Comparables

For a long time now, I have been wondering what the comparable index is for technology companies - well, it is the NYSE ARCA Tech 100. Its a price weighted multi industry index comprising common stocks and ADRs listed on US exchanges, whose core capability is the technology sector. Price weighted, of course, is all their prices divided by the number of shares adjusted for stock splits.
Sectors included are: Semiconductors, computer hardware and software, telecommunications, data storage and processing, electronics, media, aerospace and defense, health care equipment and biotechnology.

http://www.nyse.com/pdfs/103_NXT_Index_Information.pdf

Over the last 52 weeks, it had fluctuated from 732 (18th Jul 2006) - 960 (20th June 2007). March this year saw a lot of low end blips where the index was trading in the 830 range but since April it has been climbing.

Searching for more information on the index ratios.

Another index of importance is the NASDAQ 100.

New Technologies

For the typical technology geek, all this may be outdated, but for me it is opening up a whole new world.
I knew about IPTV and then I heard about TV clips on the mobile thanks to 3G. Now, we have DVB-H. And what is the difference: TV via 3G streams the data to your mobile phone whereas with DVB-H, the information is actually being broadcast to the mobile phone. Broadcast to the phone - now why didnt I think of that.

This from a Pyramid research report on the efficiency of subsidies for subscriber acquisition, when it comes to the black market for handset sales India is at 20% i.e. 20% of handset sales in India is through the blackmarket. I know, thats huge, but it was the lowest in the chart. Russia was the highest, at 90%! As for ARPU differences, in India and similar markets, the ARPU would be $9 whereas in Europe its around $38 and in the US, it ranges to almost $50.

We generally say - the telecom capex is - here's a category division of capex:
Access - DSL, WiMAX(I think), cable, fibre
Network control and routing
Transport networks
Software and applications.
Will try and gather the main technologies in each head as of now....

A redundant one-liner - two large telecom players from Latin America - Telmex, which focuses on only businesses outside of Mexico and Telefonica with a focus on business and residential - Telmex has a higher capex because they have started investing in wimax but Telefonica hasnt taken the plunge yet.

An input on WiMAX - The capex for WiMAX is not expected to be lower than GSM. And why? GSM implementations would be cheaper because of scale and lower spectrum bands(30 MHz). However the Opex for WiMAX will be lower because of its all IP architecture and higher capacity(2/2.5/3.5 GHz). Acquisition costs, of course, 3G is lower. Enlightening for me was the thinking on IPRs. It is expected that the IPR on the equipment for WiMAX will be 0% of the value. The value is typically 2-5% though its almost 15% for W-CDMA equioment. Lower the IPR, more the competition, more the players, lower the equipment costs and higher the adoption.

Telco ratios

Collecting data: ratios from the Indian market
MTNL: P/E - 15.71
Bharti: P/E - 38.71 (interestingly when I checked the price was Rs. 823 whereas Idea was trading at 117. )
Reliance communications: P/E - 49.12 with a share price of 513.
I had no idea that BHarti was the most highly priced share.....

Indian ARPU from December 2006 - Rs. 315

These are figures from April 2007
Indian has penetration rates of less than 16% which is about 167 million. Comparatively China has a penetration rate of 35% with 400 million covered. As I've said before, one of the keys to valuation in emerging markets are the numbers of subscribers. This was more so earlier when EBITDA was largely negative. However, now, EBITDA multiples are largely being used for valuation even in India.

One of the articles I read, talked about earnings multiples being used in the future though I am not so sure about the thought process. I find EV/ EBITDA used with highest frequency. Also, the same article talked about EPS being a performance measurement index when the growth rates stabilise as does capex. The reason I disagree is because in a telecom environment, capex is not just related to growth in subscribers but also growth in technology. The large investments being made today by AT&T and Verizon are for their broadband growth and the FiOS projects etc not just a battle for coverage.

Some acquisition data:
AT&T-Bellsouth - $67 billion that is 54 million wireless and data Bellsouth subscribers
Telefonica-O2 UK - $31 billion
Aditya Birla sold 33% of Idea Cellular for $813 million
Tata Teleservices sold 9.9% to Temasek for $300 million

Also, a quote from the same article I've mentioned earlier - I would love to have this confirmed: Indian telco capex since 1995 - $13 billion. Now, in the next three years, the capex expectation is $22 billion! I wish I had some background to these numbers. I may be able to cull out something from the balance sheets of the equipment providers. Just in the month of June, a look at the Nokia-Siemens orders from India - Rs. 300 crore GSM expansion from Aircell, Rs. 500 million GSM/ GPRS/EDGE expansion from Idea Cellular. The BSNL order is DSLAMs for their Eithernet Internet network - 6 million connections but no figures on financials. This is one month - $77 million not counting BSNL.

Interview Preps

Was preparing for a to-be interview and decided to write down some data from their annual report:
NASSCOM reports: IT services export industry grew by 33% till March 31st, 2006 and IT and IT enabled export services are expected to grow by 27%-30% till March 2007.