Bharti V/s China Mobile - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Bharti V/s China Mobile

Sep 30, 2004

The Indian telecom sector, especially the mobile telephony segment, has come into its own in the last two years and is finally living up to its potential of high growth. With an addition of over 1.5 m subscribers every month to the total subscriber base, India is one of the fastest growing mobile markets in the world and compares favorably with neighbour China in terms of its growth potential. In this context, we compare two of the largest telecom companies in these countries - China Mobile from China and Bharti Televentures from India.

China Mobile is the largest mobile telecom services provider in its country, while Bharti Tele is the largest in India. Before we carry out the comparison, we would like to point out that while China Mobile is a pure mobile telecom services provider, Bharti Tele also provides fixed line, long distance and other corporate data services along with its mobile telephony operations.

In terms of size, China Mobile is clearly the winner as its 141.6 m mobile customers clearly tower over the 6.5 m customers of Bharti Tele. Since the Chinese telecom market is highly regulated with limited competition (duopoly in case of mobile market) China Mobile has emerged as the largest player in the Chinese mobile market. The huge 54% market share commanded by the company, compared to 25% for Bharti Tele, also substantiates this fact. To put things in perspective, while China Mobile has only one large mobile company, namely China Unicom, to compete with, Bharti Tele has five other major competitors.

ParticularsChina Mobile**Bharti Tele*
Subscriber base141.66.5
ARPU (Rs)569572
Prepaid/Postpaid ratio0.640.79
Market share54%25%
   
Revenues (Rs bn)88550
OPM (%)58.2%33.5%
NPM (%)22.4%11.7%
   
ROA15.5%5.3%
ROE17.9%12.0%
   
P/E (x)13.143.8
P/BV (x)2.35.4
Source: company balance sheets
* FY04
** Year ending December 2003

Also, Bharti’s prepaid to postpaid ratio is relatively much more skewed to the prepaid customers. This is a characteristic of a nascent market. On the other hand, the lower prepaid to postpaid ratio for China Mobile indicates a maturing market. The ARPUs (average revenues per user) for the two companies are almost the same. However, we would like to point out that since the Indian telecom sector is still in high growth (and high competition) stage, we may see further reduction in ARPUs for large companies like Bharti Tele.

As far as the operational parameters are concerned, China Mobile fares better than Bharti Tele. China Mobile’s operating margins are substantially higher than that of Bharti Tele. Duopoly seems to be the key reason for this. Thus the company is likely to have a high bargaining power both among customers as well as its suppliers. Bharti Tele on the other hand, operates in an environment where competition has significantly brought tariffs down.

However, we would like to point out that Bharti Tele has just turned profitable in FY04 and to that extent the operational parameters of the company may look depressed. Also, one needs to understand that Bharti Tele provides almost all kinds of telecom services including fixed line and long distance services. Due to such a diverse offering too, the operating profit margin of the company is on the lower side compared to China Mobile. Moving on to the return ratios, here again, China Mobile outperforms. This is due to the fact that Bharti Tele’s operations have not achieved steady state (has become profitable only in FY04), thus the return ratios seem depressed.

Coming to the valuation parameters of both the companies, at first glance, Bharti Tele’s valuations look much more expensive than its counterpart China Mobile. However, as mentioned earlier, Bharti Tele has just turned profitable in FY04, and there is expectation that the earnings of the company will catch up to the price in the long-term.

 ChinaIndia
Population (bn)1.31.08
Telecom penetration *42.37.1
Mobile penetration (approximately)23.04.5
Monthly additions to mobile subscriber base (m)4-4.51.5
* source: ITU (2003)

China Mobile is a showcase of what a telecom company can do in a fast growing market. In a matter of few years China Mobile has become the largest mobile operator in the world, in terms of subscriber size, unseating even Vodafone. Looking at the table above, one can gauge the fact that despite registering such strong growth in subscribers’ month on month, India still has a long way to go. Despite having a telecom density that is 6 times India’s, China continues to add close to 4 m -4.5 m mobile users in a month (almost 3 times the Indian market). That is why, some telecom companies use the tag line: The future is bright…


Equitymaster requests your view! Post a comment on "Bharti V/s China Mobile". Click here!

  

More Views on News

BHARTI AIRTEL 2018-19 Annual Report Analysis (Annual Result Update)

Sep 9, 2019 | Updated on Sep 9, 2019

Here's an analysis of the annual report of BHARTI AIRTEL for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of BHARTI AIRTEL. Also includes updates on the valuation of BHARTI AIRTEL.

BHARTI AIRTEL Announces Quarterly Results (1QFY20); Net Profit Down 890.7% (Quarterly Result Update)

Aug 2, 2019 | Updated on Aug 2, 2019

For the quarter ended June 2019, BHARTI AIRTEL has posted a net profit of Rs 25 bn (down 890.7% YoY). Sales on the other hand came in at Rs 207 bn (up 3.3% YoY). Read on for a complete analysis of BHARTI AIRTEL's quarterly results.

BHARTI AIRTEL Announces Quarterly Results (4QFY19); Net Profit Up 144.7% (Quarterly Result Update)

May 8, 2019 | Updated on May 8, 2019

For the quarter ended March 2019, BHARTI AIRTEL has posted a net profit of Rs 6 bn (up 144.7% YoY). Sales on the other hand came in at Rs 206 bn (up 4.9% YoY). Read on for a complete analysis of BHARTI AIRTEL's quarterly results.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

I Recommended this Stock over Page Industries because it's Relevant to Doubling Your Income (Profit Hunter)

Sep 7, 2020

Things are not often what they seem in the market and how you can take advantage of this.

The NASDAQ Whale Could Harm Your Portfolio (Fast Profits Daily)

Sep 7, 2020

The discovery of Softbank pushing up prices on the NASDAQ will cause volatility in the market. Stay alert!

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

BHARTI AIRTEL SHARE PRICE


Sep 18, 2020 (Close)

TRACK BHARTI AIRTEL

  • Track your investment in BHARTI AIRTEL with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

BHARTI AIRTEL 5-YR ANALYSIS

COMPARE BHARTI AIRTEL WITH

MARKET STATS