Author: kktan
SingTel – BT
India's telcos blast high spectrum price
Mobile operators demand 80% cut in it, saying extra costs threaten survival of some players
INDIA'S top mobile operators launched a broadside against the sector regulator on Thursday, pressuring the government to reject proposals they say will add billions of dollars to their costs and threaten the survival of some players.
In a rare show of unity, chief executives of Bharti Airtel, Vodafone's Indian unit and Idea Cellular, the country's top three carriers by revenue, lambasted the regulator's proposals for a costly spectrum auction at a joint news conference in New Delhi.
"We believe that they ring the death knell for the Indian telecommunications industry, and also lead to prolonged disputes and litigation," said Sanjay Kapoor, CEO of Bharti's India and South Asia operations.
The once-booming sector has been beset by turmoil after a scandal over the below-market price sale of telecoms permits in a 2008 state grant process, which a state auditor said could have cost as much as US$34 billion in lost revenue.
India's Supreme Court has ordered cancellation of all the permits granted in the tainted sale and asked the government to redistribute airwaves through an open auction. It would be the last chance for eight carriers including Idea and Telenor's India unit to win back their lost permits.
The sector regulator last week proposed an auction starting price that is nearly 10 times higher than that of 2008 and suggested auctioning just one-fifth of the available bandwidth, which means slots for just one or two carriers per zone.
The industry has slammed the regulator's proposals and is lobbying hard before the government finalises the rules. On Wednesday, the global CEOs of Vodafone and Norway's Telenor, along with Indian tycoons Sunil Mittal of Bharti Airtel and Kumar Mangalam Birla of Idea, met several key ministers and government officials, voicing their concerns about the proposals.
India's captains of industry, usually a reticent lot, have become increasingly vocal, in some cases over policy paralysis and in the case of telecoms, over proposed regulations.
Earlier this year, Prime Minister Manmohan Singh pledged help for the embattled power sector after several business leaders including tycoons Ratan Tata and Anil Ambani jointly met him seeking faster coal and gas development for the industry.
In addition to the high price, the regulator's proposal for several slots risks driving up bid prices, as was the case in an auction of 3G airwaves in 2010.
"One thing is very clear: If you create artificial scarcity then the price is not a real market-discovered price. And that is exactly what has already happened in the 3G auction," said Marten Pieters, CEO of Vodafone India.
"At the most one new player will survive," said Rajiv Bawa, chief representative officer for Telenor in India, referring to the affected companies, including his own that must win back licences to continue operations.
The operators have demanded an 80 per cent cut in the proposed price and said such a high spectrum price could bump up tariffs by up to 30 per cent.
Bharti and Vodafone also oppose a move to refarm, or substitute, their more-efficient 900 MHz spectrum bands with relatively inferior-quality 1,800 MHz band before their licences come up for renewal starting in 2014.
This would mean the operators would have to buy new bandwidth and spend on networks as replacement spectrum will need more mobile masts and new equipment. Vodafone estimates it would have to spend nearly US$2 billion on a new network if New Delhi goes ahead with the refarming. – Reuters
SingTel – BT
India's telcos blast high spectrum price
Mobile operators demand 80% cut in it, saying extra costs threaten survival of some players
INDIA'S top mobile operators launched a broadside against the sector regulator on Thursday, pressuring the government to reject proposals they say will add billions of dollars to their costs and threaten the survival of some players.
In a rare show of unity, chief executives of Bharti Airtel, Vodafone's Indian unit and Idea Cellular, the country's top three carriers by revenue, lambasted the regulator's proposals for a costly spectrum auction at a joint news conference in New Delhi.
"We believe that they ring the death knell for the Indian telecommunications industry, and also lead to prolonged disputes and litigation," said Sanjay Kapoor, CEO of Bharti's India and South Asia operations.
The once-booming sector has been beset by turmoil after a scandal over the below-market price sale of telecoms permits in a 2008 state grant process, which a state auditor said could have cost as much as US$34 billion in lost revenue.
India's Supreme Court has ordered cancellation of all the permits granted in the tainted sale and asked the government to redistribute airwaves through an open auction. It would be the last chance for eight carriers including Idea and Telenor's India unit to win back their lost permits.
The sector regulator last week proposed an auction starting price that is nearly 10 times higher than that of 2008 and suggested auctioning just one-fifth of the available bandwidth, which means slots for just one or two carriers per zone.
The industry has slammed the regulator's proposals and is lobbying hard before the government finalises the rules. On Wednesday, the global CEOs of Vodafone and Norway's Telenor, along with Indian tycoons Sunil Mittal of Bharti Airtel and Kumar Mangalam Birla of Idea, met several key ministers and government officials, voicing their concerns about the proposals.
India's captains of industry, usually a reticent lot, have become increasingly vocal, in some cases over policy paralysis and in the case of telecoms, over proposed regulations.
Earlier this year, Prime Minister Manmohan Singh pledged help for the embattled power sector after several business leaders including tycoons Ratan Tata and Anil Ambani jointly met him seeking faster coal and gas development for the industry.
In addition to the high price, the regulator's proposal for several slots risks driving up bid prices, as was the case in an auction of 3G airwaves in 2010.
"One thing is very clear: If you create artificial scarcity then the price is not a real market-discovered price. And that is exactly what has already happened in the 3G auction," said Marten Pieters, CEO of Vodafone India.
"At the most one new player will survive," said Rajiv Bawa, chief representative officer for Telenor in India, referring to the affected companies, including his own that must win back licences to continue operations.
The operators have demanded an 80 per cent cut in the proposed price and said such a high spectrum price could bump up tariffs by up to 30 per cent.
Bharti and Vodafone also oppose a move to refarm, or substitute, their more-efficient 900 MHz spectrum bands with relatively inferior-quality 1,800 MHz band before their licences come up for renewal starting in 2014.
This would mean the operators would have to buy new bandwidth and spend on networks as replacement spectrum will need more mobile masts and new equipment. Vodafone estimates it would have to spend nearly US$2 billion on a new network if New Delhi goes ahead with the refarming. – Reuters
StarHub – BT
StarHub's Q1 net profit up 28% at $88m on mobile growth
STARHUB continued to ride on mobile revenue growth in the first quarter. Its net profit for the three months ended March 31 shot up 28 per cent year on year to $88 million, the firm announced yesterday.
Mobile revenue increased 4 per cent to $307 million, mainly on a higher post-paid subscriber base and increased Arpu (average revenue per user). Earnings per share came to 5.15 cents, up from 4.03 cents a year earlier.
This arm of the triple-play provider's business still makes up the bulk of StarHub's business, at 52 per cent contribution. In Q4, mobile revenue hit $312.2 million, making up 51 per cent of the firm's business
StarHub's mobile customer base is split nearly in half between post and pre-paid bases, with 1.07 million post-paid and 1.13 million pre-paid customers.
SMRT – DMG
Persistent cost pressures
Core earnings within expectations. SMRT’s 4QFY12 core PATMI (this excludes S$21.7m impairment of goodwill) came in within expectations and was up 5% YoY to S$36m (-4% QoQ) while top-line rose 12% YoY to S$275m (+3% QoQ). Including the impairment, 4QFY12 and FY12 PATMI was down 59% YoY to S$14m and down 26% to S$120m respectively. Our concerns over SMRT’s current cost issues remain, with further downside risks pertaining to costs related to its rail upgrading and renewal plans. A final dividend of 5.7S¢ per share has been declared bringing total FY12 dividends to 7.45S¢ per share and reflecting a decent yield of 4.4%. Our TP remains unchanged at S$1.73 based on DCF implying a FY13 (FYE Mar) P/E of 17x. Maintain NEUTRAL.
Bottomline hit by impairment of goodwill on bus operations. The S$21.7m impairment charge was made due to adverse impact by substantial increases in bus operating costs which was less than offset by fare hikes. Going forward we see limited downside risks relating to this as intangible assets have been lowered to a smaller S$13.6m (as at 31 Mar 12) from S$35.3m (as at 31 Mar 11). 4QFY12 bus operations remained poor reporting operating losses of S$3.7m (+111% YoY, +118% QoQ) due to higher diesel and staff costs.
CCL ridership picking up; rail upgrading costs remain a concern. The average weekday ridership for CCL was up 17% QoQ to 350k in 4QFY12. This provides some relief as CCL ridership heads towards the estimated breakeven of ~450k/day. However, higher expected costs relating to SMRT’s rail upgrading and renewal plans remain a concern. 4QFY12 expenses (from mainly repair, maintenance and professional fees) arising from the Dec 12 MRT disruptions amounted to S$3m (~12% of 4QFY12 repair and maintenance expenses).
Fairly valued. SMRT does not appear cheap trading at 16x FY13 (FYE Mar) P/E versus ComfortDelGro’s 13x FY12 P/E. We believe SMRT’s share price may see limited upside given the potential costs involved in its rail upgrading and renewal plans. Investors will also be looking out for its CEO succession plans.
HLFin – DMG
Weaker 1Q12 earnings on reversion to provisions
Sharp earnings decline due mainly to general provisions. HLF reported 1Q12 net profit of S$16.7m, down 37% YoY. Whilst pre-provisioning operating profit was down a less severe 12% YoY to S$21.3m, provisions of S$1.2m (versus 1Q11’s write-back of S$7.6m) contributed to the severe earnings contraction. We cut FY12 net profit forecast by 17% to S$67.2m to reflect the 1Q12 weakness, as well as expectations of continued weakness in net interest income, as pricing for lending products remained under pressure. On a positive note, loans expanded 6.3% and deposits rose 8.2% QoQ, reflecting the balance sheet growth. We maintain our target price of S$2.42, which is pegged to 0.65x book. Neutral recommendation re-iterated.
Loans and deposits both grew strongly. Loans rose 6.3% QoQ or 22.3% YoY to S$7.92b. Deposits rose 8.2% QoQ or 14% YoY to S$8.4b. The strong deposit growth is a positive, as it provides scope for further loan expansion going forward.
Target P/B is between historical average and crisis low. HLF trades at a historical average P/B of 0.95x. With the uncertain economic environment, we do not see any catalyst driving its share price to that level. The soft pricing for lending products will also reduce investors’ interest in HLF. Our target P/B of 0.65x is a premium to the 2009 global financial crisis low of 0.5x.