MTS struggling to grow in India?

The main highlight of the third quarter result of Sistema Shyam TeleServices (MTS India) is its lack of ability to grow revenue significantly.

The Russian telecoms MTS’s Indian joint venture outfit could not add revenue in Q3 at a time when its main rivals are generating revenue. Its main focus – retail mobile users and data – did not bring good result in the third quarter.

The competition has forced MTS India, which reduced its exposure in the country due to telecom regulatory issues, and appointed a new CEO to revive the company, posted an unexpected revenue dip. MTS India reported 2.2 percent drop in Q3 consolidated revenue quarter-on-quarter to $45 million in 9 circles. The company says the drop in revenue is due to seasonality.

Take a look at the revenue of Uninor India, a joint venture of Telenor. Uninor has presence in six telecom circles in India. Uninor third quarter organic revenue increased 23 percent to $124 million.

But revenue of telecoms such as Bharti Airtel, Vodafone and Idea Cellular rose in the quarter year-on-year. These operators did not report any seasonality issue. In the case of MTS India, its revenue declined sequentially and year-on-year basis.

However, MTS India says blended mobile ARPU for the quarter increased 6.8 percent to Rs 95 on account of increase in minutes of usage following improved quality of customer base. But its ARPU is significantly lower than its GSM rivals.

For comparison, Vodafone India ARPU reached Rs 200 in the July-September quarter. Bharti Airtel ARPU decreased to Rs 192 from Rs 200.

Uninor ARPU increased to Rs 100 in Q3 from Rs 97 in Q2, reflecting the price increase in the Indian mobile market.

MTS India says minutes of usage increased quarter-on-quarter by 11 percent to 363 during the quarter.

The telecom service provider says success of SSTL’s data strategy is evident with non-voice revenues contributing 34.5 percent of total quarterly revenues. SSTL’s HSD services now cover over 500 towns across 9 circles. Its data card subscriber base for the quarter increased 4.5 percent to 1.21 million subscribers.

MTS India revenue growth

Do these numbers reflect success in the Indian mobile industry? Look at Vodafone data. Data users of Vodafone India reached 42.5 million — 27.3 percent of total subscriber base — with 4.5 million 3G subscribers in July-September quarter. The data of Vodafone is from 22 circles against MTS India’s 9 circles. Even if we calculate the MTS India’s performance in 9 circles, it is well below its rivals.

MTS India, which has presence in telecom circles such as Delhi, Kolkata, Rajasthan, Gujarat, Karnataka, Tamil Nadu, Kerala, Uttar Pradesh (West) & West Bengal, posted a flat consolidated OIBDA loss of Rs 219 crore ($35 million).

The July-September quarter profit of Idea Cellular declined 3.24 percent to Rs 448 crore from Rs 463 crore in the first quarter of current fiscal.

Sistema Shyam Teleservices CEO Dmitry Shukov said the company continued to focus on optimizing its business in line with its medium term target to turn OIBDA positive by end of 2014.

Uninor is also targeting cash flow break-even by end of 2013. Uninor EBITDA growth was 65.7 percent in the third quarter of the current year.

Financial Summary:

INR million Q3 ‘13 Q3’12 Y-o-Y Q2’13 Q-o-Q
Revenues 2,844 4,040 -30 % 2,909 -2.2 %
OIBDA -2,197 -3,541 38 % -2,193 -0.2 %
-margin -77 % -88 % 11p.p. -75 % -2p.p.
Net Income -7,601 -4,954 -53 % -8,447 10 %
-margin -267 % -123 % -144p.p. -290 % 23p.p.









Most interestingly, MTS India’s mobile subscriber base declined by 1.8 percent quarter-on-quarter and reached 9.6 million customers as of September 30th, 2013.

Uninor added 1.5 million new subscribers during the quarter. ( Uninor posts 23% organic revenue growth in 6 circles in third quarter )

SSTL’s mobile subscribers’ MoU for Q3 2013 improved to 363 min vs. 328 min in Q2 2013.  Non-voice revenues, from both data and mobile VAS, for the quarter declined 2.2 percent to INR 979 million.

Its net income during the quarter declined 53 percent quarter-on-quarter due to mainly on account of forex losses and business restructuring.

SSTL made investments of Rs 40 crore during Q3 2013. Idea Cellular’s FY 2014 Capex is around Rs 3,500 crore for 22 circles.

Baburajan K
[email protected]