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Airtel Q4-FY14 Concall: On Telco consolidation; 3G vs 4G & others


Bharti Airtel had reported India mobile data revenues of Rs 1,325 crore for the quarter ended March 31, 2014, up 89.2% YoY.This accounted for 11.1% of Airtel’s total mobile revenues for the quarter which was at Rs 12,083.5 crore, up 11.6% YoY.

Here are some notes from Airtel’s investor conference call:

3G vs 4G services: Bharti Airtel Managing Director and CEO (India and South Asia) Gopal Vittal mentions that 3G will be the leading contributor to incremental data growth in the next three years, since the device ecosystem is far more developed in 3G than 4G services.

Over a period of time, the same will happen to 4G. However, it is a factor of how fast the device ecosystem grows. For instance, a TD-LTE handset is currently available for about Rs 50,000, however with the network China Mobile is planning on TD-LTE, its possible that we could see a $100 device in the next 18 months itself. But by then, 3G device will probably be available at $35 to $40.

Vittal believes that both technologies will co-exist over the next three years, but 3G will be more mass market while 4G will probably be more niche and more for high value customers.

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On 1800 MHz vs 2300 MHz for 4G: Airtel will be using the recently acquired 1800 MHz spectrum to provide more coverage and the existing 2300 MHz spectrum to provide more capacity with hotspots to users.

On regularity clarity: There is some element of regularity clarity for the industry in India with movements on the regulatory front, especially with items such as the recently concluded spectrum auctions. There is also some clarity with M&A rules being notified and initial thinking process is there regarding spectrum trading.

On February 2014 2G auction pricing: The auction was more or less at the base price in 1800MHz band but it was inflated to a large extent in 900 MHz band, which forced Airtel to bid at a premium to retain the extension of licenses. Earlier, the telco had mentioned that the 900 MHz band auction had artificial and unrealistic prices due to spectrum shortage and undesirable position of incumbents who were forced to bid for this spectrum to protect their investments and interest of their customers.

Vittal had mentioned that future auctions should ensure that more spectrum should be secured in the 900 MHz band from other agencies and operators who are grossly underutilizing this spectrum band. He had also pointed out that this auction highlights the urgent need to vacate E-GSM spectrum in the 800 MHz band which is currently being used for older technologies or lying unused with certain agencies.

Active consolidation to happen over next few years: Bharti Airtel group CFO Sarvjit Singh Dhillon says there is overcapacity as far as competition is concerned in India, which can be described as hyper-competition. He says that while they have seen passive consolidation in the country, there may be some active consolidation play over the next few years. Note that Airtel had earlier inked a strategic agreement to acquire the operations of Mumbai-based Loop Mobile in February this year, provided they get the requisite transactional approvals.

On increasing voice RPM: While the voice RPM was fairly flattish for the quarter, operators will have to increase voice RPM due to the input costs. This has to be done either by increasing the existing rate or reducing more discounts since there is still a fair difference between the customer rate and the existing RRP (recommended retail price) rate.

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On Telemedia business: Telemedia revenues crossed Rs 1,000 crore mark first time ever in a quarter, driven by increased data usage. Over 61% of revenues from Telemedia are non-voice revenues.

On DTH business: DTH continues to grow, adding 250,000 customers this quarter. With the second phase of digitisation which comprises 38 cities concluding by June 30, 2014, Airtel expects this to be big driver for the customer base of its DTH business and consequentially its revenues.

Our Airtel Q4-FY14 earnings coverage :

Airtel reports 10.98M 3G & 58.08M data connections for Q4-FY14
Airtel Money’s India transactions up 25.8% QoQ; Amount transacted at Rs 1,364 Crore
Airtel Q4-FY14 profit at Rs 962 crore; India mobile data revenues at Rs 1,325 Cr

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