NTT DoCoMo buys Tata’s Flip-Flop Telecom story at Irrational Valuation
You are already aware of the exuberant deal between NTT DoCoMo and Tata Telservices at the time of global economic crisis. Certainly, Tata’s need to be congratulated as they were able to command a 50% premium valuations to India’s leading mobile operator – Bharti Airtel [basis of EV / Subscriber Model, explained below], despite their half-hearted, unplanned and flip-flop telecom strategy.
Tata’s were one of the original promoters of Idea Cellular who exited in 2006 as they thought CDMA was the way to go. [ A business opportunity that emerged after Reliance lobbied with then Telecom Minister Pramod Mahajan] Not a bad idea at all.
In 2006, talks failed between Qualcomm and Indian CDMA operators over various issues. RCom announced its grandiose GSM expansion plans. Late 2007 and early 2008, telecom policies were fine tuned to benefit RCom and few others, Tata Tele by now had realized CDMA alone won’t help it make to make it to the Top-5 Telcos in India and thus threw its hat and got a GSM berth and is now planning to unveil a PAN-India GSM network.
Tata’s being one of the oldest industrial houses in India should lead and not follow. To me it seems like Tata’s have been following into the footsteps of Reliance, not just in Telecom but also in Energy / Power sector. [Another story on how they diverted funds from Tata Power and lost half of it for their broadband ambitions]
Valuation of Indian Telecom Companies – Bharti Airtel, Reliance Communications, Tata Teleservices
- Bharti Airtel has an Enterprise Value of Rs 1.2 1Trillion with 80 mn subscribers
- Reliance Communications has an Enterprise Value of Rs 571 Billion with 57 mn subscribers
- Tata Teleservices’ Enterprise Value is estimated to be Rs 590 Billion with 25.5 mn subscribers
Now on the basis of EV / Subscriber, Tata Teleservices valuation was at an Irrational Premium of ~50% to Bharti Airtel and ~125% to Reliance Communications [WTF!!!] Does Tata Teleservices really deserve this premium in current market scenario ?
Now does NTT DoCoMo know more than what we do ? What is that it could be ? Will Tata’s consolidate all its Telecom Operations under Tata Teleservices ? Additionally, as we move forward into 3G, NTT DoCoMo is one of the pioneers in Value Added Services and will probably introduce them into the Indian market. Shall we now expect Anil Ambani to strike a deal at higher valuations 
Wireless Revenues – Airtel grows at cost of Reliance and BSNL
Bharti Airtel’s Gross Revenues from Wireless Operations in Q2-FY09 [June-Sept] equals combined revenues of BSNL and all the CDMA operators in India [RCom, Tata TeleServices, Shyam and HFCL]. Alternatively, Bharti Airtel’s Revenues also equals to the combined revenues of second and third largest mobile operators [Vodafone India and Reliance Communications]
According to data compiled from TRAI’s release [Wireless Gross Revenues for Q2-FY09],
- Bharti Airtel – Rs 80.1 bn
- Vodafone India – Rs 47.9 bn
- Reliance Communications – Rs 34.1 bn
- BSNL – Rs 25.6 bn
- Idea Cellular – Rs 23.22 bn + Spice Rs 3.1 bn
- Tata Teleservices / Indicom – Rs 20.29 bn
- Aircel – Rs 7.6 bn
Revenue market share of all the GSM operators continue to rise over CDMA service providers. Bharti Airtel had a revenue market share of 29.8% in Dec-07 and now has 32.7%. Vodafone India inched up from 18.5% in Dec-07 to 19.6%. Idea Cellular also grew substantially from 8.1% in Dec-07 to 10%.
BSNL and Reliance Communications were the biggest losers in revenue market share. BSNL’s share dropped from 14.1% to 11.4% while that of Reliance Communications dropped from 15% to 12.4% between Dec-07 and Sept-08. Tata Teleservices / Indicom also lost revenue market share from 8% to 7.5%.
Revenues from Which Circle ?
Across the board, Category-A circles [including Chennai] recorded the highest revenue in Q2-FY09 followed by Category-B Circles. Metro Circles stood third and Category-C circle at the bottom.
Mobile India has an excellent compilation about existing and revised 2G Spectrum Charges and Revenues.
Revenue Breakup of Indian Telecom Operators
This is the first time I am able to see the revenues of Vodafone India, which really is very impressive. Wireless operations account for the bulk of revenues for these Telcos as already seen from Bharti Airtel and Reliance Communications results. Here is a quick comparison on how various verticals stack amongst the Top five Telcos in India. All figures in INR, Million for Q1-FY2009.
Vodafone India without operations in any of the Category – “C” Circles is managing to have the second largest pie in Wireless revenues. BSNL with highest spectrum in its kitty has put up a dismal performance so has Reliance Communications with one of the best PAN India telecom infrastructure.
Bharti Airtel has become the largest carrier of ILD / NLD traffic beating Tata communications, erstwhile VSNL and state owned BSNL. It will be really interesting to watch how this breakup will change post DTH, IPTV and 3G launch in India. Any guess ?
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