Tariff cuts aimed at new players in India

• Bharti may register low-single digit growth ahead.
• We lowered SingTel’s FY10/11F earnings by 2%/3%.
• SingTel’s TP lowered to S$3.30. Maintain HOLD

Rcom initiated tariff cuts targeted at new entrants. In response to the entry of new players, Rcom cuts its tariffs by up to 50% on long distance and roaming calls, while local call tariffs remain largely same. The lower tariff would hit hard the new players – who do not own long distance lines and do not have pan India presence. Assuming that Bharti is forced to retaliate, its average revenue per minute (ARPM) could decline by c.20% in the next one year, offsetting an estimated 25% subscriber growth and 10% usage (MoU) growth in FY10F. We lower Bharti FY10F/11F earnings by 6%/8% each, and expect Bharti’s earnings to show low-single-digit growth in FY10/11F compared to consensus’ projection of 13%/11%. This lowers our SingTel FY10F/11F earnings by 2% each.

Talks about per second billing in India are in the preliminary stage. While the regulator TRAI has mentioned about making per second billing mandatory for operators, there is no timeframe yet. TRAI may issue a consultation paper seeking the industry's views. However, it is unlikely to garner much support, as it would imply additional capex for setting up IT & billing systems. This could be resisted by both big and small players, specially when tariffs are already declining sharply.

Including high content cost, SingTel’s FY10F/11F earnings lowered by 2%/3% overall. We have assumed S$40m (c.1% of earnings) adverse impact on earnings in FY11F due to high cost of English Premier League (EPL) rights. Overall, we lower our FY10F/11F earnings by 2%/3%. Our SOTP target price is lowered to S$3.30 as we lowered (i) our fair value of Bharti by 10% to Rs 375. (ii) Lowered our Singapore-Optus valuation by 3%.

DBS Vickers

 
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I don't reckon so I heard wrongly.

Maybe have to scour around for that piece of broadcast.

really? then it depends on whether you trust the news on tv more or what i posted here more. anyway i didn't write those in italics.

I think you missed one word "previously"

Macquire "previously" upgraded Singtel to outperform at 3.53 

Anyway Kimeng has an interesting opinion as well. "Buy first, think later."

MUMBAI: KIM ENG Securities has recommended ‘Buy’ on Bharti Airtel and Reliance Communications on declines. The brokerage plans to review its forecasts after the second quarter earnings. “Telecom stocks declined after analysts downgraded stocks on concerns over sustainable ARPU. We maintain our ARPU forecast of a decline of 26% for FY10. Assuming a 31% decline in ARPU this year, Bharti Airtel (BHARTI) earnings would fall less than those of Reliance Communications (RCOM) and Idea Cellular (IDEA). We will review all our forecasts after Q2 earnings are released this month. With further declines, the stocks of Bharti on a PER of 9x FY11F and RCOM at 7x FY11F are very attractive. We recommend BUY on weakness for Bharti and RCOM,” the brokerage said.

-- SINGAPORE TELECOMMUNICATIONS <STEL.SI> 
    - Macquarie downgraded its recommendation on Singapore 
Telecommunications to "neutral" from "outperform", and cut the 
target price to S$3.12 ($2.23) from S$3.53 previously, citing 
tougher competition ahead for its Indian affiliate, Bharti Airtel 
<BRTI.BO>, as a reason. 
    - DBS Vickers lowered its target price of SingTel to S$3.30 
from S$3.45 previously. 

Target price of $3.12. I guess they are more pessimistic than I am about the impact. 
With this new target price, it really sets people thinking what is the new trading range.
Typically, a target price is the fair value. when news are good, it trades above that.
When news are neutral, it trades somewhere below that value. 
when news are bad, i can't imagine. 

I still think $3.04 is a good price for Singtel but things just don't look as cherry as I thought.

That is not what was announced on the news today (8/10/09) on ChannelNewsAsia leh.

It was said that Macquire upgrades Singtel to outperform at 3.53 leh.

-- SINGAPORE TELECOMMUNICATIONS <STEL.SI> 
    - Macquarie downgraded its recommendation on Singapore 
Telecommunications to "neutral" from "outperform", and cut the 
target price to S$3.12 ($2.23) from S$3.53 previously, citing 
tougher competition ahead for its Indian affiliate, Bharti Airtel 
<BRTI.BO>, as a reason. 
    - DBS Vickers lowered its target price of SingTel to S$3.30 
from S$3.45 previously. 

Target price of $3.12. I guess they are more pessimistic than I am about the impact. 
With this new target price, it really sets people thinking what is the new trading range.
Typically, a target price is the fair value. when news are good, it trades above that.
When news are neutral, it trades somewhere below that value. 
when news are bad, i can't imagine. 

I still think $3.04 is a good price for Singtel but things just don't look as cherry as I thought.

DBS Vickers cuts SingTel (Z74.SG) target price to S$3.30 from S$3.45 on lowered assumptions for Indian associate Bharti (532454.BY), Australian business Optus in sum-of-the-parts valuation; maintains Hold rating. Broker also trims FY10, FY11 earnings forecasts by 2%, 3%, respectively, to factor in rising price competition in Indian telco market, earnings hit for SingTel from high content costs for English Premier League rights. Says tariff cuts by rivals in India could force Bharti's average revenue per minute down. Expects Bharti's earnings to show low-single-digit growth in FY10 and FY11 vs consensus expectations for 11%-13% growth. Shares down 1.6% at S$3.07; STI +1.0%. (KIG)

 
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