BSNL Cash Reserves Dwindle Under Kapil Sibal’s Regime

In a Written reply to the Parliament, the Government has stated that the Cash reserves of the BSNL have dwindled from Rs 29335 Cr to just Rs 1214 Cr during the regime of Kapil Sibal as the Minister of Communications and IT. The reply stated is as below,


(a) Details of cash reserve with Bharat Sanchar Nigam Limited (BSNL) during the last three years is as follows:
Year Cash Reserve of BSNL ( in Rs crore)
2009-10 29355.5
2010-11 1733.35
2011-12 1214.44

You can imagine how good the governance and how much is the corruption in BSNL which directly comes under the purview of Kapil Sibal as the Minister. Don’t forget the $20 Bn 2G Spectrum Scam during his per-decessor’s [A. Raja] regime.

ZTE Matures into High end SmartPhone with Grand Memo Launch

ZTE Grand MemoZTE is still targeting to be one of the top three handset makers by 2015 and forecasts a 30% increase in smartphone sales in 2013 as it focuses on higher end smartphones to improve profitability.

ZTE launched only one high-end smartphone versus eight models a year ago. (more…)

Indian Mobile Sector – Cloud of Spectrum Uncertainity

Overall we are still relatively cautious on Indian Telecommunications given high valuations, regulatory drama and clearly the 2G auctions continue to drag on. The regulatory landscape has never been easy to call, but with every delay in 2G
auctions, the risk of large license renewal payments is reducing.

For the upcoming auctions scheduled in March, none of the Indian telcos have expressed interest for 1800Mhz/900Mhz spectrum bands and only MTS has submitted interest for 800Mhz spectrum band. As background, for this auction, the government was making available 800Mhz in all circles (no bids in previous auction), 1800Mhz spectrum in 4 circles of Delhi, Mumbai, Rajasthan and Karnataka (no bids in the previous auctions) and 900Mhz in Mumbai, Delhi and Kolkata. This raises more questions about what’s next?

The telcos appear to now be collectively taking a stand on the spectrum prices which they have been saying is too high and this will be seen as a positive sentiment driver for the stocks. Nevertheless, we are still not at the end of the regulatory process, and there could still be several iterations which could create volatility, in our view.

As far as the market leader Airtel is concerned, recent management shuffle and its new India CEO could take a more proactive approach on improving profitability. The business has significant operating leverage. Airtel’s license renewals start kicking in from 2014 onwards, which will see cash outflows.

In the long term, Airtel fares well on metrics like scale (+200mn subs), cash generating ability (+USD1bn pa), earnings diversity (20 markets), marketing positioning and reach. These factors are critical for long-term sustainable growth, especially as most of its markets have low data penetration rates.

myairtel app wins Best Application in Mobile World Congress

Airtel’s myairtel application has been acknowledged as ‘App of the Year’ in ‘Best Application using Network APIs’ category at the prestigious Global Mobile Awards 2013 in Barcelona.

myAirtel App is developed by IBM Labs India, and Powered by a robust Network API backbone and a simple front-end User Interface. The myAirtel App lets customers of Airtel Services (mobile, fixed line, DTH, broadband, 3G, etc.) to check outstanding bills, recharge, make payments, activate-deactivate services, raise requests and complaints etc. The application is available as a free download for Android as well as iOS based mobile phones, and has recorded more than a million downloads since its launch in September 2012.

The ‘Best Application using Network APIs’ award category at Global Mobile Awards 2013 is aimed at promoting the utilisation of Network Application Programming Interfaces (APIs) to allow developers to enhance their mobile or web application either by incorporating information from the mobile network or by making it easier for a mobile user to use the application.

However, Airtel Network APIs are not available for Developers very easily as the Company is choosy on granting access if the Developer is going to make lot more money.

Excess Spectrum Charge for Incumbeants in Delhi High Court

The Cabinet has recently decided that all GSM operators that hold spectrum above 4.4 MHz in any circle will have to pay a one-time fee. Notably, Airtel and Idea have excess spectrum of 73MHz and ~35MHz, for which they will have to make a payment of US$825m and US$325m, respectively. DOT had asked the operators to pay the excess spectrum charges by mid-January 2013. Incumbent operators (including Bharti and Idea) filed a petition in the Bombay High Court, seeking a stay order on this demand for payment. The court has now extended the relief to Idea till 04 April 2013.

The Delhi High Court has extended the stay order on DOT’s decision that demanded that telecom operators (including Idea and Bharti) pay the one-time excess spectrum charges by mid-January. The stay order was based on a petition filed by incumbent operators challenging the DoT order to pay the one-time fee. Earlier, the court had put a stay order till 01 March 2013. However, now DOT has sought more time to respond to the court. Hence, the next hearing is now scheduled for 01 April 2013 and the court has extended the stay order on payments till 04 April 2013.

We believe that the Indian telecom industry is going for virtual consolidation (number of meaningful players down to 6 from early teens) given the weak profitability and upcoming regulatory cost burden. We expect incumbents – notably, Idea and Airtel – to benefit from emerging trends (consolidation, growth in data, potential tariff hikes, etc) in the medium to long term.

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