Messages

841

4G / LTE / Idea Reiterates 4G Investments Not Until 2016

« on: January 29, 2015, 12:34:38 PM »

Idea Cellular reiterated the stance that 4G networks will be launched only in 2016, and the market is not yet ready for 4G uptake. On the earnings call, management explained that it prefers to wait until competition and customers move on 4G before making their own investments. In a media interview, management also commented that Idea could move on 4G only after smartphone prices become affordable (Rs5,000 price points).

We worry that this focus on short-term returns by delaying 4G investments could impact longer-term market share prospects for the
company. We note that 4G smartphone prices have already fallen below Rs7,000 (including some dual-SIM phone models), and at least
one existing operator (Bharti) appears to have picked up 4G investments significantly in recent quarters?in addition to the upcoming 4G launch by Reliance Jio Infocomm.

Separately, management explained that investments into 3G network would be calibrated as well (3G footprint could go up from 30-40% of 2G footprint to 60-70% over 2-3 years). Idea's 3G network utilisation has gone up to ~50% now vs ~30% just two quarters ago.

842

Web 2.0 / Zomato /UrbanSpoon Business Model & Strategy

« on: January 23, 2015, 11:16:48 AM »

Zomato revenue is primarily from advertising ? by leasing out space on its web/mobile interface to restaurants that place banner ads. Zomato charges its clients an upfront subscription fee on a quarterly basis. Price revisions happen periodically. Rates vary from INR2,000 to INR100,000 a month. Zomato offers no commitment to the restaurants in terms of clicks or leads.

Management expects that any major city will take two to four years to become profitable, depending on existing competition in a particular city. The company believes that having a local field sales force is its key advantage in scaling up new locations. According to management, Zomato has a strong local team in all its foreign locations and is not constrained on management bandwidth yet.

Zomato?s advantages in a new market are 1) the product, 2) traffic on its site and 3) the field sales force ? which is able to educate businesses who may not be tech savvy about the benefits of using Zomato.

Zomato believes they can be the top restaurant discovery provider in every market they enter. In the markets where they have been present for a while, they are significantly ahead of the competition.

Zomato (with Urbanspoon) attracts 80mn+ visits per month and has upwards of 48mn user ratings. For Zomato, the immediate focus is on monetizing Australia and Canada, while in the US they will run a few pilot projects initially before expanding. In Australia and Canada Zomato will look earn revenue through own listings, while in the US they will consider monetizing the traffic.

On the question of why Urbanspoon was acquired for valuation less than that of Zomato (which was valued at USD660mn in recent fund raise), management commented that valuations were a function of growth, product and competitive scenario. The founder members of Urbanspoon had left the company while its owner IAC was looking to exit.

843

Web 2.0 / New features to be launched by Zomato

« on: January 23, 2015, 11:13:30 AM »

Zomato is looking to enter into transaction based businesses and offer online food delivery as well as payment support. Table reservations are an area the company is still considering

Cashless payments ? which will enable users to pay through the Zomato mobile app, is a new feature that it is launching in Dubai in February 2015.

Zomato management was confident of achieving success in online food delivery as they have good relationships with the businesses as well as good user traffic. In addition, the company is open to partnerships with food delivery players to expand reach.

844

Cable / DSL Services / Convergence of Cable / DSL Into Wireless Services

« on: January 20, 2015, 02:38:43 PM »

Cable / DSL Service Providers can make use of unlicensed spectrum by operators to deliver Wireless Services. The two key technologies in that regard are Wi-Fi and LTE-Unlicensed (LTE-U). Wi-Fi is the preferred technology of fixed operators to expand into mobile services, backed with MVNO contracts.

The following Picture Shows how Wired Networks Converge into Wireless Services


As such, Wi-Fi is the critical enabling technology for mobile disruption in certain markets. Conversely, mobile operators are looking to use both Wi-Fi and LTE-U to leverage unlicensed spectrum to augment their cellular networks, particularly in areas where coverage is poor or population density and/or traffic volumes are high.

845

3G / HSPA / EVDO / Idea Bid Strategy for 2015 Spectrum Auction

« on: January 20, 2015, 12:37:05 PM »

This is how we feel Idea Cellular will bid in the forthcoming 2015 Mega Spectrum Auction

Scene - 1
Renews spectrum in 900 for cINR180bn (we assume Idea adds only 5 MHz in most markets).
Estimated wallet for 3G would be INR40bn and may add data spectrum in max two key markets

Scene - 2
Opts out from one or two circles with relatively lower contribution to revenues and diverts more proceeds to 3G.
3G wallets is increased to INR 60bn and attempts to add 3G spectrum in leadership markets including Andhra Pradesh, Gujarat and Maharashtra.

846

3G / HSPA / EVDO / How Could Airtel Bid in 2015 Spectrum Auction

« on: January 20, 2015, 12:35:09 PM »

We Discuss Various Bid Scenarios in which Airtel could Bid in the Mega 2015 Spectrum Auction.

Scenario - 1
Renews all 900 spectrum for c INR 100bn.
We see company spending cINR20bn for 1,800MHz spectrum.3G wallet/budget estimated at INR100bn for 3G and preference will be adding 3G coverage in Maharashtra, Gujarat, Madhya Pradesh and capacity in Delhi.

Scenario - 2
Renews all existing 900 and attempts for additional 900 of competition in markets such as Madhya Pradesh. 900 renewal pay-out estimated at INR130bn
Left with at least INR 70bn for 3G and preference will be adding 3G coverage in Maharashtra and Gujarat or adding capacity in Delhi. In
addition we see the company spending cINR20bn for 1800 spectrum.

847

4G / LTE / Global LTE Subscribers vs 4G Network Spectrum

« on: January 16, 2015, 11:20:37 AM »

The Following chart shows comparison of 4G LTE subscribers Across various Spectrum Bands and operators in the World. Operators with highest LTE subscribers -- - Most operators have coverage on low frequency; Chinese operators deploy LTE on high frequency but have put in huge capex

848

Web 2.0 / 99Acres Facing Competition from MagicBricks / Housing.Com

« on: January 16, 2015, 10:41:48 AM »

The online real-estate market is estimated to be worth Rs3bn market (as of FY14) and growing at c.40% YoY. The market currently has six players with 99 Acres being among the Top 2 operators. With players being well-funded, we expect all companies to aggressively advertise and invest in their platforms to gain traction. This will likely keep the competition high in the next 12-18 months, in our view

Majority of the online advertisement is done by developers/builders, especially when any new projects come up. Besides these, brokers and sometimes owners also pay. The mix is not expected to change substantially going forward. Most of the revenues for 99Acres? come from 8 cities (present in c.20 cities) with Delhi/NCR contributing one-third of its revenues.

99Acres lost its No.1 market share position in the last few months to Magicbricks as per Comscore (this data does not capture mobile traffic share). The company recently raised Rs7.5bn through a Qualified Institutional Placement (QIP) and intends to spend the amount almost entirely on 99Acres, to improve 1) verified listings; 2) map search; and 3) better user experience, among other things. In our
view, 99Acres will aggressively invest in advertising and content to regain its No.1 market share and, over time, will look to widen the gap between itself and other portals

849

Web 2.0 / Naukri Dominance to Continue

« on: January 16, 2015, 10:38:28 AM »

Info Edge?s online recruitment portal ?Naukri? is a dominant leader in the online job market with c.68% of traffic share. The online market is expected to be around 25% of the total recruitment market and is estimated to grow at c.20% from FY14-17E.

Naukri follows a subscription-based model with 90% of revenues coming from recruiters (B2B) and 10% from job seekers (B2C). The recruiters pay for 1) resume database access; 2) job listing; 3) employers visibility and 4) advertising. The IT & ITES sector contributes to 27% of the total revenues.

Naukri vs LinkedIn in India
While LinkedIn has being gaining traction in India offlate, we note that the website is used more for networking and less for seeking
jobs. Besides, most hires that happen from Naukri are below 10 years of work experience vs. LinkedIn which is being used by senior executives for recruitment

We expect Naukri?s revenue outlook to improve in coming years led by an improving GDP growth rate (in-line with our economist forecasts) and estimate Naukri?s FY15-18E revenue CAGR to be 19% (vs FY12-15 revenue CAGR of 13%).

850

4G / LTE / Reliance Jio's 4G Spectrum Challenge

« on: January 15, 2015, 12:56:19 PM »

Reliance Jio Infocomm's biggest challenge arises from the spectrum bank it possesses currently. The company has 20MHz of 2300MHz on a pan-India basis and 5-7MHz of 1800MHz spectrum in 14 of the 22 service areas.

2300MHz is in a higher frequency band and suffers from poor propagation characteristics. Hence, a pan-India 4G network roll-out is
likely to be prohibitively expensive. Though 1800MHz is better than 2300MHz in terms of coverage, the company does not appear to have sufficient 1800MHz spectrum to offer a quality 4G service.

4G handsets are likely to sell at a significant premium to 3G. We do not think RJio has a mass-market service that could be delivered affordably (from the perspectives of handsets and service) and hence appeal to the mass market. RJio is a green-field entrant and it lacks the brand awareness of the market leaders (Bharti Airtel, Vodafone and Idea), which have created superior brands over the past 18 years. Global telecom operators, such as DoCoMo, Telenor and Etisalat, have struggled in India in competition with the current
market leaders.

851

3G / HSPA / EVDO / Will Airtel, Vodafone Idea Suffer from High Renewal Prices ?

« on: January 15, 2015, 12:53:30 PM »

DoT has increased reserve prices for 900MHz spectrum at 27% premium to TRAI recommended prices on average. In our view, there will be only four viable bidders in the upcoming auctions ? Bharti Airtel (Airtel), Vodafone, Idea Cellular (Idea) and Reliance Jio (RJio). We
believe that RJio is unlikely to be aggressive in 900MHz given their publicly stated policy of being primarily a data provider (4G), as well as non participation in 900MHz in the last auctions.

We expect both Airtel and Idea to be able to successfully renew the spectrum they want, similar to in February 2014 auctions. We believe that both companies have sufficient financial headroom (in terms of covenants) to fund the upcoming auctions. Given the market leaders acquired sufficient spectrum in the previous auctions, we expect auctions to be rational.

852

Web 2.0 / SouFun - Chinese Online Real Estate Giant for 2015

« on: January 12, 2015, 04:38:14 PM »

SouFun overall visibility remains low for 2015, according to management. On the macro front, Soufun saw more stimulus policies from local governments lately, and it says moderate recovery has begun. Overall property transaction volume in 2015 could rise 5-10% YoY but uncertainty is still relatively high, it notes. The new direct sales e-commerce model has a higher take rate but lower margins than its traditional e-commerce (coupon) model, as the company is offering customers high rebates for the direct sales e-commerce.

For the traditional e-commerce model, management expects the take rate to decline further to below 50% in 2015. Management remains cautious about the listing business outlook in 2015, but does not expect any more large secondary property agents to leave Soufun's listing platform going forward. Soufun says it will continue to work on the authentication of property listings in 2015, but does not expect to change the listing business model significantly.

853

SmartPhones & Apps / Cheetah Mobile Advertising on Big Growth in 2015

« on: January 12, 2015, 04:34:57 PM »

Cheetah said it continued to make good progress on overseas mobile advertising monetization. Daily peak overseas mobile ad revenue is currently over US$400k, up from US$200k two months ago, according to management. On the user front, management expects total mobile MAU (Monthly Active User) to grow to 500mn by the end of 2015, up from 340mn in September 2014.

Regarding mobile ad monetization overseas, the Facebook ad system, third-party ad networks and Cheetah's direct sales are expected to be the three pillars for growth in 2015. Management believes that Cheetah is the best Chinese company in terms of understanding different mobile tracking and advertising systems in overseas markets. Cheetah's overseas direct sales channel is now selling 1,300-1,500 ad campaigns on a daily basis, and the company is bringing this expertise back to the domestic market (~800 ad campaigns a day).

It plans to roll out a self-serving advertising system for SME advertisers in 2015. In terms of ad pricing, effective CPM in the overseas market is slightly higher than in the domestic market, according to management.

854

Web 2.0 / VIPShop - Chinese e-Commerce Giant Business Strategy 2015

« on: January 12, 2015, 04:31:40 PM »

Vipshop has received positive feedback from major suppliers for the colocation initiative; helping to reduce warehouse costs and save reverse logistics costs for its suppliers. Vipshop has secured more land for self-built warehouses at favorable land costs offered by local government. In addition, currently ~50% of Vipshop's orders are fulfilled in-house (i.e., VIPS and its invested affliates) and this percentage is expected to reach 70% by end 2015. As order volume ramps up and order density becomes higher, Vipshop may seek to
take controlling stakes in these delivery companies in which it currently has minority interests.

In 2015, Vipshop will continue to focus on its core discount flash sales business market, since its current market share is still at low- to mid-single-digit level. The company currently covers 80% of the existing apparel companies in China and will seek to increase SKUs / sales per brand. Vipshop is confident in its competitive position in its core discount flash sales and doesn't think increasing flash
sales focus from bigger competitors will be a large threat in view pf the highly flexible operational / warehousing system required for apparel flash sales.

The company remained cautious about cross-border eCommerce, believing there are policy-level uncertainties among the regulators. In terms of M&A activities, the company is considering bolt-on acquisitions in mobile commerce verticals such as the mother & baby category.

855

Web 2.0 / Qihoo vs Baidu in Search Monetization

« on: January 12, 2015, 04:27:15 PM »

Qihoo Management expects that its CPC is now ~one-third of Baidu's and coverage is roughly half to two-thirds of Baidu's level. So overall per traffic monetization is roughly 15-20% of Baidu's level now. On the recent investment in the JV with Coolpad, management noted that owning a mobile device platform is important because it controls the entire ecosystem. However, the company does not expect the competition on mobile device platforms will result in heavy subsidies and significantly lower margins. On the enterprise security products, Qihoo will launch a suite of 4-5 different services, including client+cloud protection and BYOD (bring your own device) solutions.

On mobile search, monetization hasn?t started yet. Coolpad's pre-installation contract with Baidu will end in March and management believes that Qihoo should be able to get better terms than Baidu.