India Telecom Subscriber Additions

Event
The Cellular Operators Association of India (COAI) has released June 2007 GSM subscriber numbers, except for Reliance Communications. Excluding RCOM, GSM operators in India added a record 5.39m subscribers in June compared to 5.04m subscribers in May, 4.13m in April, 5.9m in March, 4.64m in February and 4.76m in January 2007 (all numbers are excluding RCOM GSM for comparison).

The total GSM subscriber base in India now stands at 135.5m (4.1% MoM growth). June 2007 was one of the strongest months for GSM operators, with second highest monthly net additions ever recorded. The CDMA operators' association (AUSPI) has not yet released the CDMA operators’ (RCOM and Tata Tele) numbers for June. Assuming same net adds run rate as last month for CDMA operators, we should see total monthly net adds of 7.2m, a record in Indian wireless history, in line with our theory of accelerating subs addition.

Impact

Bharti Airtel continued its impressive run with record net adds of 1.96m subs in June 2007, compared to 1.85m in the previous month. Bharti’s total subscriber base now stands at 42.7m subscribers (up 4.8% MoM and 85.1% YoY). We have modelled in 1.92m subscribers per month for the remaining nine months of FY08E in our earnings model. A stronger performance by Bharti would provide further upside to our estimates.

Idea Cellular saw a good month, with net adds of 0.86m in June 2007. Improved performance in Delhi, Rajasthan and UP (West) circles led to strong overall subscriber growth for Idea. Idea’s subscriber base now stands at 16.1m (up 5.6% MoM and 88.9% YoY).

Vodafone Essar (erstwhile Hutchison Essar) (Not listed) also reported record numbers, with monthly net additions of 1.54m in June 2007. Vodafone’s subscriber base currently stands at 30.8m (up 5.3% MoM and 75.3% YoY).

BSNL (Not listed) again saw a poor month with monthly net adds of 0.42m, taking its subscriber base to 28.4m (up 1.5% MoM and 55.4% YoY). Severe capacity constraints continued to choke the growth of BSNL and we think this will continue until its new capacity comes onstream.

Aircel (Not listed) witnessed a poor month with net adds of 0.37m. Low growth in Assam and North East led to slow overall growth for the month.

Category B circles witnessed a strong month with subscriber base growing at 5.13% MoM. Category C and Category A circles also witnessed strong growth with subs growing at 4.27% MoM and 4.08% MoM, respectively. Metro circles witnessed a steady month with growth of 3.14% MoM.

Outlook
Macquarie expects strong subscriber growth to continue in coming months. RCOM remains our top pick in the Asia Pacific telecom universe, and we also reiterate our Outperform rating on Bharti and Idea.