TELCO ANALYSIS - MOBILES

  1. 4,941 Posts.
    lightbulb Created with Sketch. 147
    Based on my earlier mobile market shares posting, it was also interesting to note the following from JB Were's commentary this morning:

    1)
    Telstra is re-introducing handset subsidies, but skewing this for high-end subscribers (ie: construed as a loyalty bonus). Previously, Telstra was not considering the re-introduction of subsidies. This suggests that Telstra is concerned with protecting its high end custosmers, and that Optus and HTA are targetting this end of the market. Optus, in particular.

    2)
    Optus is taking market share, although at a greater rate of acceleration away from Vodafone, than from Telstra.

    3)
    Vodafone's position in the market is continuing to weaken, given its nationwide coverage, and its MVNO arrangements with TEL and AAPT.

    4)
    Hutchison's CDMA business in Sydney and Melbourne is growing at an accelerating rate of improvement. Up from 55k in net add-ons in H1fy01, to 72k in net add-ons in H1fy02, to 42k in net add-ons in Q1fy02 (or 84+k for H1fy02).

    5)
    Hutchison also appears to be preserving ARPU values whilst the comparable ARPU values for VOD, SGT and TLS are all declining.

    6)
    Hutchison grew its CDMA subscriber base by ~21% during Q1fy02, thereby suggesting that it is on track to secure a 360k subscriber base by year's end. For HTA, any subscriber base coming in above 270k is likely to turn its CDMA business EBITDA positive.

    7)
    During Q1fy02, HTA's CDMA subscriber base grew "neck to neck" with Telstra, and may well have overtaken Telstra in grwoth management terms during April.

    Overall:

    1)
    Most analyst forecasts for HTA factor in a 280k subscriber base for fy02 (ie: to 31/12/02), and falling ARPU revenue of $62 - $64pm. Currently, HTA's ARPU revenue is likely to remain closer to the $69pm mark.

    2)
    Most currently ascribed valuations for HTA factor in only the CDMA business, and anticipate a much smaller CDMA business than is currently emerging. This suggests that most analysts will, from a CDMA perspective (if not froma 3G perspective), soon be ascribing an upwardly revised valuation for HTA.

    3)
    Overall, mobile market growth is slowing, and ARPU values are compressing. Both Telstra and Optus, therefore, are like to feel the strain on this before year's end. Vodafone is already feeling the strain of this and is unlikely to recover from this in the short to medium term.

    4)
    Lower overall telco share prices for SGT and TLS are likely in the short to medium term, with TLS and HTA outperfoming the sector in the medium term.

    5)
    Accordingly, I am of the view that TLS offers the better complete telco exposure, but HTA offers the more complete upside, along with a more direct exposure to 3G. SGT offers diminishing value with limited recoxvery potential in the short time, whilst VODAFONE remains anybody's guess at this time.

 
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.