Decline in net subscriber addition continues: Angel Broking

Angel Broking has come out with its report on telecom space.

Cellular Operators Association of India (COAI) reported GSM subscriber data for July 2011, which continued its declining trend in this month as well. GSM subscriber net addition data was reported to be weak on a mom basis across all the telecom operators (except BSNL). The net subscriber addition number stood at 7.6mn, down 11% mom, taking the total GSM subscriber base to 606.4mn in July 2011.

Weakness across the board: Net addition run rate on mom basis for all operators (except BSNL) dropped steeply (Refer Exhibit: 5 and 6) in July 2011. Among the incumbents, Bharti and Vodafone reported significant decline in net subscriber addition numbers with net addition numbers dropping to 1.5mn for both, down 28.8% mom from 2.1mn in June 2011. Idea as well continued its declining trend in net subscriber addition numbers in this month as well by adding just 1.0mn subscribers, down 26.0% mom. BSNL emerged as the dark horse by showing strong growth in net subscriber addition numbers and added 1.8mn subscribers, which led to inch up in its subscriber market share by 10bp mom to 14.9%. Subscriber market share of Vodafone remained stable mom at 23.6%, however, market share of Bharti and Idea declined by 20bp and 10bp to 28.1% and 15.8%, respectively. Among new operators, Videocon reported net decline of 0.1mn subscribers it its subscriber base. Net subscriber addition of S Tel and Uninor grew by 21.4% and 12.1% on a mom basis, with addition numbers of 0.2mn and 1.1mn. Subscriber market share of all new operators remained flat on mom basis expect for Uninor. Uninor managed to increase its share by 10bp mom to 4.5%.

Circle-wise highlights: In July 2011, the net addition run rate of Metro circle increased to 0.9mn vs. 0.7mn in June 2011. In the Metro circle, in this month again Vodafone had the highest net additions at 0.29mn, followed by Bharti and Idea reporting 0.14mn and 0.13mn net subscriber additions, respectively. Subscriber addition run rate of A circle, which bounced back in June 2011, again declined to 2.6mn from 3.0mn in June 2011. This led to decline in the net subscriber addition market share of A circle to 34.4% from 35.0%. Subscriber additions in B and C circles also fell to 2.7mn and 1.3mn from 2.7mn and 1.5mn in June 2011, respectively.

For Bharti Airtel and Idea, such a decline in net subscriber additions was along expected lines, thus our estimates remain unchanged. The driving force for the overall sector is increase in tariff rates as well as increasing use of value added services, which will, in turn, lead to higher ARPUs of all the players, thereby aiding profitability. Bharti continues to be a better bet due to its low-cost integrated model (owned tower infrastructure), potential opportunity to scale up in Africa, established leadership in revenue and subscriber market share and relatively better KPIs. However, overall we remain Neutral on the telecom sector.

FIIs holding more than 30% in Indian cos

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