Bharti Airtel vs Idea Cellular (India Mobile business progress comparison) post Q2-FY'17.

As we all know that Idea Cellular's business is purely it's India Mobile business, but in case of Bharti Airtel, it's business includes not just it's Mobile business in 18 countries, but also smaller India businesses like Digital TV, Home Broadband, Enterprise Solutions, etc. For Bharti Airtel, it's India Mobile business contributes nearly two-thirds of it's Consolidated Revenues and possibly a higher proportion of it's Profits. Hence the good or bad performance of it's India Mobile business does have a substantial impact on the company's overall numbers.

For my analysis, I have divided the Total Revenues (India Mobile business only) of the two companies into two parts: Data Revenues & Non-Data Revenues. The latter part will comprise about 95% of Voice business & rest from VAS like SMS, Ringtones, etc. Let's first check out the

Quarterly progress of the Non-Data Revenues. Both the companies have seen their Quarterly Non-Data Revenues hover within a range over the last 10 quarters. Idea Cellular has performed slightly better than Bharti Airtel. Idea's Sept'16 number of Rs.7420 crores is nearly 14% higher than it's Sept'14 number of Rs.6525 crores and nearly 5% higher than it's Sept'15 number of Rs.7035 crores. On the other hand, Bharti Airtel's Sept'16 number of Rs.11,158 crores is only 3% higher than it's Sept'14 number of Rs.10829 crores and nearly 3.6% higher than it's Sept'15 number of Rs.10762 crores. In Sept'14, Idea Cellular's Non-Data Revenues were about 60.3% of Bharti Airtel's corresponding number. But the same has now improved to 66.5% in Sept'16. Idea Cellular has clearly outperformed Bharti Airtel on the Voice business front over the last 2 years. Both the companies have also reported a small Q-o-Q dip in Sept'16, with Bharti Airtel's number dropping 3.2% and Idea Cellular's number dropping 2.2%. In case of Bharti Airtel, the Non-Data portion forms 75.7% of it's India Mobile business revenues, while the same for Idea Cellular forms 78.7%.

Coming to the primary growth driver of all Telecom operators across the world, i.e. Data Revenues, the developments in Sept'16 quarter have been exactly as per expectations. The steady growth that both Bharti Airtel & Idea Cellular were reporting quarter after quarter over the last

2-3 years, is clearly showing signs of coming to a screeching halt in Sept'16. I had mentioned this in my previous post on this topic. Have a look at the chart alongside. The sudden collapse of incremental growth rate was expected due to availability of Reliance Jio's Preview Offer since June-July16 and then the Welcome Offer launch on 5th September, when 4G Smartphone owners started scrambling for a Jio simcard. Let us try & check which one of the these two have done better so far. Bharti Airtel's Sept'16 Data Revenue of Rs.3577 crores is 98% higher than Sept'14 number and 23.6% higher than Sept'15 number, but only 1.4% higher Q-o-Q. On the other hand, Idea Cellular's Sept'16 Data Revenue of Rs.2009 crores is 92% higher than Sept'14 number and 19.2% higher than Sept'15 number, but only 2.2% higher Q-o-Q. Bharti Airtel has noticeably posted a little better growth in 2-years or 1-year comparison, but Idea Cellular has posted marginally better Q-o-Q growth number.

Bharti Airtel has a much wider 3G as well as 4G spectrum footprint when compared to Idea Cellular. Hence Airtel is expected to post much better Data Revenue/Volume growth. But it seems like either Airtel is not able to properly utilise it's spectrum advantage or Idea is doing much better even with 3G/4G coverage is limited circles. Let us look at how the Data Volume growth is panning out for the two operators.

Both operators have seen a stupendous surge in Data Volumes over the last many quarters. Bharti Airtel's Sept'16 Data Volume of 178.1 million GBs is 163% higher than Sept'14 number, 54.9% higher than Sept'15 number and 12.7% higher Q-o-Q. At the same time, Idea Cellular's Sept'16 Data Volume of 107.4 million GBs is 173% higher than Sept'14 number, 49.2% higher than Sept'15 number and 15.4% higher Q-o-Q. That means Idea Cellular has managed to outperform Bharti Airtel in Q-o-Q as well as 2-years comparison, but lagged only in the 1-year comparison. I find this to be a big achievement for Idea Cellular as it has a clear disadvantage when it comes to 3G/4G spectrum footprint. Bharti Airtel has been offering 3G in 21 circles on it's own spectrum, while Idea Cellular does the same in only 13 circles. Even on 4G front, Bharti Airtel has been offering the services in 15 or 16 circles for more than a year now, while Idea Cellular started rolling out it's 4G services only in December'15, that too limited to about 9 or 10 circles. Despite this spectrum holdings advantage, Bharti Airtel has not been able to report superior performance on the Wireless Data business front. At this point, I would rate Idea Cellular's overall performance to be superior to Bharti Airtel's.

Despite it's spectrum disadvantage, Idea Cellular has been very aggressive on the rollout of 3G/4G services in it's circles of strength. I had mentioned this in an earlier post on Idea Cellular in June'16. The observations that I had shared in that post are certainly the reasons behind Idea's strong performance despite spectrum disadvantage. During the recently concluded Spectrum Auctions, Idea Cellular has not just managed to strengthen it's spectrum position in the circles of importance, but also increased it's 3G/4G reach into newer circles. If Idea Cellular does manage to replicate it's success in it's strong circles (even to a small extent) in the newer circles, Bharti Airtel will have more reasons to worry. And we cannot forget Reliance Jio and Vodafone. Bharti Airtel clearly needs to buckle up and prepare for more aggressive network rollout and use it's spectrum advantage to the maximum. It has clearly failed to do so until now.

Market-shares of Car makers - How things have changed over last 1 year.

There quite a few positives for Automobile manufacturers in the current period. Firstly the Rainfall has been good this year, which has infused optimism in the overall economic atmosphere in the country. Secondly, the Govt. has announced 7th Pay Commission for it's employees & people are again set to get healthy arrears. Even Ex-servicemen are getting their OROP arrears this year. Add to all this, the prime festive period of Navaratri to Diwali has arrived a couple of weeks early this year, compared to last year.

Most of the leading 2-wheeler makers have been reporting over 20% Y-o-Y Growth in dispatches since the last few months. The Car makers too have seen Total Sales increase by nearly 18% Y-o-Y in the recently-ended Q2 of current fiscal, after reporting single-digit growth in Q1. In order to understand who all have Gained & who all have Lost in the race for Market-share over the last 1 year, I have arranged the Quarterly

Market-share Data of all Car Makers in India (Excluding the Luxury Car Makers). There have been quite a few Surprises & changes in market-share Rankings over the last 1 year. The most prominent one being the rise of Renault-Nissan Alliance moving up from No.9 position in Q2 of last fiscal to No.4 position in Q2 of current fiscal. The primary reason for this rise has been the stupendous success of Renault's small car KWID, which was launched around the end of September'2015. The KWID helped increase Renault-Nissan's market share from under 2% in Q2-FY'16 to around 4.70% in the following quarter. And the market-share has kept improving with every passing quarter till now. Renault's KWID got some assistance from Datsun's Redigo in the recent few months. It will be interesting to see if Renault-Nissan Alliance is able to build on this 12-months of success and progress towards being a strong No.3 player in the Indian Car Market.

The next big surprise is Maruti-Suzuki's Sales resilience. Despite all the incremental competition from Renault-Nissan or Ford or Hyundai or Tata or others, Maruti Suzuki has seen it's market-share remain steady around the 47-48% range. It's Q2-FY'17 market-share being slightly higher than Q2-FY'16 suggests that Maruti-Suzuki managed to grow it's Sales during the period slightly faster than Industry growth. Yes, it's ALTO model did take some hit from KWID, but the drop in volumes was just about 10% or so. This was more than compensated by success achieved by Maruti Suzuki's new launches of the BALENO and the VITARA BREZZA and also the CIAZ. All these three models are near the upper-end of Maruti-Suzuki's model portfolio and hence their success means a lot more to the company than the small drop in sales of it's ALTO model. Both the BALENO and the BREZZA are currently commanding a waiting period of almost 3 to 5 months, which is making the company even more desperate to see Suzuki's Gujarat plant being commissioned, which is expected to happen sometime in 2017.

The next surprise is Honda's struggle for Volumes, which started in November'2015. Since then the company has been saying that it has slowed down dispatches of Diesel versions of it's Car models as there has been an inventory pile-up at dealer level due to slower demand for the same. But it's been nearly 11 months since then and Honda's volumes are still nowhere near normal, though there has been slight recovery in numbers due to BRV launch a few months ago. Honda reported a 28% Y-o-Y drop in volumes during Q1 of this fiscal, which was followed by about 18% Y-o-Y drop in volumes in Q2. This massive under-performance resulted in Honda's quarterly market-share dropping by nearly 250 bps in Q2 of this fiscal, compared to a year-ago period. Honda lost it's No.3 position during this period and is now at No.5, which too is under threat from a resurging Tata Motors.

The next point is Mahindra & Mahindra's lacklustre show despite several new potentially volume-generating launches over the last 12 months. M&M's market-share improved from 7.2% in Q2-FY'16 to 9.45% in Q4-FY'16, primarily on the back of 2 new launches in the Compact SUV space: the TUV300 and the KUV100. But both these models have failed to hold volumes beyond the initial couple of months, despite good marketing & promotional support. The NuvoSport, which was introduced later, was an even bigger dud in terms of volumes. M&M will again be pinning it's hopes on the refreshed & slightly-shorter version of the BOLERO to bring increased volumes for the company. Since the BOLERO now confirms to the Compact segment restrictions, it is cheaper by nearly Rs.1 lakh compared to the previous model. Hence it is now even better value-for-money than before and hence has good chances of being successful. M&M has managed to grab & hold the No.3 position since Q3-FY'16, but it needs to do better to continue holding the rank.

Coming to rest of the car makers, the No.2 Rank holder Hyundai has done a fine job through most of the year, but posted slower growth in latest quarter, resulting in slight erosion in market-share. Seems like Hyundai's ELITE i20 and the CRETA models are losing some steam in the face of increased competition. Tata Motors too has finally found success with it's TIAGO model, which is currently commanding a waiting-period of 2 to 3 months. The company is ramping up production at a measured pace and hence we haven't seen it's volumes shoot up suddenly. At the same time Tata Motors has another 2 to 3 new models lined up for launch, spread over the next 12 months, which should boost the company's image as well as market position in the coming quarters. Toyota continues to remain dependent on it's INNOVA model for volumes & market-share, which has remained more or less steady, even after the launch of the new generation INNOVA. The company has also refreshed the ETIOS siblings with a hope of finding more volumes.

Ford and Volkswagen have also gone nowhere in terms of market-share over the year. Ford did launch it's brand new Compact Sedan the ASPIRE and the new generation FIGO late last year. Everyone expected Ford to improve it's market-share with these new models. But it's been a big surprise to see both these capable models to do lacklustre volumes, while Ford's ECOSPORT continues to generate decent monthly volumes, despite increased competition in the Compact SUV space. Volkswagen group has only recently got slightly ambitious for increased domestic volumes.Volkswagen worked on it's POLO/VENTO platform and has introduced the AMEO compact sedan recently, which it hopes will help boost it's volumes to some extent. The result for the same is yet to be seen.