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    The Australian Financial Review this morning reported that over 12m Australians now have a mobile phone.


    According to the AFR report, Telstra led the way with 5.79m mobile customers (up 154k in Q1) for a 47% market share (previously, 47.1%, based on December quarter outcomes).

    Telstra was followed by Optus with 4.16m mobile customers (up 134k in Q1), for a 33.8% market share (previously, 33.6%).

    Vodafone followed 3rd with 2.15m customer connections (up 26k), for a 17.4% market share (previously, 17.7%).

    Hutchison followed 4th with 216k customer connections (up 24k), for a 1.75% market share (previously, 1.6%).

    Subsequently, reading through JB Were's Morning Cable for today, I found that the AFR figures were erroneously stated.


    According to JB Were (8/5/02):
    Telstra's subscriber connections and market share details are correct.
    Vodafone's figures are correct, but the figures quoted for both Optus and for Hutchison are incorrect.


    In relation to Optus, JB Were has advised:
    125k Q1 additions (not 134k); and
    33.7% market share (slightly down fromthe AFR's 33.8% rating).


    In relation to Hutchison, however, the JB Were figures are evn more telling:
    Q1 addtions of 42k (not 24k, as reported in the AFR);
    31/3/02 subsciber connections of 235,000 (not, 216,000, according to the AFR);
    Q1 market share of 1.9% (not, 1.75%, as reported in the AFR).


    During the March quarter, Telstra accounted for 44.4% of net quarterly adds, Optus for 36%, Vodafone for 7.5%, and Hutchison, for 12.1%.

    Given that HTA operates its CDMA network out of Sydney and Melbourne, only, vs, national GSM coverage for the rest, the results are even more telling against the rest, and a clear indictment on the continuing parlous state of Vodafone in Australia.

    In effect, HTA, operating in just 2 markets, captured 42k net subscriber additions, and grew its CDMA subscriber base by ~22% in the quarter.

    Vodafone, however, operating in all Australian markets, and with the benefit of the TEL MVNO subscriber arrangements (ie: TEL /AAPT customers being connected to, or switched via the Vodafone network), not only performed poorly for the quarter, but going on a "like fo like" comparison basis, actually went backwards at a fast rate of knots.

    Optus performed much better, but primarily this was due to the thriving success of the Virgin Mobiles business which accounted for >2/3 of net Optus additions for the quarter.

    As for Telstra, market dominance continued to protect Telstra from too much exposure to market erosion, but the loss of Srathfield and other high profile "connection agents" is starting to have a telling effect.


    JB Were's report does not further breakdown the source of telstra's net 154k additions for Q1, but going on past trends, the bulk of the additional connections would appear to be GSM related. Translated, this means that HTA is now either:
    challenging Telstra neck to neck on CDMA subscriber additions; or
    HTA has now overtaken Telstra in adding subscribers to its CDMA network.

    Either way, HTA's current market share is growing quite rapidly.

    Extrapolating this to year-end, HTA may well have a further 130k in net subscriber additions throughout 2002, making for a 360k+ CDMA network by year's end.

    Using a $69pm ARPU (the actual 31/12/01 ARPU figures) and calculating this to a (smoothed) weighted average HTA network of 277,000 full year equivalent customers (based on a 31/12/02 network size of 360,000 customers) should make for ~$230m in annualised CDMA revenue for 2002 (ie: a doubling in Orange mobile revenue for 2002, over 2001).

    Added to this is the paging (etc) revenue of ~$40m, making for 2002 anticipated revenue of $270m+. Currently, most analysts are forecasting much less than this, with JB Were forecasting 289,000 CDMA subscribers in 2002, rising to 390,000 in 2003 (vs my suggestion of 320 - 360,000 subscribers).

    With HTA forecasting that they will turn EBITDA positive on a 270 - 300,000 CDMA subscriber base, there is a very strong possibility that if current rates of performance are maintained, most analysts will need to upgrade their HTA results (at least based on the CDMA side of the business).


    Currently, JB Were has an NPV valuation for HTA of 45c, whilst UBS Warburg values HTA @26c, based solely on the 31/12/01 size of its CDMA business.

    The suggested upside that is likely to occur from here, therefore, suggests that HTA's CDMA business is probably now worth upwards of 30 -40% more than what UBS Warburg was vluing it at earlier this year (ie: 34c - 36.5c), with more upside to come from the 3G side of the equation as 2002 continues to roll on.

    Taken in altogether, this suggests that JB Were's forecast of 45c is likely to form the base case going forward and that an upward revision closer to 55c - 60c is possible in the interim, based again solely on the better than anticipated improvements in the CDMA business model. This may well account as one of the reasons why JB Were has strongly and consistently being buying into HTA since mid February 2002.

    JB Were acquired sizeable share parcels in HTA during early February, and again in the first half of March. Towards the end of March, JB Were was again buying heavily into HTA. Most of the sizeable April tradicng in HTA was also due to JB Were buying up on the stock. In all, JB Were appears to have acquired anything up to (net) 6 -7m shares in HTA since mid-February.
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