Bharti Airtel in discussion with other operators for pan-India 3G alliance
Bharti Airtel is in discussion with other mobile operators, including Vodafone Essar and Idea Cellular, to structure a planned alliance to propose 3G services on a pan-India level.
The alliance is made necessary because not even a single operator won the 3G spectrum in all the circles, but Bharti Airtel won the spectrum in 13 circles, Vodafone has 3G airwaves in nine and Idea in 11 circles.
According to Mr Sanjay Kapoor, CEO, Bharti Airtel- India and South Asia, the talks were on with other players. The very fact that the 3G auctions have been a fractured verdict leaves a lot of opportunity for collaboration. All preparations are on to make sure the company offer pan-Indian 3G experience to the customers. By and large, usage alliances will happen within the Government rules and regulation.
Whilst Kapoor did not reveal the names of the operators in the alliance or the nature of the proposed partnership, but he further revealed that the deal will be firmed up before the company starts rolling out its 3G services by December. According to Industry sources, Vodafone and Idea could be the likely partners.
The three operators are planning to have 3G spectrum athwart all the circles in the country excluding Orissa. Bharti, Vodafone and Idea also mutually own Indus Tower, which will allow them to share basic infrastructure for 3G rollout.
According to Mr Kapoor, Airtel will begin 3G roll outs starting with the metros for which deals with equipment suppliers are close to being finalized. On the price of 3G services to consumers, he added that the high cost of spectrum combined with the fact that each operator has only 5 Mhz of bandwidth will ensure that there will not be any unlimited plans.
While asking on the availability of 3G devices, Mr Kapoor alleged that high-end smartphone devices such as iPhone will not get much traction because the Indian mobile market is largely pre-paid, and therefore, there is no scope for offering subsidy on devices like in the US. The massification of data will happen on lower end Smartphones. India and China will dictate the device market therefore, the moment these two markets get uptake on data by next year Smartphones will be available at US$50.
Bharti remains top pick in Indian telecom sector
“Bharti Airtel (Formerly Bharti Televentures) is
India
‘s largest private sector provider of integrated telecom services, especially wireless. The wireless business accounts for nearly two-thirds of the company’s total revenue. The company is a market leader in wireless services and its wireless operations extend across all 23 domestic circles.”
Potential for margin expansion despite tariff pressures
“Bharti believes that wireless EBITDA margins could expand to ~39-40% over the long term, despite likely continued pressure on revenue per minute, rpm. In 1Q FY07A, Bharti’s wireless margin stood at 36.4%; we forecast margins at ~37% for FY07E and expect that margins will expand further to ~39% in longer term, as scale economies should overcome rpm pressures. Despite the growing cloud of mobile minutes, Bharti expects rpm to remain under pressure due to high competitive intensity in the market and also, some pass through of scale benefits by operators.”
New operator rollouts seem unlikely before end-2007
“Recent newsflow of more wireless operators seeking a pan-India footprint is a dampener from the standpoint of industry structure, but we think any threat to Bharti’s customer and profit leadership is distant. Also, we think any on-the-ground network rollout by new operators is unlikely to commence before end-CY07.”
Reiterate Buy, Bharti remains our top pick
“We forecast Bharti’s earnings to grow at a CAGR of ~48% over FY06A-08E driven primarily by ~61% growth in its wireless subscriber base. At a PE of ~16x Mar ’08 & EV/EBITDA of 9x FY08E, the stock is currently trading near the lower end of its one-year forward PE-band of 18-24x and EV/EBITDA band of ~10-13x. Bharti remains our top pick in the Indian telecom sector. Buy.”
Source- http://www.moneycontrol.com
Technorati : Bharti Airtel, EBITDA, GSM, India
Ice Rocket : Bharti Airtel, EBITDA, GSM, India
