Messages

106

4G / LTE / How Airtel + Idea differ with Jio on Promotions - Predatory Pricing ?

« on: June 28, 2017, 06:45:32 AM »

"The pricing is unsustainable. 1GB a day (of data) for that price (Rs 309) is pretty low. It is better than zero (free services)" ? Sunil Mittal, Chairman, Bharti Enterprises

How Airtel and Idea differ with Jio on Promotional Offers and  Predatory Pricing ?

Airtel - Promotions shouldn't exceed 90 days. IUC compliance should be seen as a driving factor. Offers below IUC cost must be
considered as instances of predatory pricing.

Idea Cellular - Promotions should comply with TRAI's principles of IUC and must cover the same. No promotions should be allowed at rates lower than IUC cost.

Jio - For effective competition promotional offers must be permitted. This is also crucial to drive adoption of new technologies. Adoption of newer technologies, convergence of networks and services mean that there are many services that can be offered free of cost. The regulator doesn't need to scrutinise the industry on this matter. Price forbearance is the best option.

107

3G / HSPA / EVDO / How Airtel + Idea differ with Jio on Non-discriminatory tariffs

« on: June 28, 2017, 06:40:53 AM »

Airtel - In a 'calling party pays' regime, IUC compliance is vital as telcos can use competitors' networks and resort to predatory/below-IUC pricing.

Idea - Tariff review incomplete without reviewing the issue of IUC compliance 4G customers must be treated as a separate class from 2G/3G customers as 4G is more efficient than 2G/3G and allows operators to provide much more benefits than 2G/3G. Incentivisation of 4G handset upgrades should be seen positively.
 
Jio - More transparency is needed. No custom offers should be permitted.

108

Web 2.0 / Why Public Cloud is Critical for Microsoft ?

« on: June 27, 2017, 12:16:15 PM »

Microsoft's portfolio of public cloud products is critical to its success, and we are impressed with early inroads, in particular in Office 365, which we believe enables enterprises and SMBs to cut back on email administrator costs. The natural outcome of public cloud competition is public cloud commoditization; therefore we feel Microsoft will need to differentiate itself from Amazon?s AWS by moving up the stack and  providing value-add cloud software applications.

Microsoft's potential opportunities in the public cloud space with Office 365 and Azure, and note an improved capital allocation policy

SaaS Bundle with LinkedIn
Given the acquisition of LinkedIn in June of 2016, Microsoft may need to invest in incremental products to round out its application portfolio of Dynamics products that are cloud-enabled, or do smaller tuck-in acquisitions to strengthen its enterprise apps portfolio, which outside of Office has failed to meaningfully grow organically in a highly competitive end market. However, we view the move into  the SaaS application layer as a long-term positive trend, which is supportive of stickier customers and ultimately higher margins.

109

5G / Wi-Fi / Broadband Subscriber Base at 284 Mn

« on: June 27, 2017, 12:12:16 PM »

TRAI reported 284mn broadband subscribers (speed of 512kbps and above) end of April-2017. The breakup is as follows.

Reliance Jio 40%
Airtel 18%
Vodafone 14%
Idea 8%
BSNL 8%
Others 12%

110

4G / LTE / Will Jio Move Disruption to Voice Market ?

« on: June 21, 2017, 08:12:56 AM »

The key question facing the sector will be pick up in sector revenue growth, which in our view is likely once Jio stabilizes with c110-120m paying subscribers. We add that at present Jio?s market share is constrained by a limited 4G ecosystem and it is possible that Jio may try to address this by launching a 4G feature phone. Such a launch would likely see some tariff pressure, as such stability in 1Q revenues may not help, and we may not get a better picture of sector revenue growth prospects in FY18 until 2QFY18e.

We note that one more driver for sector revenue is likely to be an upgrade by pure voice subscribers to bundled plans, however any upside may be capped if Jio's 4G feature phone launch is combined with more disruptive pricing action.

111

SmartPhones & Apps / User Engagement Rises with Smartphone Screen Size

« on: June 19, 2017, 11:14:50 PM »

As smartphone screen size increases, a greater percentage of people start engaging more fully in varied online activities. Survey evidence showed that a higher proportion of users with >5" screen sizes performed more varied online activities than those with phone screens smaller than 5". The activities that showed the greatest upturn were gaming, payments, shopping, and music/video downloads.

Survey evidence also showed that an increase of at least 20%-50ppt in the percentage of people who were spending over 30 minutes on various online activities using smartphones with screen size >5" vs. those who were using smartphones with screen size of 4-5 inches.
This shows not only that greater percentage of people use smartphones for performing various activities but also that a greater percentage of people spend more time with smartphones having larger screens.

In 2016, shipments of phones with >5" screen size constituted 67% of total smartphone shipments in India

112

3G / HSPA / EVDO / Idea's 3G/4G Data Consumption Vs Revenue Alarming in Jio Effect

« on: June 19, 2017, 10:54:00 PM »

For Idea Cellular, 3G / 4G Data fared much worse than voice with data revenue declining 15% Q/Q and 22% Y/Y) and voice declining to a lesser extent (3.2% decline Q/Q, 10.2% Y/Y). Surprisingly, data ARPU did not decline Q/Q despite such a sharp data revenue decline (possibly, because Idea suffered a significant decline in its data sub base)

Consumption-related metrics jumped sequentially for both voice and data, especially for data (with data volumes up 16.7% and per user data usage jumping 36.7% Q/Q). But given the sharp data pricing fall (27.7% Q/Q) and halving Y/Y, it did not help revenue performance. This is the main point we?ve been highlighting for some time ? pointing to significant volume (consumption) jumps as proof of positive elasticity does not make sense when this is accompanied by sharp pricing cuts.

Ultimately, we focus on data ARPU, data revenues, data revenue added and data revenue growth. It is very much possible to show volume expansion and robust data sub-adds in data taking steep price cuts.

113

5G / Wi-Fi / How Jio is dependent on Reliance Communications ?

« on: June 19, 2017, 10:44:22 PM »

RCOM's current operating challenges could impact Jio in the medium term.

In addition to leasing towers and fiber from RCOM, Jio has a spectrum-sharing deal in the high-value 800MHz band. Our analysis of spectrum holdings suggests that the sharing deal is crucial in six high-value markets where Jio holds less than the 5MHz spectrum which is the minimum required bandwidth of its LTE network. These markets collectively account of c.45% of industry revenues.

Furthermore, RCOM's 43K towers account for c.40% of Jio network sites. RCOM's fiber network also provides the significant backhaul capacity which has been a key competitive lever as it has allowed Jio to provide large data bundles to attract subscribers.

114

Web 2.0 / Yatra's multi-channel disctribution / sales platform

« on: June 19, 2017, 10:36:18 PM »

Yatra has a multi-channel platform to access different markets and to allow cross-selling

B2C ? Consumers can book travel on the Yatra.com website or the Yatra mobile app, with support from a multi-lingual call centre. Yatra has had 5.2m customers since 2006.

B2E ? Companies with a total of 1.4m employees use Yatra Corporate to book and manage corporate travel. While net revenue margins are lower in the B2E segment, marketing spend is lower, and so the segment is more profitable than B2B.

B2B2C ? reaching consumers in smaller markets is hard, so Yatra processes bookings for over 17,000 travel agents (and growing) who are mostly in Tier 2 and 3 cities.

Yatra?s acquisitions include ticket consolidator TSI in 2010, hotel aggregator MagicRooms in 2012, event portal Buzzingtown in 2012, and hotel network TravelGuru in 2012.

115

Web 2.0 / Taobao/Tmall/Alibaba.com/1688.com - Customer Metrics

« on: June 19, 2017, 10:32:19 PM »

As per management, via providing value for brands/merchants in online/offline sales, brand marketing, customer acquisition/engagement and productivity improvement, Alibaba now generates revenue from the distribution, brand marketing, customer service budget pool of brands/merchants, compared to transaction-only budget pool in the past.

Management discussed that Tmall GMV accelerated to 40% in the current quarter to date on YoY basis as more brands adopt Alibaba's databank to explore non-transaction initiatives (i.e. Market research, brand recognition, interest formation, loyalty program, etc).

Management also shares several metrics in user cohort. For example, consumers that have registered for 5 years averagely place 123 orders/purchased 24 categories/spend ~Rmb 12k per year, compared to 38 orders/9 categories/~Rmb 3k of first year registered users.

Change in Strategy
Meanwhile, the company will also change the term of online marketing revenue to customer management revenue to reflect Alibaba?s value position in helping merchants/brands to acquire, engage and retain customers.

116

4G / LTE / Higher Frequencies for High Speed 5G Network

« on: June 19, 2017, 06:41:31 PM »

The reason why high frequencies (24GHz to 86GHz) are being actively considered by the ITU and industry is that it will provide big blocks of clean spectrum, which will enhance the performance of 5G. However, the challenge of high frequencies is twofold: 1) a very high density of micro cells will be required, making wide-area outdoor coverage extremely expensive, and 2) signal interference risk is high.

The US strongly supports high frequencies, and in fact has reserved spectrum at 28GHz, 37GHz and 39GHz for 5G services. The US
believes they have achieved technological breakthrough in resolving the signal interference issue (i.e., millimeter-wave technology), and such high frequencies will serve super hot spots (i.e., super high traffic volume and high speed requirement in small, concentrated areas)
most efficiently.

Commercialization of 5G Network Gears
We believe the most likely longer-term scenario is that many countries will deploy different combinations of low, mid and high frequencies for 5G, depending on spectrum availability and whether governments/carriers emphasize super hot spots or lower-cost wide area coverage. Therefore, we expect 5G equipment (i.e., handsets and base stations) will need to be able to handle a much wider range of frequencies than currently, making modulation, antenna and RF technologies even more important than in 4G.

117

Technology / VC/PE Funding Activity in May 2017

« on: June 12, 2017, 03:01:44 PM »

Cumulative funding raised in the last two months exceeded that for full-year 2016. At least one large deal (US$100mn+)
has been closed each in online shopping, travel & taxi, payments, and logistics during the last three months.

VC/PE Funding Activity in May 2017 (US$mn)

Paytm Payment solutions 1000
Olacabs Cab aggregator 104
Delhivery Logistics 30
4tigo Truck Logistics 10
Shopclues* Online shopping 8
Magicpin Deal discovery platform 7
PaySense Online Financial Services 5
LegalRaasta Online Legal Services 5
EarlySalary Fintech platform 4
Freecharge Payment solutions 3
Curefit Health & Fitness 3
Telr Payment solutions 3
The Good Life Company Online Tea Vendor 1
Box8 Cloud Kitchen 1

118

5G / Wi-Fi / Smaller Telcos Collapsing due to Jio Effect

« on: June 12, 2017, 02:56:15 PM »

The smaller telcos in India, on aggregate, saw 21% YoY revenue decline vs. industry revenue decline of 14%. FY17 marked the first year of industry revenue decline at 2.2%. In 4Q, Bharti saw the highest RMS gains YoY at 190bps. Bharti also managed to hold on or improve its RMS in all circles. Vodafone gained 56bps RMS YoY whereas Idea saw a loss of 8bps.

Metro/class A/B/C circles saw 9%/8%/5%/4% QoQ revenue decline in 4Q. In our view, this can be explained by: 1) JIO?s initial focus being primarily in metros and class A circles; and 2) smartphone penetration declining as one moves from metros to class C circles. These factors would have resulted in a higher extent of down-trading in metro and class A circles.

We understand that: 1) JIO is working on 4G feature-phones; and 2) JIO is expanding its rural coverage. There is a large portion of revenue that has so far been out of reach for JIO's disruptive launches. The disruption in this segment will likely happen within six months.

119

3G / HSPA / EVDO / Vodafone + Idea Merger for $10 Billion Cost Synergy

« on: June 12, 2017, 12:08:28 PM »

The merger with Idea will be completed sometime in 2018. Regulation permits one year for the market share of the merged entity to settle at or below 50% in each circle. Management?s view that this plus some assumed ramp-up in JIO's market share plus various market
interventions should be enough to avoid value destruction in the excess RMS circles is plausible, though the complexity of the merger in trying circumstances may result in market share erosion in other circles also.

The stated estimated cost synergies of Vodafone and Idea Merger  worth US$10bn are regardless of the final RMS.

120

4G / LTE / Data of Incoming / Outgoing Calls on Jio VoLTE Network

« on: June 09, 2017, 11:10:27 AM »

Jio reported GR of Rs 3.2 bn for 4QFY17. Now, if we were to assume that the gross revenues reported by Jio essentially reflect
interconnect revenues from other operators (for off-net incoming minutes into Jio's network), the Rs 3.2 bn gross revenues reported by Jio suggest that the company saw roughly 23 bn off-net incoming minutes in 4QFY17.

On the same lines, if one were to assume that the difference between GR and AGR (of Rs 15 bn) were to reflect gross interconnect costs (payout to other operators for off-net outgoing minutes originating from Jio?s network) for Jio, this would imply that Jio carried nearly 107
bn off-net outgoing minutes in 4QFY17.

Computation above on off-net incoming and outgoing volumes looks just right in light of Jio's own reported metric of 2 bn total voice minutes per day.