Indian Mobile Players- Waiting for another bonanza ahead
I have a fixation with the telecommunication sector and it has to be!!! as I started my equity research career as a telecom analyst. This sector still excites me and my area of attraction remains emerging markets in general and India in particular. India is seeing an enormous growth in mobile telephony with every month they are beating the last month addition which happened to be the historic highs.
With enough of ongoing party time and bonanza, this sector is waiting for another good news. After a slew of foreign interests from western and eastern part of the world including Europeans, Russians and Asia Pacific there is another region waiting to enter the still too attractive Indian mobile market. Flush with enough liquidity and buoyancy in their economies and strong balance sheet with enough of cash in hand with them they are all set to enter Indian mobile market. The economy which has been earning more than $300bn annually just because of the sustained increase in the price of black gold. Yes, I am talking about the great rich Middle East (telecom) players that include the likes of Emirates Telecommunications, MTC etc.
Indian mobile companies have always seen their valuation going up (with the key indicator being EV per subscriber) every time a foreign company bid up for them. When Russian giant Sistema (which holds the largest Russian mobile company ‘Mobile Telesystem’ in its portfolio) bid for Aircel 2 years ago it valued its subscriber at around $450 which has increased to around $650 recently when Malaysian telecom operator Telekom Malaysia bid for the same company. World’s largest mobile player Vodafone has taken a 10% stake in Bharti during October 2005 at EV/Subs of around $1000!!!
And for these rich Middle East companies sky is the limit as far as the valuation is concerned as they are gifted with deep pockets. If they want it they will grab it for sure…they have the money power. See the recent example of the acquisition of P&O by DP World. It bid and re bid at such a price that even the cash rich Temasek could not match it. During 2005, Emirates Telecommunication bid for Pakistan’s telecom incumbent at $2.6bn which was double to the bid amount of the second and third highest bidder China Mobile and Singapore Telecom. The Middle Eastern companies are shopping around hotels, ports, utilities etc.
They have shown tremendous interest in emerging markets in African and Asian countries and India is among their preferred list…has to be; with still 8% mobile penetration (when the world averages at around 30%) with burgeoning middle class of 300 million. They have expanded their operation out of their home markets to other countries in their region as well as in Africa. They are in shopping spree for the past 2-3 years and wish to continue the trend.
So in short, Indian mobile players…you are soon to be treated with another ring of valuation boost up.
With enough of ongoing party time and bonanza, this sector is waiting for another good news. After a slew of foreign interests from western and eastern part of the world including Europeans, Russians and Asia Pacific there is another region waiting to enter the still too attractive Indian mobile market. Flush with enough liquidity and buoyancy in their economies and strong balance sheet with enough of cash in hand with them they are all set to enter Indian mobile market. The economy which has been earning more than $300bn annually just because of the sustained increase in the price of black gold. Yes, I am talking about the great rich Middle East (telecom) players that include the likes of Emirates Telecommunications, MTC etc.
Indian mobile companies have always seen their valuation going up (with the key indicator being EV per subscriber) every time a foreign company bid up for them. When Russian giant Sistema (which holds the largest Russian mobile company ‘Mobile Telesystem’ in its portfolio) bid for Aircel 2 years ago it valued its subscriber at around $450 which has increased to around $650 recently when Malaysian telecom operator Telekom Malaysia bid for the same company. World’s largest mobile player Vodafone has taken a 10% stake in Bharti during October 2005 at EV/Subs of around $1000!!!
And for these rich Middle East companies sky is the limit as far as the valuation is concerned as they are gifted with deep pockets. If they want it they will grab it for sure…they have the money power. See the recent example of the acquisition of P&O by DP World. It bid and re bid at such a price that even the cash rich Temasek could not match it. During 2005, Emirates Telecommunication bid for Pakistan’s telecom incumbent at $2.6bn which was double to the bid amount of the second and third highest bidder China Mobile and Singapore Telecom. The Middle Eastern companies are shopping around hotels, ports, utilities etc.
They have shown tremendous interest in emerging markets in African and Asian countries and India is among their preferred list…has to be; with still 8% mobile penetration (when the world averages at around 30%) with burgeoning middle class of 300 million. They have expanded their operation out of their home markets to other countries in their region as well as in Africa. They are in shopping spree for the past 2-3 years and wish to continue the trend.
So in short, Indian mobile players…you are soon to be treated with another ring of valuation boost up.
posted by Vikas Maheshwari, CFA at 10:12 PM
2 Comments:
Hey I know babe. you have a fixation for the telecom. I am wondering whether your enthusiasm is short lived? Hey, the estimates are being revised for the demand for Cellular technology in INDIA.
I am a tad worried with the way spectrum allocation is going? Because frankly adding customers at breakneck speed looks extremely difficult at the rate the government is expecting. I did some research on this, and I came to know that the b/w is blocked by mostly hammers/ Military and the Goverment.. I am struggling to understand how can we make a leeway from this?
indeed technology and specifically mobile industry has a a real bright future in india, esp the value adds in the segment ,the revenues coming out of applications like ringtones , contest etc is a testimony to it...it indeed is becoming a wireless world , the mobile is no longer a mobile but one of the most important accessories of today's man which combines telephony along with all forms of entertainment .The success of Nokia in the handset market and of other players in the network & telephony proves that ....
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