also plans to consult the telecom regulator before it takes a final view on the allocation procedure. Earlier, top Ministry sources had told Business Line that the panel’s report may not be acceptable since it will disturb the level playing field in the mobile segment between new and old players.

DoT sources said it will decide on spectrum allocation criteria within six weeks. This means that operators such as Bharti Airtel and Reliance Communications, which have sought additional spectrum in some of the circles, will have to wait till then.

New Reliance E-Lite Plan For BlackBerry Users

From www.efytimes.com

Thursday, June 11, 2009:  Reliance Mobile and Research In Motion (RIM) have introduced the ‘Reliance E-Lite’ plan for BlackBerry smartphone users in India. With the ‘Reliance E-Lite’ plan, users can have unlimited access to email and instant messaging (IM) on their BlackBerry smartphones for Rs 299 per month.

The Reliance E-Lite service plan allows Reliance customers to access up to 10 supported POP3/IMAP email accounts (including ISP email accounts such as Yahoo! Mail and Google Mail). Users can also view, popular attachment formats including JPEG, TIF, Microsoft Word, Excel and Power Point while on the move.

The plan also enables users to have unlimited access to IM services like Yahoo Messenger, Google Talk, Windows Live Messenger and BlackBerry Messenger. The Reliance E-Lite service plan is offered with all BlackBerry smartphones available from Reliance Mobile, such as BlackBerry 8703e, BlackBerry 8830, BlackBerry Curve 8300, BlackBerry Curve 8900, BlackBerry Pearl 8110 and BlackBerry Pearl 8130.

Vrajesh Shelat, head, wireless data business, Reliance Communications, said, “It has been our constant endeavour to bring greater value to the Indian consumer. Through ‘Reliance E-Lite’ we will extend our reach to a wider market by providing an affordable and high quality of service to consumers who wish to primarily stay connected through email and instant messaging on their smartphones while on the move.”

“RIM welcomes this attractive new service plan for Reliance Communications customers in India. We continue to see strong interest from a broad range of customers in India and this new service plan will help further expand the reach the BlackBerry solution in India,” added Frenny Bawa, vice president, India, Research In Motion.

Related stories at

• http://www.thehindubusinessline.com/2009/06/11/stories/2009061150880400.htm
• http://www.ciol.com/technology/mobility/news-reports/rcom-offers-blackberry-for-rs-299/month/12609120953/0/

RCom bags Rs 125cr order

From www.ciol.com on June 11, 2009

MUMBAI, INDIA: Telecom major Reliance Communications (RCom) has bagged a Rs 125 crore Wide Area Network (WAN) contract from global consultancy major Mott MacDonald, a Business Standard report says.
 
The one-year contract was bagged through the company’s global arm, Reliance Globalcom, against competition from global majors like Dubai-based Etisalat, sources said.

GSM base growth slips again in May (adds 8.3 mil)

The Hindu Business Line Bureau on June 11, 2009

 New Delhi, June 11 GSM based mobile subscription growth rate has slipped for the second consecutive month.

GSM operators added 8.3 million users in May, taking the total user base to 306.45 million, according to the Cellular Operators’ Association of India. The operators had added 8.97 million in April and 10.8 million in March. The slump in growth has been attributed mainly to lower additions by state-owned Bharat Sanchar Nigam Ltd.

BSNL saw its subscribers additions slow to 4.5 lakh in May, less than half of April’s 1.04 million and less than one-fifth of record additions of 2.50 million in March. In comparison, Bharti Airtel added 2.8 million new subscribers in May while Vodafone got just over 2.5 million in the same month. “Private operators are maintaining the growth rate. If BSNL ramps up its network then the growth rate will be back on track,” said an industry representative. Both Idea Cellular and Aircel have added more than one million new subscribers each in May.

Related stories at

• http://economictimes.indiatimes.com/India-adds-over-8-mn-GSM-mobile-users-in-May/articleshow/4646220.cms
• http://www.ciol.com/technology/mobility/news-reports/india-adds-8.3mn-gsm-users-in-may/12609120881/0/
• http://www.ciol.com/technology/mobility/news-reports/8-mn-new-gsm-users-in-india/12609120917/0/

Excerpt from above:

Meanwhile, the Reliance Communications (RCom) has deactivated over 36,000 connections in Jammu & Kashmir even as the state police continued its probe into the violation of guidelines in issuing SIM (Subscriber Identification Module) cards.

 

“The company has deactivated 36,000 connections and begun an internal probe into issuance of mobile connections on the basis of fake documents,” senior superintendent of police, crime branch-Jammu, J P Singh said. Singh, who is heading the probe, said Reliance had conveyed to the crime branch the deactivation of these numbers and on the progress of its internal probe.

 

RCom, Alcatel to enter into Rs 3,000cr deal

From www.ciol.com on June 9, 2009

MUMBAI, INDIA: In what could be one of the largest outsourcing deals in the Indian telecom space, Reliance Communications is close to awarding a $500-600 million (Rs 2,500-3,000 crore) operations and maintenance contract to French telecom infrastructure provider Alactel-Lucent, says a report in Business Standard. The contract would be either executed independently by Alcatel-Lucent or by the joint venture between Alcatel-Lucent and RCom formed in May 2008 for managed network services that would take on outsourcing contracts from global telecom operators.

On the GSM front, RCom will initially outsource the operations of five circles — Himachal Pradesh, Haryana, Punjab, Jammu & Kashmir and Chhattisgarh — to Alcatel-Lucent.

The outsourcing deal also includes managing and strengthening RCom’s 175,000 km global optical fibre cable systems. The OFC system, of which 80,000 km is in India, is also used to carry international telecom data.

Related stories at

• http://economictimes.indiatimes.com/Reliance-Comm-may-give-contract-to-Alcatel-Report/articleshow/4634278.cms

RCom shareholders okay demerger of optic fibre business

26 May 2009, 1656 hrs IST, IANS on www.economictimes.com

MUMBAI: Reliance Communications (RCom), India’s second largest telecom operator, Tuesday said it has received approval from its shareholders for the demerger of its optic fibre division and subsequent merger with wholly-owned subsidiary Reliance Infratel. “The demerger will help reduce set-up and operating costs resulting in cost efficiency coupled with greater financial flexibility,” the company said in a regulatory statement.

Moreover, the segregation of business into providing telecommunications services and infrastructure will enable both the companies to concentrate on their core businesses, the statement added.

RCom launches calling cards

From The Hindu Business Line on 19 May 2009

Thiruvananthapuram, May 19 Reliance Communications has launched a Singapore- Malaysia calling card for its mobile customers in Kerala. Priced at Rs 449, the card offers an ISD tariff of Rs 3.50 a minute on all calls made to South East Asian countries, says a company press release. Customers who opt for this offer will receive a talk time of Rs 407. The offer is available through e-recharge and is valid till the end of June. The company also offers US, Canada and `Gulf’ international calling cards to its customers in Kerala.

SC notice to RCom on MTNL’s plea

(From www.business-standard.com) Press Trust Of India / New Delhi May 13, 2009, 0:25 IST

The Supreme Court today issued notice to Anil Ambani-owned Reliance Communications on a petition by MTNL alleging that the private mobile services provider had tampered with the process of deciphering the point of origin of a call.

MTNL has sought the transfer of RCom’s petition pending before the telecom tribunal and clubbing it with another plea pending before the Supreme Court.

Wireless Not-So-Narrow Band!

11 May 2009, 0346 hrs IST, Abhimanyu Radhakrishnan, ET Bureau

Even as India’s severely-abused internet users wait for a new government to give 3G the green light and liberate them from the “fraudband” mafia, there’s been a flurry of activity in the wireless internet space, with at least four players announcing new allegedly ‘high speed’ data devices on their improved 2-2.5G networks.

I’ve been using the new Netconnect Broadband+ from Reliance Communications for about a month now and the experience has been mixed. I ordered it online and while all the pictures on the website showed a sleek, foldable white device, the model I was delivered was a bulky black matchbox-shaped thing with an antenna jutting out and a cap dangling from the side. The modem was in fact big enough to block the other USB ports on my Macbook, while in use. I was annoyed that I wasn’t given the choice of the sleeker modem, that customers who bought it offline were getting, but I quickly forgot about it once the thing was installed and ready to go. I held my breath and hit the “connect” button on the dialer, and voila! I was seeing things that no Indian has seen on his or her wireless data card – three digits! I was actually seeing speeds of around 150 to 200 kilobits per second.

No matter that this is precisely the peak speed the older cards launched half a decade ago were supposed to offer. No matter that the card was giving anything from a tenth to a twentieth of the advertised speed. The point was that for the first time, half-decent wireless surfing was possible in a country that claims to be the world’s pioneering mobile market, but can’t execute a 3G spectrum auction.

Meanwhile, even as the regulator TRAI remains headless, a slightly disturbing development has occurred. All major telcos have suddenly announced “fair usage” policies on their high-speed “unlimited data” plans. There’s now a tiny asterisk next to the word “unlimited” that mentions a figure, beyond which, the customer will be charged for further data usage. Let’s, for instance, consider the 10GB monthly limit on data transfer, that the Reliance Broadband+ card offers on its most expensive unlimited plan. By RCOM’s own admission, the peak speed is 3.1Mbps, and if you do the math that involves 8 bits in a byte and 1024 megabytes in a gigabyte, you’ll run out in about 7 hours and 20 minutes – in a month!

Ok ok, so the peak speed is a theoretical maximum, much like mileage on a car, but even if you get a quarter of that speed consistently, which is the least a consumer should expect, you’ll run out after using it for just about an hour a day. It’s only fair then that the telcos stop calling them “unlimited plans”, especially in the YouTube era wherein the average legitimate surfer will easily consume more data than these caps allow. Let’s hope the soon-to-be-appointed gentleman in the hot seat at TRAI takes notice.

The best is over (On how the future might be for Airtel)

Shobhana Subramanian / Mumbai May 11, 2009, 0:46 IST on Business Standard

It’s one of the best moves Bharti Airtel ever made. When peer Reliance Communications (RCom) rolled out its GSM network in January this year, it was dishing out free minutes to anyone who bought a connection. One might have expected Bharti to retaliate. But it refused to join the price war and didn’t even tweak its tariffs, let alone offer free minutes.

In fact, Bharti hasn’t touched its key rates for quite a while now, almost 18 months. That’s despite the fact that both Vodafone and Idea Cellular have been rolling out networks in new circles. Subscribers seem to be willing to pay up—the telco commands a revenue market share of an enviable 32 per cent. And the high base doesn’t seem to be coming in the way of growth.
In 2008-09, the Rs 36,962 crore firm added nearly 32 million subscribers, close to a fifth of the net additions during that period, so that its subscriber base is now nudging 94 million.

MOUs trend down

Indeed not tinkering with call tariffs seems to be paying off: in the March 2009 quarter, Bharti’s average revenue per user (arpu) fell by a less than expected 6 per cent sequentially.

Also, while the minutes of usage (mou) per subscriber dropped by 20 minutes (or 4 per cent) sequentially to Rs 485, eleven minutes were lost because of the fewer number of days in the quarter. Of the rest, some minutes were yielded to the competition and some lost because more connections are being sold in rural markets.

However, it’s evident that elasticity trends aren’t showing an uptick—people don’t seem to be talking more just because it costs less to do so. In fact, the drop in mou for RCom during the quarter was a sharper 9 per cent.

Also, since Bharti will continue to expand in the rural areas—currently over 50 per cent of new subscribers are from the hinterland— the growth in traffic can’t but slow down. It’s happening already: Bharti’s total wireless minutes grew by just 5.7 per cent sequentially in the March 2009 quarter lagging the 9.7 per cent growth in subscribers—the trend was similar in the December 2008 quarter.

Calling rural India

The rural spread could hurt arpus too. But that’s the only way forward for the telco, which now reaches 81 per cent of the population compared with 71 per cent at the end of 2007-08.
Given that roughly 70 per cent of India’s population is rural and urban-teledensity has already hit a high 75 per cent—90 per cent plus in the metros—it’s rural subscribers who will come into the fold and drive the industry for the next few years. Industry watchers say there’s an opportunity here for Bharti which it is well-positioned to exploit; that’s because it has 900MHz of spectrum in 13 service areas.

But a rural franchise can also mean lower arpus. So far though, the revenue per minute (rpm) has held up pretty well, coming off by just 2 per cent sequentially in the March 2009 quarter, a factor that helped the support margins for the wireless business at 31.5 per cent. As analysts point out, the ebitda (earnings before interest depreciation and tax) per minute at 20 paise has stayed more or less flat now for four quarters.

However, although the management has indicated that most of the capital expenditure is behind it and that some channel costs are lower in rural areas, that may not be enough to cushion a fall in the margins which could result from lower growth in revenues.

Top line to taper off

Indeed, the days of an annual 35-40 per cent growth in revenues are over. The sequential revenue growth in the March 2009 quarter was a rather disappointing 2 per cent betraying the severity of the competition.

Typically, revenues have grown at around 5-6 per cent and on occasions, even faster. So it’s not surprising that even for the current year, analysts are pencilling in a sales growth of just 16-17 per cent: compare that with the 37 per cent rise in revenues in 2008-09 to Rs 36,962 crore.
The growth for 2010-11 is a far more subdued sub-15 per cent. Even if the RCom threat has subsided after it withdrew the free minutes scheme, the competition from both incumbents and new entrants—who are also expanding their network—will continue to hurt.

Vodafone, for instance, is already netting 2 million subscribers a month and by the end of the year will have a pan-India footprint. The multinational has been gaining market share in many of the new circles where it has launched.

Idea Cellular too has become a stronger player after the acquisition of Spice and although it operates only in 16 circles now will have a pan-India presence by end 2009.

In January this year, despite RCom’s GSM launch, Idea trebled its share in the Mumbai market, albeit on a low base. Also, while churn for Bharti, both in the pre-paid and post-paid segments, had fallen to an all-time low in the December 2008 quarter, it went up again in the March 2009 quarter.

THE TONE GETS LOUDER

Source: CLSA Asia-Pacific Markets, E-Estimate
The arrival of Mobile Number Portability (MNP) too could result in some churn though it’s unlikely Bharti will lose too many customers given its strong brand equity, reach and value-added services.

The 3G kicker

Where Bharti scores over its rivals is in the scale that it has built—the telco is in a far better position than its rivals to absorb costs. Moreover, its strong balance sheet will allow it to bid for and offer 3G services without taking on too much debt. That’s why the sooner 3G spectrum auctions are held, the better for Bharti.

Analysts point out that since the lack of 2G spectrum remains an issue, 3G will probably be used mainly for voice services initially, but add that Bharti can always offer value-added services at higher charges which could offset some of the fall in the 2G arpus.

The company has said it would spend $2-2.2 billion on capex this year and finance this from internal accruals since it now generates free cash flows on a stand-alone basis; also it needs to make much smaller investments from here on since it already has a huge reach.

Peer RCom, on the other hand, has decided on a smaller outlay of Rs 10,000 crore for expanding its network in the current year, possibly because it is far more leveraged. That’s surprising given that RCom needs to expand its GSM network. Bharti’s other initiatives such as mobile commerce and mobile banking revenues will start paying off though how soon they will contribute meaningfully to the bottom line is hard to tell.

The top line for non-mobile segments, in the March 2009 quarter, was nothing to call home about—the wholesale carrier business, in fact, saw a sequential fall in revenues.

Industry watchers believe that with Idea Cellular and Vodafone putting up their own fibre networks, Bharti’s revenues in the carrier segment will be driven largely by captive usage, which in turn will be a function of how well the the wireless business does. Bharti holds a 42 per cent stake in Indus Towers and while the investment is currently a drag on profits, analysts believe the venture should make money this year.

The best bet in telecom

Of course, earnings growth for Bharti will taper off in the next couple of years –analysts are estimating a compounded 16 per cent growth in net profits between 2009-2011. In 2008-09, net profits grew 26 per cent to Rs 8,470 crore.

Concerns on over-ownership by foreign investors, RCom’s GSM rollout, company executives selling shares and the cut in termination fees have left the stock subdued in recent months. The stock is currently valued at just around 7.8 times 2009-10 EV/ebitda (enterprise value to ebitda).

Surprisingly, RCom trades at just a 14 per cent discount to Bharti–an EV/ebitda of 6.7 times, which is much too small given that Bharti has a much stronger balance sheet with a net debt to equity ratio of just 0.23 times whereas RCom’s net debt to estimated ebitda for 2009-10 is expected to be just under three times.What’s even harder to understand is why Idea Cellular trades at an even smaller discount. Although Idea has a strong balance sheet with close to Rs 5,000 crore of cash, it has neither the reach nor the scale that Bharti has and makes losses in several circles. So it’s Bharti for those who want to play telecom in India

Motilal Oswal puts BUY on RCom

(This is an excerpt from the article posted on www.livemint.com at 10:39 AM IST on Wednesday, March 18, 2009. The source is Motilal Oswal Securities)

Reliance Communications (RCom) added 3.38m subscribers in February 2009, retaining the lead in monthly net adds post its 14-circle GSM launch in January 2009.
February additions indicate strong momentum for RCOM despite the rationalization of initial GSM promotional offer, which now requires higher upfront payment and offers lower quantum of free minutes.
Subscriber momentum should remain strong given increased addressable market post GSM expansion.
Our recent meeting with the management indicated strong focus on margin defense. We expect wireless margin to stabilize at 34-36% (37.7% in 3QFY09) in FY10/FY11.
The company is currently focusing more on localized promotions and utilization of spare network capacity while limiting mass media advertising (especially electronic media).
A significant 114% increase in network expenses over the past four quarters indicates that the bulk of network cost hike due to GSM expansion is likely built into the current cost structure.
Regulatory developments
Recent regulatory developments have been favorable. RCom is a net gainer from the reduction in termination charges and should also benefit from MNP implementation. Telecordia and Syniverse were recently selected as the third party MNP operators; implementation is likely by end of CY09.
RCom’s debt programme was recently assigned the highest rating by ICRA. Out of the total gross debt of Rs267 billion, ECB/FCCB constitutes Rs178 billion and is repayable from FY11 end/FY12; balance Rs88 billion is revolving INR loan (cost of borrowing estimated at 9-10%).
Despite highest leverage among listed telecom majors, balance sheet position is comfortable with a net debt/EBITDA of 2x and net debt /equity of 0.65x. 3G auction postponement would provide relief on near-term capex.
Outlook
We upgrade monthly wireless net adds assumptions to 3.7m (v/s 2.04m) for 4QFY09 and 3m (v/s 2.3m) for FY10, implying a 7-14% increase in FY09 and FY10 subscriber estimates.
Revenue, EBITDA and PAT estimates are largely unchanged as we lower our ARPU assumptions by 5-10% on lower quality of incremental subscribers and free promotional minutes.
RCOM is down 72% over the past one year, underperforming the Sensex by 28% and Bharti by 44%.
At 6.1x FY10E P/E and 5.1x EV/EBITDA, it trades at 15-40% discount to Bharti Airtel. We maintain BUY recommendation on likely operational turnaround post GSM launch and sharp reduction in capex intensity.
Key risks: higher-than-expected pressure on wireless RPM, upward risk to finance costs given significant net debt, and any adverse findings in the licence fee investigation.

Telecom biggies hit capex circuit

6 May 2009, 0203 hrs IST, Rashmi Pratap & Krishna Gopalan, ET Bureau

MUMBAI: India’s big three wireless service appear to have hit the peak of their capex cycles. For FY10, Bharti Airtel, Reliance Communications and Vodafone Essar are expected to cumulatively invest $6.5 billion, which is over a 30% drop compared to their outlays for FY09. This is largely because the biggies have already entered all the telecom circles and now will just need to spend on network upgradation and marketing. Also, with the transfer of passive infrastructure assets like towers to separate companies and outsourcing non-core operations, including IT and call centres, operators have managed to convert a significant part of capex into opex.
The capex for Bharti Airtel, India’s largest cellular service provider, is down to $2.5 billion for FY10 from a level of $3.5 billion in FY09. “For Bharti Airtel, stand-alone capex, which does not include passive infrastructure, should be around $2.5 billion,” the company joint MD Akhil Gupta said after announcing the results last week. He added that investment plans for its passive infrastructure companies, Bharti Infratel and Indus Telecom, are still under way. Airtel’s population coverage has crossed the 80% mark. By generating free cash flows now, the company expects to meet future capex requirements from internal accruals.
Bharti Airtel’s closest rival, Reliance Communications (RCom) has reduced its proposed capex FY10 to $2 billion. This is after the company spent far less than its forecast of Rs 30,000 crore ($6 billion) last fiscal. It eventually spent Rs 19,000 crore. “The peak of the capex cycle is behind us and we are moving towards a free cash flow,” RCOM vice-chairman Satish Seth said.The other player forming the big three, Vodafone Essar, which like Bharti Airtel and RCom is a pan-India player, spent around $2 billion last fiscal and is expected to invest a similar amount this year, too. However, players who are still in the expansion mode — among them are Idea Cellular and Aircel — have increased their investment outlay despite a global economic slowdown. Idea, which invested over Rs 5,000 crore in FY09, will increase that to Rs 6,000 crore this fiscal. Aircel, meanwhile, has a total capex outlay of $10 billion, out of which around $6 billion has been invested.

Telcos to face margin pressure

8 Apr, 2009, 0943 hrs IST,TNN

The intensely competitive telecom sector is expected to report a double-digit growth rate in its topline during the March 2009 quarter on the back of a strong subscriber addition.
However, unlike previous quarters, most broking houses estimate that profit margins of these companies would be under pressure on account of a falling average revenue per user (ARPU). That apart, high costs incurred in the launch of operations in new circles too will have an impact.
According to the average estimates of six broking houses and ET Intelligence Group (ETIG), the top three listed players — Bharti Airtel, Reliance Communications (RCOM), and Idea Cellular — are likely to record a 23% growth in aggregate sales. Net profit (PAT) is expected to increase by just over 9% on a year-on-year basis. On a sequential basis, aggregate net sales and net profit could rise by just 3% and 1%, respectively. Operators like RCOM and Idea launched their GSM services in various new circles in the recent past. This is likely to result in substantial acceleration in subscriber additions for the March quarter. “We expect a record growth in the industry’s wireless subscriber additions of over 42.5 million in Q4 FY09 and subscriber base at 389 million. The subscriber base is 12% higher from that of the previous quarter,” said Edelweiss Securties in a recent report. Average estimates suggest that among the top three players, Idea Cellular is likely to see the sharpest growth in revenue at over 46% followed by 30.5% rise in Bharti’s revenue. However, the strong subscriber addition is likely to drag ARPUs down. Companies have offered lower tariffs to bring in more users. For instance, RCOM’s initial offer in different circles was on the lines of free talktime to the extent of Rs 5 or Rs 10. This kind of aggressive promos is likely to have an impact on the revenue per minute of RCOM and minutes of usage of other operators who have chosen to maintain their current tariff rates. All this would significantly offset the growth in subscriber base of these companies. “We expect a muted Q4 FY09 operating performance from the listed telecom majors despite strong subscriber growth” , said a recent Motilal Oswal earning preview report. A lower ARPU, higher launch costs and more selling and marketing expenses is expected to hurt the operating margins of the telecom operators. “We expect the three telcos (Bharti, RCOM and Idea) to record a combined 313 basis points year-on-year fall in EBITDA (earning before interest, taxes, depreciation and amortization) margins in Q4 FY09”, said an Angel Broking report. However, the impact on operating margins would vary with each company. For Bharti, which has stable operations, the margin could contract by 40-100 basis points compared to levels a year ago. For RCom and Idea, which have incurred huge network expansion cost and higher marketing expenses, the operating margin is expected to contract by around 400 and 1,000 basis points, respectively. The positive factor during this quarter is the relatively lower depreciation of the Indian rupee against other currencies like the US Dollar and Japanese Yen. This would restrict the forex losses incurred by these companies.

RCom Net Down 3% in Q4, Plans Rs.100 Billion Capex for Current Year

Published on 4/30/2009 9:50:22 PM
A sharp decline in Average Revenue Per User (ARPU) and promotional offers that drove down tariffs to the lowest levels in the industry weighed on Reliance Communications (RCom) as it posted a a 3.3% fall in fourth-quarter consolidated net profit. Net profit fell to Rs 14.54 billion during the quarter from Rs 15.03 billion a year earlier. The company’s revenue from its wireless business grew 2% quarter on quarter from Rs 44.11 billion to Rs 45.01 billion or 8% higher than the same quarter in the previous year.
Monthly ARPU dropped 11% from the previous quarter to Rs 221 during January-March quarter. Interestingly, despite a promotion offering free minutes of usage for 90 days, RCOM’s minutes of use per subscriber per month slipped to 372 minutes from 410 (Character emphasis mine).
RCOM added over 11.3 mn wireless subscribers during the quarter inlcuding 5 million that were added on its GSM network rolled out in January. During this period, India added close to 44 million mobile subscribers. At the end of March 2009, RCom had 72.6 million subscribers.
The company’s capex stood at around Rs 190 billion, which was spent mainly on rolling out its GSM network. This was 35% lesser than previous estimates. Company chairman Anil Ambani attributed the lower capex to “very competitive cost”. During the January-March quarter, the company added 5,000 telecom towers to its network, taking the total to 48,000 towers. Reliance is expected to spend 33% lesser than the earlier announced Rs. 300 billion capex in 2009-10 suggesting that the major part of its expansions are over and the operator’s infrastructure has now stabilized at operational level. The company will now spend Rs. 100 billion excluding any 3G license related expenses.

RCom Q4 net falls 3.3% on expansion cost

1 May 2009, 0052 hrs IST, TNN

MUMBAI: Reliance Communications (RCom) has seen a drop in quarterly profit due to expansion costs. The country’s second biggest mobile phone operator on Thursday reported 3.3% decline in consolidated net profit at Rs 1,454 crore in the fourth quarter ended March 31, 2009.
RCom posted a net profit, after adjustment of share of minority interest and associates, of Rs 1,503 crore in the same quarter of 2007-08. Total income rose more than 15% to Rs 6,124 crore in the March quarter 2009, from Rs 5,311 crore in the previous corresponding period. The company, which offers both GSM and CDMA services and had 73 million subscribers as of March 31, 2009, reported a 9% jump in consolidated net profit for the financial year ended March 31 at Rs 5,908 crore, from Rs 5,401 crore in the year-ago period. Revenues were higher by more than 20% to Rs 22,941 crore during 2008-09, from Rs 19,068 crore in 2007-08. Commenting on the results, RCom chairman Anil Ambani said: “Reliance Communications has completed the world’s largest network rollout in 2008-09 ahead of schedule and at a very competitive cost, which is approximately 35% lower than original guidance. We are confident of improved performance in the coming years.” RCom launched its GSM services in just 11 months after receiving in January 2008. The company has added over 11.3 million wireless subscribers during the quarter, an increase of 110% compared to the previous quarter, and also increased its town coverage from 11,000 to 20,000 in just three months. At a conference call with analysts on Thursday evening, vice chairman Satish Seth said, RCom’s $2-billion spending plan for this fiscal year does not take into account expenditure on 3G services. The company, which has crossed the “peak” of its capital expenditure, spent $3.8 billion on expanding networks and services in the year ended March 31, Seth said. During the year, Reliance Globalcom, an RCom subsidiary, also signed an agreement to buy global managed network services provider Vanco Group, which has a strong presence in developed markets, with annual revenue of $365 million (Rs 1,550 crore), through secure long-term contracts with large enterprise customers.
Vanco is reported to have over 220 multinational customers and its services are available in over 40,000 locations across 163 countries. The company has said that “Flag’s reach and capacity along with Vanco’s long-term relationships and expertise would be a perfect combination to offer high margin value-added services to enterprise customers”. An analyst tracking the company said RCom’s nationwide GSM service had helped it gain three million customers more than Bharti’s 8.3 million additions last quarter. The Vodafone Group increased its subscribers by 7.8 million. India, the world’s largest wireless market after China, added almost 45 million users, more than the population of Spain, in the three months ended March 31, the analyst added.