Kotak - Indian Bank, HCL Tech, UTI Bank, Tata Steel, Telecom

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Man Impact Analysis(Banking And Telecom)

Man Impact Analysis(Banking And Telecom)

Mckinsey - Mobile Phones the True Value In Developing Markets

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SSKI - Sector report: Telecom (wireless) - Connecting the Blue Billion

Wireless subscriber base in India is soaring. Whereas 4.6m subscribers were added per month over H1CY06, 6.3m subscribers have been coming to the fold since then. Traditionally a price sensitive market, India has broken the mould with subscriber additions stepping up even sans tariff cuts. With infrastructure sharing facilitating rapid rollouts and thus wider coverage, increasing affordability would drive market expansion. We expect the wireless subscriber base to reach 504m by 2012. But for a tariff cut due to lower regulatory costs, we do not see any tariff wars in the offing despite Vodafone’s acquisition of Hutch. Hence, profitability of operators is likely to remain intact with an estimated 40% earnings CAGR for our wireless universe over FY07-09. However, spectrum unavailability could be a dampener. We rate Bharti Airtel and Reliance Communications as Outperformers and Idea Cellular as Neutral.

Indian wireless market – the floodgates have opened: The government has set a stiff target of expanding the current wireless subscriber base of 159m to 584m by 2012. While regulatory costs are set to fall and make tariffs more affordable, infrastructure sharing, still at a nascent stage, would facilitate faster coverage of rural areas. We expect India to have 504m subscribers by 2012 (25% CAGR from the current base).

Operators to see sustained profitability: The incremental 345m subscribers would largely come from rural areas. Though ARPU in rural areas would be lower, we believe coverage would induce increased usage from existing subscribers. Thus, we expect EBITDA margins to expand by 200bp over FY07-09 for our wireless universe on the back of higher outgoing usage and cost benefits arising from infrastructure sharing.

Buy Bharti and RCOM; Neutral on Idea: While lower tariffs make usage more affordable, rapid population coverage would increase the addressable market. At an estimated EBITDA CAGR of 40% over FY07-09 for Bharti and RCOM, the stocks trade at 10.1x and 8.5x FY09E EBITDA respectively. While Idea trades at a 28% premium to RCOM, we find the premium unjustified given that operations are restricted to 11 circles and NLD business would be fully operational only by end-FY08. Thus, we rate Bharti and RCOM as Outperformers and Idea as Neutral.

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Emkay - Telecom Monthly

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After the dust settles...

Reliance: Disappointing outcome but story intact

Reliance Communications losing the bidding war for Hutchison Essar to Vodafone may be a short-term negative for the Reliance stock. Since the stock had not run up significantly in the homestretch to the deal, the downside risks may be limited. However, concerns arise on two fronts. One, from slower-than-expected grant of scarce frequency spectrum for execution of Reliance's GSM technology strategy (as opposed to its existing CDMA strategy), which it had articulated last year. Two, any slowdown in subscriber additions as Reliance changes its technology course may dampen market sentiment.

We recommend that investors consider taking an exposure in the Reliance Communications stock on weakness as the multi-year mobile expansion story remains intact and Reliance will remain a strong participant in it.

Reliance Communications will be disappointed with the Hutchison Essar outcome as, among the bidders, the company stood to gain the most from the acquisition. This would have fulfilled its aspirations of switching to GSM in a single stroke, with hardly any overlapping circles. Second, as an Indian company, Reliance Communications could have enjoyed the flexibility of buying out 100 per cent equity in Hutchison Essar, unlike Vodafone, which has to restrict its exposure to 74 per cent, under the FDI guidelines. Finally, the acquisition could have helped Reliance march past Bharti to garner a dominant market share.

Bharti Airtel: Focussed on ring-fencing its stake

Bharti Airtel's market share leadership remains intact, with Vodafone winning the Hutchison Essar bid. We recommend investors retain their holdings in the Bharti stock and use any price weakness linked to the broad market to build up fresh exposures.

With Reliance Communications involved in the build-out of its GSM strategy, BSNL struggling to resolve its mega GSM tender and Vodafone-Hutch caught in the integration process, Bharti will be well placed to strengthen its subscriber additions and extend its market share lead in the near term, before intense competitive picks up again.

Bharti has also extricated itself smoothly from a slightly sticky shareholding situation. Vodafone, which held a 10 per cent equity stake in Bharti Airtel, has granted a Bharti group company the option to buy 5.6 per cent equity at Rs 686 per share for $1.6 billion. The remaining 4.4 per cent will be retained by Vodafone, as an ongoing relationship with Bharti. The Bharti management's ability to enter into an infrastructure-sharing relationship with Vodafone may be a positive for the stock in the long run, as the telecom regulator is reviewing the need to share active network infrastructure.

ICICI Sec - Telecom

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Thanks Ashis

Sharekhan Investor's Eye dated December 13, 2006

PULSE TRACK

• Infrastructure Index up 9% for October 2006

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STOCK IDEA

Fem Care Pharma
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs500
Current market price: Rs358

A name FEM(mes) trust

Key points

• Leadership position in a niche category: Fem Care Pharma Ltd (FCPL) has a dominant market share (around 65%) in the niche segment of bleach cream. It is also among the leading players in the liquid soap and hair-removing categories. To boost its overall growth, the company has introduced several product variants at various price points to effectively tap the expected growth in the FMCG industry, especially the fast growing beauty treatment and skin care segments.
• Incremental growth from exports: In FY2006, FCPL acquired a US-registered premium bleaching cream brand, Jaquline, which has an established presence in the UAE and Middle-East markets. The company plans to utilise it as an umbrella brand to introduce skin care and beauty products, and boost the overall growth of its export business.
• Margins to firm up: The introduction of high-margin premium products has positively affected its operating margins. The company has also commissioned a new manufacturing facility in the tax-blessed region of Baddi, Himachal Pradesh. The fiscal incentives in the form of income tax and excise duty exemptions are further boosting its overall profitability.
• Consolidation of its marketing arm: The distribution of FCPL's products is done exclusively by its 60% subsidiary, Mirasu Marketing. FCPL is expected to acquire the remaining 40% stake (held directly by the promoters) in Mirasu Marketing over the next one year. The consolidation is likely to result in marginal dilution in its equity base (about 1-1.5% on the higher side) but would be earnings accretive.
• Attractive valuation: The consolidated revenues and earnings are estimated to grow at a CAGR of 17.5% and 48.3% respectively during FY2006-08. Currently the stock trades at 9.9x FY2007E and 8x FY2008E earnings. We recommend a Buy on FCPL with a price target of Rs500.

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SECTOR UPDATE

Telecom

Record breaking month
Riding on the cellular boom and the aggressive strategy by the operators to add new users, the Indian telecom operators are breaking new records. Both the GSM and CDMA industries witnessed a robust growth in subscriber add-ons taking the mobile subscriber base to 140.0 million at the end of November. However the key highlight for the month was witnessed in the GSM space. With an additional 5.0 million GSM subscribers bagged during the month, the total GSM mobile subscriber base stands at 100.7 million at the end of November, marking its entry into the elite 100 million GSM subscriber club. India now has the third largest number of GSM mobile subscribers next only to China (401.7 million) and Russia (152.2 million).

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Emkay - Telecom Monthly Numbers - December

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Thanks Vishesh

Emkay - Economy Notes & Telecom Monthly

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