Regardless of the recent turbulence, most mobile service providers are charting aggressive plans to continue on the steep growth trajectory, before the onset of consolidation a couple of years down the line
The second largest population in the world, relatively low tele-density and a fast-growing economy have ensured that India continues to hog global headlines for the immense potential waiting to be tapped in the country's telecom market.
Millions of new users are being added each month and analysts cannot stop raving about the gold trail that awaits the competitors trawling the minefield. The stories that consume space may not always be positive-most of the recent discourse has been around issues related to the wrongful allocation of spectrum, Bharti's merger pains after the acquisition of Zain in Africa, and the legal costs surrounding Idea's buyout of Spice Telecom. But regardless of the turbulence, most service providers are charting aggressive plans, setting their compasses northwards, sailing to pursue the rewards this soaring industry promises.
As if to spook the story a little, the break-out of the 2G spectrum scandal threatened to derail the industry. But after it emerged that the main protagonists in the problem may be fringe players, it has been business as usual for one of India's fastest-growing industries. While a Joint Parliamentary Committee (JPC) investigates the spectrum allocation matter to isolate the culprits, the market leaders have turned their attention to leverage the Cricket World Cup to build brands and consolidate their share of the pie.
The launch of mobile number portability (MNP) has added to the evolving texture of heated competition among the main players-Airtel, Vodafone, BSNL, Idea, Tata and Reliance. MNP allows cellular customers to switch between operators within the same circle while retaining the existing number for a nominal charge. The impact of MNP will only be understood in a few months, when substantial market data is available on the movement of customers over a period.
Preliminary data from a recent survey indicated that about 25% of mobile phone users were considering shifting network. It will be interesting to see the net ported connection figures that should become available between May and June this year. Early indications suggest Bharti and Vodafone are likely to be the two main beneficiaries of the shuffle.
The recent launch of 3G services by various operators also means that the doors have opened to new streams of revenues as they push VAS and data content through the expanding base of smart phones in the market. The evolution of operating systems (iOS, Android and Windows 7) and the ever-increasing range of mobile applications have enabled service providers to create and tap into a new generation of opportunities. With voice-related revenues hitting a plateau due to falling unit prices and the intense competition, VAS, gaming and data will add a healthy layer to buffer flat ARPUs (average revenues per user per month).
The key drivers of growth are expected to be: Value added services (VAS), 3G services- streaming & m-advertisements, data connections, and rural penetration.
It is widely accepted that voice revenues will continue to remain flat, or essentially trace the growth of connections. ARPUs that range from about Rs75 for CDMA operators to about Rs125 for GSM operators, have declined for five straight quarters. But the decline is expected to reverse, thanks mainly to advertising investments during this period which is dominated by the World Cup now and the IPL IV season beginning in April. The two big events have set the stage for an organised push for higher non-voice revenues and RCom is expected to benefit significantly from holding exclusive mobile rights to the ICC event.
A recent study by Assocham-Deloitte estimated that non-voice revenues are set to quadruple from the current Rs12,200 crore by 2015. As against the global average of 23% of total revenues, Indian service providers get just 10% of their revenues from value added services currently. The Indian market is believed to be on the cusp of a break-out in this segment, catalysed by an improvement in hardware and operating systems, quality mobile applications that enhance the experience, coupled with faster network connectivity. This explains why key players are clamouring to get onto the broadband and wi-fi bandwagon.
It appears that Idea Cellular, which invested the most in MNP related advertising, may not have received commensurate return on investment. One of the reasons could be Idea's strength in the rural markets, where there is lesser churn from MNP. Irrespective of the short-term shuffle in connections, MNP will certainly encourage innovation and competitive behaviour. The Economic Times reported that over 1.7 million subscribers opted to port their numbers as of 9th February.
The MNP shuffle could alleviate some of the pain for GSM majors Airtel, Vodafone, Idea and BSNL which suffered the most in terms of market share last year. The arrival of a slew of second generation service providers crowded the market and resulted in the leading players-Airtel (2.1%), Reliance (1%), Vodafone (0.75%), BSNL (0.4%) and Idea (0.1%)-suffering a combined loss of 4.3% market share, down from 62.6% in January 2010 to 58.3% at the end of December 2010. The biggest gainers have been new players Uninor and Videocon that gained 2% and 1% respectively. Tata is the only company to have survived the wave of attrition, mainly due to its strong acquisition of customers through its GSM service Tata DoCoMo.
The following table lists the market share as of January 2011
*Source - Cellular Operators Association of India (Figures for Reliance Telecom as of Dec. 2010)
While RCom and Tata have made rapid strides with the introduction of GSM services, Idea Cellular has also moved up quietly, climbing from 5th to 4th on the list of service providers by market share. Even more impressive is the proportion of Idea's active subscribers (90.04%), second only to market leader Bharti.
In the recent Visitor Location Register (VLR) figures released by TRAI, Idea reinforced the belief that it is emerging as one of the national alternatives to erstwhile leaders Bharti Airtel, Vodafone Essar, RCom and BSNL. Vodafone and BSNL have reason to be concerned, clocking abysmally low volumes on active subscription numbers, while we do not have quality numbers to report the relative performance of RCom.
Rural tele-density was 30 connections per thousand people at the end of December 2010, leaving enormous room for growth. It is an area that is expected to expand rapidly, thanks to the relentless trends in migration and rising incomes from social development programmes such as NREGA. Among the established players, Bharti and RCom made early inroads, alongside BSNL, in the rural areas, riding on an estimated Rs14,000 crore USO (Universal Service Obligation) Fund. While there are murmurs that both the private sector biggies are itching to bail out of their commitments, another operator has been steadily chipping away at the rural market.
Idea Cellular is enthusiastic about the vacuum in rural telephony supported by its growing investments in cell sites. In fact, Idea has a high proportion of rural subscriptions in its growing portfolio-almost half of Idea connections originate in rural India. Of course Bharti, RCom, Vodafone and BSNL each have a higher volume of customers, but when we overlay the active connection rates over the subscription numbers it is easy to see why Idea is an emerging threat to its competitors.
While there are several listed companies with direct and indirect investments in the mobile services industry, it is difficult to make a practical assessment of most of these stocks due to the clouds hanging over the industry.
Bharti has spent over Rs340 crore on an international branding campaign to reshape its identity in Asia and Africa. And it is not yet clear how the acquisition of Zain in Africa will play out in terms of cash flows and the return on investment in the next few years. Idea's (Aditya Birla Group) buyout of Spice is likely to result in higher than expected legal costs, even though the marriage has enabled Idea gain a national footprint. DoT has once again re-opened the BSNL-MTNL merger discussion, while RCom and Essar are working overtime to mitigate the risks associated with their respective investments in Swan/Etisalat and Loop Telecom.
But despite the chaos, the industry is set to continue on its steep growth trajectory, before the onset of consolidation a couple of years down the line. While there are many direct and indirect plays to share in the growth, two companies are worth a deeper study from an investor's perspective-Bharti Airtel, the clear market leader, and Idea Cellular.
It would be prudent to let the current turmoil in the market and the industry pass, although declines in the broader indices may create interesting investment opportunities, investors with a moderate risk appetite will do well to investigate Bharti and Idea as promising long-term investments. Both companies have outpaced the market in ARPUs-Bharti earns Rs198, while Idea takes in Rs168, against the industry average of Rs110. Irrespective of the short-term market turmoil and governance risk, the mobile services industry in India is all set to continue growing at a brisk pace.
Data source: TRAI and COAI
Illegal mining of minerals has been impacting various industries as well as the country’s economy, and the amendment will strengthen the monitoring mechanism for end-to-end accounting of minerals produced, traded or exported, and consumed in India
The government has amended Rule 45 of the Mineral Conservation and Development Rules (MCDR), 1988, to check illegal mining in the country.
The Ministry of Mines, after consultation with various State governments and Central ministries, has amended the above Rule to strengthen the monitoring mechanism for end-to-end accounting of minerals produced, traded or exported, and consumed in the country.
Illegal mining of minerals has been impacting various industries as well as the country's economy, as this activity has been taking place in rich mineral-producing, but poor economic states-mainly in Jharkhand, Orissa, Chhattisgarh and West Bengal.
In November last year, the Central government appointed MB Shah, retired Judge of the Supreme Court-led Commission to probe into the illegal mining of iron & manganese ore in various States, to curb illegal activities.
Mr Shah has been asked to submit a report in 18 months, and file an interim report, if required.
According to the amended Rule 45 of the MCDR, miners, traders, stockists, consumers and exporters of minerals have to be registered with the Indian Bureau of Mines within one month from the date of commencement of these rules.
Under this amended Rule, it will be compulsory to file monthly returns and annual returns inter-alia, requiring mines to submit details on production of minerals, sale of minerals, consumption of minerals and in case of traders, stockists and exporters of minerals, the source of minerals, sale/export of minerals or end-use of the same.
Failure to file returns would lead to-in case of mining leases-suspension of mining licences, and in case of traders, stockists and exporters, the licences granted by the State government, according to the amended Rule 45 of the MCDR.
The Ministry of Mines is of the view that the amended Rule 45 of MCDR will help various State governments to closely monitor the mining business across the country. The Ministry also believes that these changes will improve revenue realisation and narrow the scope for illegal mining.
After receiving reports from various States, the Centre has noticed that poor regulation of the mining sector at the field level incites illegal mining.
Red Fort will invest Rs200 crore in the JV, in which it will hold 26% stake and Ansal API will hold the 74% stake
Ansal Properties & Infrastructure (Ansal API) said private equity firm Red Fort Capital has agreed to pick up 26% stake in a joint venture (JV) to develop a residential township project in Gurgaon for Rs200 crore.
"Red Fort will invest a total of Rs200 crore in the JV, in which it will hold 26% stake and Ansal API will hold the remaining 74% stake," Ansal API said in a release.
The joint venture would develop a 108-acre township project adjacent to its existing 112-acre Esencia township project in Gurgaon.
Ansal API said the investment by Red Fort in the JV would be through a mix of equity and compulsorily convertible debentures (CCDs).
On Friday, Ansal API ended 0.56% down at Rs35.55 on the Bombay Stock Exchange, while the benchmark Sensex gained 0.39% to 17,700.91.