Telecom: the great equaliser

Transcription

SOCIAL AND GOVERNANCE & EQUITIES
Global
April 2016
By: Charanjit Singh, Robert Walker and Hervé Drouet
https://www.research.hsbc.com
Telecom: the great
equaliser
Investing responsibly: Mobile for
social empowerment
Poor social infrastructure in low
and middle income countries
provides a key opportunity for
mobile products and services
Three mobile services – mobile
money, m-Health and m-Education
– are driving a social trend with a
potential USD210bn investment
opportunity by 2020
Key beneficiaries of this
trend include eight stocks from
HSBC coverage, particularly
telecom operators
Disclaimer & Disclosures: This report must be read with the disclosures and the analyst
certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it
EQUITIES  SOCIAL AND GOVERNANCE
6 April 2016
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Some interesting statistics
Ten indicators reflecting the magnitude of social issues in low and
middle income countries
Poor social infrastructure in
low and middle income
countries
1.
Around 15% of the population in these countries live below the poverty line.
2.
Around 50% people do not have access to bank accounts.
3.
There are on average 24 bank branches and ATMS per 100,000 people in these countries
versus 93 in the high income countries.
4.
From amongst the 122m estimated school (primary and secondary) drop-outs globally, low
and middle income countries account for c95%.
5.
Around 65% of the world’s illiterate population is from South and West Asia and c30% is
from Africa.
6.
Per-capita health spend is less than 5% of that of developed countries.
7.
The number of physicians per 1,000 people is 1.15, vs. 3.10 in high income countries.
8.
On average, 830 women die each day because of curable pregnancy and
childbirth complications.
9.
Despite employing 900m people in agriculture (vs. only 30m in high income countries),
farming yields in these countries is 40% below developed countries.
10. Globally, natural disasters are estimated to have killed over 1m people, affected c2bn and
caused at least USD1.67trn in economic loss over one decade (2004-13). Asia is most
affected by these disasters, with nine out of ten people affected since 1951 (source: World
Disasters Report 2014, IFRC).
Source: The data for points 1 and 3-9 are primarily sourced from the World Bank; point 2 sources
are the Groupe Speciale Mobile Association (GSMA), World Bank and HSBC estimates.
Mobile technology is acting
as a great equaliser in
bringing opportunities to
those who need it most
Five indicators of the growth of mobile connections and services
in low and middle income countries
1.
In a number of countries, mobile connections have surpassed electricity and clean water
connections. For example, in Nigeria in 2014, 78% of the population had a mobile
connection versus 69% (as of 2015) with access to drinking water and 56% (as of 2012)
with electricity connections.
2.
Half the two billion people without a bank account have a mobile connection.
3.
In three-quarters of the markets where mobile money is available, agent outlets outnumber
bank branches.
4.
Globally, there were on average a billion mobile money transactions per month
towards end-2015.
5.
Mobile money transactions globally during December 2014 totalled USD16.3bn (source:
GSMA). In Kenya, for example, annual mobile money transactions of KSH2.8trn translate
to c7.6% of the total transaction recorded in the country’s payment system (source:
www.centralbank.co.ke).
Source: The information for points 1-4 is primarily sourced from GSMA; Point 2: PWC-GSMA
study, World Bank, HSBC calculations
1
Mobile technology providing cost-effective and /or long-distance solutions
•
Problems
(Developing countries)
•
Financial exclusion : Around 50% of population in the
developing countries is without bank facilities, and faces
financial risks and inconvenience
Number of unbanked people are estimated to exceed 2bn
but c1bn of these people have mobile phones
•
•
•
Mobile Money
Solutions
Per capita expenditure is less than 5% of that in the
developed world
High mortality rate: 830 women deaths per day from
preventable causes related to pregnancy and childbirth
High cost of medical facilities and pressure on the state
health budgets (also applicable for developed countries)
•
•
m-Health
High illiteracy rate: 65% of this illiterate population is housed
in Asia, and another 30% in Africa
High school drop outs: From an estimated 120m dropouts in
2013 around 95% are from developing countries
m-Education
6 April 2016
2
Three mobile services are leading a social revolution and could provide a cUSD210bn investment opportunity by 2020
USD 210bn opportunity
•
Benefits
•
•
•
Progress on solutions
•
•
•
Low cost and easy to operate vs. somewhat cumbersome
banking solution
Availability of credit, insurance, interest on savings, and other
services
Women empowerment can be achieved through mobile
payment systems
Mobile money is now available in 85% of the countries with
lack of formal banking system
271 live services in more than 93 countries (December 2015)
411m mobile money connections, which is 10% of total
mobile subscriptions (2015)
By end 2015, there were at least 5 interoperable markets:
Pakistan, Sri Lanka, Tanzania, Indonesia and Madagascar
Estimated opportunity
(2020)
Select key beneficiaries
•
•
Increasing health awareness to improve patient care
Improving the reach of medical facilities to rural locations
Reduction in the cost of medical facilities
Improve post-treatment understanding through monitoring
devices
North America accounted for the largest share of 32% of the
m-Health solutions market, followed by Europe, Asia and
other markets (2014)
Blood pressure (BP) monitors and Blood Glucose monitors
are the two fastest growing instruments for the connected
medical devices.
USD 60bn (including devices)
USD 46bn (excluding devices)
•
•
•
•
•
•
Improve accessibility of education in the rural areas
Availability of materials through cloud technology at any point
of time using mobile devices
Customization, quality enhancement & better monitoring
Services launched by Telecom operators in countries across
North America, Latin America, Africa and Asia.
From the 3.17m applications available in various app stores,
c15% are categorized under education segment (Oct 2015).
Devices (such as tablets, kindle and net books) are the largest
segment in this space
USD 70bn (including devices)
USD 38bn (excluding devices)
Mobile operators – Bharti Airtel, Millicom, MTN, Safaricom, Telenor, Vodacom, Vodafone;
Banks – KCB, EQB NK; Mobile health device companies – Dexcom , Medtronic, Omron; Mobile devices, application and content leaders – Apple , Google, Amazon
abc
Source: GSMA, Markets and Markets, PWC, World Bank, HSBC calculations
USD 78bn in 2019
•
•
•
•
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Contents
Some interesting statistics
1
Executive summary
4
Empowering society
8
Mobile money revolution
13
m-Health: third largest service
22
m-Education: devices are half the
market opportunity
30
m-Agriculture: bridging the
information gap
33
Disaster response: mobile
technology is crucial
35
Key stocks in mobile services
37
Appendix
63
Potential for mobile money across
some key markets
64
Disclosure appendix
77
Disclaimer
80
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Executive summary
Mobile ecosystem: light at the end of a dark tunnel
Low and middle income countries constitute c80% of the world’s population and c90% of the
global rural population. For years, their governments have struggled to provide basic services such
as banking, education, healthcare and clean drinking water to the poorest people in their societies
given the sheer size of the population base and high cost of setting up infrastructure. However, many
of these countries are experiencing rapid growth in their mobile ecosystem, with mobile penetration
surpassing that of other basic services. Mobile technology is now enabling the penetration of some of
these basic facilities in developing countries.
Three mobile services fostering social inclusion and significant
investment opportunities
Three mobile services (Mobile
money, m-Education and mHealth) are estimated to grow
5-7x to USD210 by 2020
Mobile technology and increased access to information are acting as an equaliser by bringing
opportunities to those who need it most. This technology is helping developing economies improve
accessibility to other basic services, thereby improving their socio-economic profile. We identify three
services that are bringing about this social transformation and which in our view offer significant
potential investment opportunities:

Mobile money: helps with money transfer, transaction and micro-loan/ insurance and subsidy
disbursement through easy digitisation of money and conversion back to hard currency.

m-Health: improves health awareness, preventive healthcare and provides timely medical
attention, even without a visit to a hospital /clinic.

m-Education: provides digital educational content to populations without access to schools or
colleges, or to those who have dropped out of education.
USD210bn
Potential opportunity by 2020
The cumulative market size of these mobile services (excluding disaster response) supporting
social inclusion is estimated to grow over five-fold to USD210bn by 2020 (see the table
overleaf). We consider mobile-money to have the greatest positive impact on the top lines of the
telecom operators and it could be truly disruptive as it could in theory completely remove the
need for conventional banking infrastructure in rural areas, where banking requirements are
normally basic, ie deposits and withdrawals.
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Mobile money customers
now account for 10% of the
mobile subscriber base
Mobile money revolution: from a CSR activity to a mainstream business
Mobile money seems to be the most advanced of the three services. As of end-2015, there were
411m users of mobile money (c10% of mobile subscribers) across 93 countries (source: GSMA).
For telecom operators such as Safaricom (a Vodafone associate) the M-Pesa mobile money service,
conceptualised in 2005 as a Corporate Social Responsibility (CSR) activity and launched in 2007 in
Kenya, contributed c20% of the company’s revenue in FY2015. With the mobile money market
estimated to grow over six-fold to USD78bn by 2019, we think there is significant opportunity for the
telecom operators. The key markets are the countries in Africa and South Asia that have low bank
penetration rates but which represent a significant proportion of the global population.
m-Health: enabling improved accessibility and low cost medical services
Healthcare spending remains highly constrained in low and middle income countries, which
constitute c80% of the global population but only 11% of the world’s healthcare bill. Given the high
mortality rates in these countries, current levels of spending are clearly inadequate. Moreover, the
ageing populations of developed economies are putting an ever-increasing burden on healthcare
services and state budgets. Mobile technology is enabling low cost and/or long distance solutions
by providing improved awareness, remote patient monitoring and consultation to patients using
video/voice services. The global market size of this opportunity is estimated to grow around six-fold
to cUSD60bn, with the size of the opportunity in devices estimated at cUSD14bn (source: PWC).
m-Education: the devices segment represents around half the total market
The global education industry is estimated to double, to USD8trn by 2020 (source: GSMA).
Currently, the m-Education market (excluding portable and other reading devices), according to
Markets and Markets is at cUSD8bn, which represents a small segment of total education spend. By
2020, excluding devices such as tablets and others, the segment is estimated to reach USD38bn;
with devices, however, the opportunity size is cUSD70bn. North America (40%) and Europe (23%)
are expected to be the two largest markets, while South Asia is the fastest growing (source: GSMA).
Estimated opportunity size of the three segments, USDbn
Mobile Money
m-Health (with devices)
m-Education (with devices)
Total (rounded off)
2014
12
11
n.a.
2020
78 ( in 2019)
59-61
70
210
Source
Markets and markets
Markets and markets, Allied Research, PWC
GSMA
Source: www.marketsandmarkets.com, www.radiantinsights.com, GSMA, PWC, HSBC calculations
Two mobile services creating social impact but limited investor
opportunity
We identify two further services – m-Agriculture and disaster response – that have considerable
social impact but limited investment opportunity. While the investment opportunity in m-Agriculture is
small, in disaster response it is somewhat difficult to quantify:
m-Agriculture is likely to have
a far-reaching impact on a
large proportion of the c900m
people engaged in the
agriculture sector
m-Agriculture: bridging the information gap and supply chain strengthening
This service has two segments: (i) Advisory, on agrarian matters including soil quality, fertiliser
use, crop patterns and pricing, weather information and other items, (ii) supply chain
strengthening, which includes financial services and supply chain solutions. With c900m people
in low and middle income countries involved in the agriculture sector, m-Agriculture has
significant growth potential, in our view.
Disaster response: potential benefits in difficult times
In the ten years between 2004 and 2013, disasters (natural and man-made) resulted in over a
million deaths, impacting c2bn people and causing economic loss of at least USD1.67trn.
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Mobile communication can offer a critical lifeline to those in disaster-affected regions, with the
technology playing a major role prior to, during and following disasters via a range of activities
from supporting early-warning systems, to facilitating access for emergency services and as a
tool for accessing any potentially life-saving information. The right support during disasters
could increase the resilience of society and its ability to recover in the aftermath.
We profile 15 stocks, including
eight under HSBC coverage
Stocks that could benefit from the shift towards mobile services
We profile 15 stocks in this report that are at the forefront of this social shift towards mobile
technology, including eight under HSBC coverage.
Telecom operators are the major beneficiaries
Based on the available data, we profile seven mobile operators that are experiencing increasing
revenue share from this segment (see table below). We summarise below the mobile money
growth prospects of the three stocks where our analysts have a Buy rating: MTN,
Vodafone and Bharti Airtel.
Of the seven telecom
operators identified, we
highlight three stocks – MTN,
Vodafone and Bharti Airtel –
which HSBC analysts rate Buy

MTN Group (Buy, TP ZAR160) is the largest operator in Africa with a market-leading
position in 15 countries and a number two position in the remaining seven. Its mobile
money users as a percentage of its total mobile subscriber base increased from 7% in 2013
to 15% in 2014. Given MTN’s presence across Africa (the region with lowest bank account
penetration globally), there is strong growth potential for MTN’s mobile financial services.

Vodafone Group (Buy, TP 260p) is the largest mobile operator globally. With c60% of its
subscriber base in India (c40%) and Africa (c20%), it has a strong presence across the key
mobile money markets. The Reserve Bank of India’s (RBI) "in-principle" approval in 2015 to
Vodafone, Airtel and nine other players to set up payments banks (PBs), should provide a
boost to the mobile money market in India (as the account penetration rate is only c52%
and its second-largest mobile subscriber base globally at over 900m). The company also
continues to grow its mobile financial services business in Africa.

Bharti Airtel (Buy, TP INR430) is ranked number one in India, with a 240m mobile subscriber
base. It also has 76m subscribers in Africa and 9m in other South Asian countries (ex-India). In
partnership with Kotak Mahindra bank, Airtel received "in-principle" approval in 2015 from the
RBI to set up a payment bank, offering full mobile money services in India.
Seven telecom operators with increasing exposure to mobile money services
Name
Ticker
Mcap
(USDm)
Safaricom
Vodacom
SCOM.NR
VODJ.J
6,410
15,988
KES 16.9
ZAR 159.3
Upside / Rating
Mobile Mobile financial
downside
financial
services
(%)
services customer base
revenue as a % of total
share
subscribers
n.a
n.a.
NR
20%
60%
157
-2% Hold
2.3%
15%
Millicom
Telenor
MICsdb.ST
TEL.OL
5,526
23,725
SEK 442.4
NOK 131.8
420
150
-5%
14%
Hold
Hold
1.9%
n.a,
18%
16%
MTNJ.J
16,255
ZAR 130.6
160
23%
Buy
na
15%
VOD.L
82,963
220
260
18%
Buy
na
4%
BRTI.BO
20,184
INR 335.5
430
28%
Buy
na
2%
MTN
Vodafone
Bharti Airtel
Currency
GBPp
CP
TP
Bank a/c penetration in key
markets (total population; key
markets)
Covering analyst
55% (43m; Kenya)
30% (173m; South Africa,
Tanzania & DRC)
22% (7m; Paraguay)
46% (1.6bn; Bangladesh, Pakistan
& India)
38% (262m; Nigeria, Uganda,
Ghana & Ivory Coast)
50% (1.5bn; India, SA, Tanzania
and DRC* )
49% (1.5bn; India, Tanzania,
Kenya, DRC, Uganda & Ghana)
n.a.
Herve Drouet
Luigi Minerva
Dominik Klarmann
Herve Drouet
Stephen Howard
Rajiv Sharma
Prices as of 1 April 2016; Source: GSMA, World Bank, Bloomberg, Thomson Reuters Datastream, Company websites, HSBC Note: *For Vodafone bank account penetration numbers we consider India and Vodacom countries as
these are the key mobile markets for the company
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Banks also gain from exposure to mobile money and other mobile financial services
Mobile money has been viewed by many as competition to the banks. However, collaboration
between mobile money operators and banks benefits both parties. We identify two Kenyan banks
under HSBC coverage that benefit from this collaboration – both of which we rate as Buy.
Two Kenyan banks under
HSBC coverage with Buy
ratings have exposure to
mobile financial services

Kenya Commercial Bank (Buy, TP KES50): In March 2015 KCB launched its KCB M-Pesa
product in collaboration with Kenya’s largest mobile operator, Safaricom, offering mobile
phone-based lending and deposits. After only nine months of operations KCB M-Pesa had
achieved (i) 4.7m customers, (ii) disbursed loans over KES9.1bn (2.6% of KCB’s net loans),
and (iii) total transactions of KES21.6bn (almost double the transactions in 2014).

Equity Group Holding (Buy, TP KES48): In April 2014, Equity Group received its mobile
virtual network operator (MVNO) licence and partnered with Airtel Kenya to offer mobile
phone-based services. Equity Group’s MVNO is called Equitel. In a market dominated by
Safaricom M-Pesa, Equitel has grown its subscriber base to 1.7m as of January 2016.
Two key beneficiary banks of mobile money and mobile financial services
Name
Kenya Commercial Bank (KCB)
Equity Group Holding (EQBNK)
Ticker Mcap (USD bn)
KCB. NR
1.2
EQTY.NR
1.4
Currency
CP
KES 41.75
KES 40.00
TP Up/ downside (%)
50
19.8%
48
20.0%
Rating
Analyst
Buy Henry Hall
Buy Henry Hall
Prices as of 1 April 2016; Source: HSBC estimates, Bloomberg, Thomson Reuters Datastream
Six further stocks with exposure to services other than the mobile money and banks
We profile six further stocks (not rated by HSBC analysts) that include companies producing devices
related to remote health monitoring or mobile education, mobile applications and their hosting
platforms. These providers are the leaders in their own domains (see pages 56-61 for details).
These stocks (not rated)
include device companies and
application providers

Dexcom has a c70% market share of continuous blood glucose monitoring devices (CGM)
market and was the first company to launch a smartphone interactive CGM product in 2015.

Medtronic is among the leaders in the medical devices segment. It has c30% share of the
CGM market and much like Dexcom, launched a smartphone interactive product in 2015.

Omron has c50% share of blood pressure monitors market. It launched its first wireless blood
pressure monitor in 2012, post the launch of a wireless product by a company named iHealth.

Apple is the leader in mobile tablets market and with 1.4m apps in its store (as of January
2015), ranks second after Google based on number of mobile applications.

Amazon is the third largest player in tablets market with the Kindle. It is also the 3rd largest
player in the Apps market, though with only 400,000 applications in its Apps store (March 2015).

Google is the largest player in applications market with 1.4m apps in its play store (2014).
Six stocks with exposure to the m-Health and m-Education segments (not rated)
Company
Name
Dexcom
Medtronic
Omron
Ticker Ccy
DXCM.O USD
MDT.N USD
CP
M Cap Service / Segment
(USD bn)
67.63
6.4 m-Health ( blood glucose monitors)
75.37
106.5 m-Health (blood glucose monitors)
6645.T JPY
3,125
Amazon
AMZN.O USD
598.5
298.6
Apple
AAPL.O USD 109.99
587.3
1GOOG34.SA USD 769.67
515.8
Google
7.2 m-Health ( blood glucose monitors)
m-Education & m-Health (devices
and applications)
m-Education & m-Health (devices
and applications)
m-Education & m-Health
(applications)
Comments
Revenue growth guidance of 35-40% p.a. over the next three to four years.
Company expects revenue for its diabetes management business to grow at double
digits until 2018, with the growth of CGM devices exceeding that of other devices.
The penetration of smartphone interactive products is on the rise, according to a
research from GfK on four key European countries (source: Gfk,2014) .
Of the 400,000 apps in the Amazon's app store, available mainly on its Kindle devices,
education and health related applications represent c8% of the total applications.
Apple generated c10% of its revenue from iPad sales in FY2015. Of an estimated
1.4m total applications in its app store (as of January 2015), education related are
c5.5%; we expect medical, health and fitness related apps to have a similar share
Of the total 1.4m applications as of 2014 in the Google's play store available on
Android devices, education related applications represent 8% while health and
fitness applications represent c4%
Prices as of 1 April 2016; Source: HSBC, Bloomberg, Thomson Reuters Datastream, Company websites; Gfk, pweinternet.org, www. pewinternet.org, Company websites
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Empowering society
 By 2020, penetration of mobile connection is expected to have risen
10ppts to 72%; emerging countries penetration rate is estimated at 70%
 Mobile access is better than access to other basic services; mobile is
now enabling access to basic facilities in remote locations
 We identify five segments experiencing significant social impact due to
the evolution of mobile, especially in the emerging economies
Mobile ecosystem contributes 4.2% to the global GDP
The mobile sector has had a profound impact on national economies worldwide. According to the
GSMA, sector contribution can be broken down into four elements: the direct contribution of mobile
operators; the direct contribution of the rest of the mobile ecosystem; the indirect impact on the
broader economy; and the increase in productivity brought about by the use of mobile technologies.
By 2020, mobile technology is
expected to generate a total
economic value of nearly
USD4trn, vs. USD3trn in 2015
Overall, considering direct, indirect and productivity impacts, in 2015 the mobile industry generated
USD3trn to the world economy in economic value added terms, a contribution of 4.2% of the world’s
total GDP. In addition to the direct and indirect contribution to GDP by mobile operators and the
mobile ecosystem, an estimated 2.2% of 2015’s global GDP can be attributed to the increased
productivity brought about by the widespread use of mobile technology (chart below). This effect
varies significantly by country and sector. By 2020, mobile technology is expected to generate a total
economic value of nearly USD4trn.
Total (direct and indirect) contribution to GDP of USD3trn in 2015
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Mobile Operators
Related Industries
Source: THE MOBILE ECONOMY 2016, GSMA
8
General Economy
Productivity
Improvement
Total Impact
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Global mobile connections penetration to rise from 63% (2015) to
72% (2020)
More than half of the world’s population now has at least one mobile connection
2015 saw continued growth in the mobile industry, with more than 7.6bn mobile connections
(representing 4.7bn unique subscribers). Over half of the world’s population now has at least one
mobile subscription, driven by the declining costs of mobile hand sets and consumer tariffs, with
advances in technology and infrastructure. Ten years ago, this proportion was only 20%. By 2020,
c72%of the global population is estimated to have a mobile subscription, with the unique subscriber
base reaching 5.6bn.
The penetration rate in
emerging markets was c59% at
the end of 2015 and is
expected to reach 70% by 2020
Unique subscriber penetration in the developed world is already high and approaching saturation,
standing at 84% at the end of 2015. In contrast, the penetration rate in emerging markets was c59%
at the end of 2015, but is expected to increase to 70% by 2020. At the end of this growth spectrum is
Sub-Saharan Africa, which was still the world’s most under-penetrated region (see chart below).
Unique subscriber penetration by region
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
World
Developed
Developing
Europe
2015
CIS
Northern
America
LATAM
Asia Pacif ic
2020
MENA
Sub-Saharan
Africa
Source: THE MOBILE ECONOMY 2016, GSMA
Mobile technology is at the heart of the new digital ecosystem
The developments in mobile
technology and its rapid
penetration have opened an
entirely new digital
ecosystem, impacting every
aspect of society
Mobile technology and increased access to information has been seen as the most significant
development of the past few decades. The initial mobile phones provided only the voice calls and
then SMS, followed by the addition of internet access (GPRS) features with basic speed good
enough for sending emails. Thereafter, the focus shifted to higher speed 3G and more advanced 4G
technologies, specifically designed from a data connectivity perspective. These subsequent
technologies have provided not only increased data speeds and system throughput but have allowed
more users to connect to mobile networks without overburdening them.
Smartphones went a step further and brought mobile internet to consumers. Now, mobile
applications, or apps, have redefined consumer experiences in many aspects of daily life, as well as
creating a range of new business opportunities and services. As technology continues to evolve, it
will increasingly link the digital and physical worlds. The global app market was cUSD86bn in 2014
(+26% y-o-y), with a large share of growth coming from emerging markets such as India and China.
Three platforms (Google, Apple and Amazon) currently dominate the global app market.
Smartphones and apps have simplified online shopping for customers, making it more convenient.
As a result, the digital commerce industry is forecast to grow from USD1.7trn in 2014 to USD3trn in
2018 and mobile commerce is forecast to account for 21% of total digital commerce by 2018, up from
12% in 2014 (see chart overleaf).
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Growth of the global digital commerce market
3500
3000
2500
2000
1500
204
133
1000
2356
2143
1922
1700
1471
1233
500
415
298
626
516
0
2013
2014
2015
E-commerce(USD bn)
2016
2017
M-commerce (USD bn)
2018
Source: THE MOBILE ECONOMY INDIA 2015, GSMA
More people have mobile connections than other basic services
Low and middle income countries face various social challenges. These economies suffer from
high economic and social inequality. Large rural populations face particular difficulties around
access to basic infrastructure and services such as education, healthcare, banking, electricity
and clean water supplies. However, as of December 2013, many emerging markets had higher
levels of mobile access than access to other basic services such as electricity, sanitation and
financial services (Source: GSMA: THE MOBILE ECONOMY 2014). For example, out of a
population of 182m, 80m (44%) people in Nigeria live without access to electricity, and 56m
(31%) without access to clean water: but less than 40m (22%) people are without mobile.
Literacy Rate for 15+ age (% of population)
% of population
95 95
100
90
80
70
60
50
40
79
60
60
40
Bangladesh
India
S Africa
Indonesia
Mexico
Brazil
Turkey
China
23
20
Source: World Bank 2016 Database, with latest data available for 2012
94
94
93
91
72
69
60
Bangladesh
80
India
85
Kenya
96
Brazil
99
Indonesia
100
S Africa
100
China
100
100
Kenya
Nos.
Mexico
Access to electricity (% of population)
Turkey
Mobile technology can be seen
as one of the most significant
technologies of the past
few decades
Source: World Bank 2016 Database, Data available for 2013 (South Africa 2012;
Indonesia, India 2011; China 2010; Kenya 2007)
Comparing bank account penetration to mobile subscriptions (per 100 people)
160
140
120
100
80
60
40
20
0
China
S Africa
Brazil
Turkey
Kenya
Bank accounts (per 100 people)
Source: World Bank 2016 Database, Global Financial Development Report 2015/16, World Bank
10
India
Mexic o
Indonesia Bangladesh
Mobile subscriptions (per 100 people)
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Delivering cost-effective and long-distance solutions
Mobile technology has acted
as a great equaliser in
bringing opportunities to
those who need them most
Developments in mobile technology and increased access to information are already being
seen as one of the most significant technologies of the past few decades. Mobile connectivity,
customer data and distribution networks are enabling innovative new products and services that
help extend access of various other basic services to populations in rural and remote areas.
Technology is delivering cost-effective solutions to address a range of social challenges in
areas such as agrarian information, education, financial services and healthcare. The social
impact of this revolution is too significant to be ignored. We list below five areas that are seeing
a significant social impact from the evolution of mobile, especially in the emerging economies.
Overview of the five mobile services
The five services having a significant social impact are: (i) mobile money, (ii) m-Health, (iii) mEducation, (iv) m-Agriculture, and (v) disaster response. The first three services are
expected to provide a sizeable (USD210bn) market opportunity for investors, especially the
Telecom operators.
1. Mobile money
A large proportion of populations in emerging markets are migrant workers who need a system that
enables them to send money back home to their families. ‘Mobile money’ is meeting this requirement
and enabling financial inclusion of unbanked populations. The service is secure, convenient and
affordable versus cash-based operations and is currently available in over 60% of the world’s
emerging markets (Source: GSMA). Mobile money operators are now building a broader payments
ecosystem to evolve the service to the next level. The development of mobile financial services
including mobile insurance, savings and credit will deepen financial inclusion by offering services
beyond simply money transfers and payments. Example: In March 2007, Kenya’s largest mobile
network operator, Safaricom (an associate of Vodafone) launched M-Pesa, an innovative payment
service for the unbanked population. It later extended the service to other countries and regions such
as Afghanistan, Eastern Europe, Egypt, India, Lesotho, Mozambique, Republic of Congo, South
Africa and Tanzania. By the end of September 2015, M-Pesa had 23.4 million active customers.
2. m-Health
High mortality and morbidity rates in emerging markets can be attributed to a lack of: (i) basic
health services, and (ii) awareness amongst large sections of population. Mobile is not only
helping to close the information gap but is also facilitating the delivery of health services to
under-served populations through the use of SMS, MMS, email, voice and IVR technologies. mHealth is helping to combat infectious diseases, and delivers remote nutritional health and
treatment for a variety of health conditions. It is also reducing the cost of medical facilities, even
in developed economies. Example: In Africa about 200,000 women die each year through
complications during pregnancy or childbirth. ‘Mobile-baby’ is an m-Health service being
implemented in Nigeria and Tanzania (known as ‘Safer Deliveries’ in Tanzania). The service is
aimed at reducing mother and child mortality by helping pregnant women in rural areas reach
hospital. ‘Mobile-baby’ allows medical practitioners to send ultrasound images, video clips and
3D scans directly from ultrasound machines to mobile phones via SMS, MMS and email,
providing real-time remote medical diagnostics. The service is resulting in reduced mortality
rates, wherever practiced, according to GSMA.
3. m-Education
The potential of the mobile industry to improve and extend education for millions of people
around the world is high. Mobile connectivity in learning offers the opportunity to tailor content to
a student’s ability and deliver it in a more ‘digestible’ format than traditional educational
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approaches. The reach of mobile broadband offers opportunities to extend and improve
education in remote areas of developing countries or in the aftermath of natural disasters.
Examples: In Kenya the mobile operator Safaricom is enabling many of the country’s 7,000
state secondary schools to access online educational content recorded at the Starehe Boys
Centre School (one of Kenya’s prestigious institutes, which receives over 50,000 applications
for admissions every year); and after the 2011 Japanese earthquake, a partnership between an
educational services provider, a mobile learning platform provider and a global Information and
Communications Technology (ICT) solutions firm allowed school children in Ishinomaki – one of
the most affected parts of Japan, where many students had lost both their home and their
school – to study via mobile tablet for their high school entry examinations. The students were
able to work at their own pace, connecting via WiFi or 3G and almost all of the 120 students
involved passed their entrance examinations despite the challenges they had faced. By April
2013 the system will be used by at least 5% of domestic Japanese educational institutions and
a roll out in Asia, Africa and Central/South America is planned.
4. m-Agriculture
One of the key reasons for the relative underperformance of farmers in many emerging markets
(vs. their peers in the developed markets) is the lack of access to critical indicators such as
weather forecasts, tips on combatting pests and diseases, guidance on soil quality and its
treatment, movement of crop pricing and the demand-supply scenario. The information gap is
more prevalent with small-scale, poor farmers that lack infrastructure. Mobile technology is
helping to bridge this information gap by equipping farmers with quality and actionable
information at a low cost. Example: mKisan is a service initiated by the Government of India in
2012 with a focus on farmers to provide comprehensive information and advice on crops and
livestock including information on market prices, and pest & disease alerts. For the period 25
May 2013 to 04 April 2016, the advice count stands at 333, 758, with advice circulated in
various Indian languages on SMS numbering over 10bn (source: http://mkisan.gov.in).
5. Disaster Response
Mobile networks can play an important role in disaster response and crisis management given
their resilience and ability to facilitate critical communication between humanitarian agencies,
affected populations and the international community. Example: Nepal Earthquake: In April
2015 a 7.8 magnitude earthquake hit Nepal, followed by a series of powerful aftershocks.
Mobile operators in Nepal worked to restore critical services after hundreds of sites across the
country were reported down either due to infrastructure damage or lack of power. Operators
also provided subscribers with free SMS and credit to ensure people could connect with family
and friends. Some operators supported rescue and emergency response teams and members
of the media through the provision of SIM cards and data connectivity. A number of operators
worldwide offered free SMS and international long-distance calls to Nepal.
Sources: www.gsma.com, GSMA: Case Study Tigo Kilimo, Tanzania, GSMA: THE MOBILE
ECONOMY 2014, GSMA: THE MOBILE ECONOMY 2015
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Mobile money revolution
 Of 2bn people without a bank account in the low and middle income
countries c1bn have a mobile connection
 Mobile money is now available in 85% of the countries that lack a formal
banking system and in three-quarters of the mobile money markets,
agent outlets outnumber bank branches
 The mobile money industry is set to grow six-fold by 2019 to USD78bn,
implying significant opportunity for mobile operators
Over one billion people with a mobile connection do not have a
bank account
Financial inclusion average is
estimated at c40% for
developing countries,
whereas for most developed
countries, this ratio is c90%
Financial inclusion in lower and middle income countries is at c40%, versus over 90% in most
developed countries. The lack of access to financial services of the poorest households limits
their ability to manage daily risks and to protect themselves from financial shocks. These people
rely instead on informal financial services that can be expensive and risky. A 2010 report Mobile
Money Market Sizing Study by CGAP, GSMA, and McKinsey & Company estimated that c2.5bn
people in the lower and middle income countries are unbanked. However, more than one billion
of these people had a mobile connection (source: GSMA: THE MOBILE ECONOMY 2014).
Since 2010, unique mobile connections have increased c1.25bn. The World Bank’s latest
estimate of the global unbanked population still exceeds two billion: it is likely that at least one
billion of these people have a mobile connection. Thus this mobile platform can be utilised for
financial inclusion of these people, providing them with access to financial services such as
payments, transfers, savings, and others, in more cost-efficient, safe and convenient manner.
Mobile money services are now available in 85% of the countries
where population lacks access to formal financial institutions
Around one billion mobile
money transactions were
made globally in December
2015
From 2005 M-Pesa pilot launch in Kenya, to 93 countries in 2015
Based on GSMA data, it can be concluded that in 2005, mobile money services existed in
around five countries in some form or another. However, it appears that the size of these
services was marginal. A new chapter was opened in the history of mobile money when
Safaricom (a Vodafone subsidiary) launched its M-Pesa pilot in Kenya as a Corporate Social
Responsibility project. Thereafter, mobile money services have spread across much of Africa,
Asia, Latin America, Europe and the Middle East. Currently, there are more than 271 live mobile
money services in 93 countries, covering 85% of the countries where the majority of the
population lacks access to a formal financial institution. Average daily transaction volume in
mobile money in December 2015 was 33m.
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411m consumers at end 2015; in three-quarters of the mobile money markets, agent outlets
outnumber bank branches
The number of registered mobile money accounts globally grew to 411m at end 2015 from 299m at
end 2014. Sub-Saharan Africa still has the majority of mobile money accounts and in East Africa, half
of mobile connections are linked to one. Globally, there are 134m active mobile money accounts
(accounts which were active for 90 days).
In three-quarters of the
markets where mobile money
is available, mobile money
agent outlets outnumber
bank branches
The size and reach of mobile money agent networks is increasing fast, now outnumbering the
traditional financial and remittance service networks. The number of global mobile money agent
networks globally grew by 46% in 2014 to 2.3 million outlets. In three-quarters of the markets where
mobile money is available, agent outlets outnumber bank branches.
Number of live mobile money services
(2001-2015)
300
271
255
232
250
200
150
Registered accounts
146
Active accounts
174
200
150
100
116
100
50
Numbers of registered and active
customer mobile accounts by region,
(millions, 2014)
66
1
1
1
4
5
6 10 16
50
2003
77
22
38
38
9
22
5
15 6
0
0
2001
62
2005 2007 2009 2011
Live mobil e money servi ces
2013
2015
Source: GSMA: THE MOBILE ECONOMY 2015
Africa*
South Asia
MENA
East Asia
and Pacific
LAC**
Source: ASIA PACIFIC MOBILE ECONOMY 2015, *Sub-Saharan Africa, ** Latin
America and Caribbean
Summary of some key developments in the mobile money industry
Year
Markets/ No. of
Countries Services
2005
5
2007
2008
2009
10
Registered
accounts (in
millions)
No. of
Transactions
per month (in
million)
Monthly
transactions
value (in USD
bn)
36
2010
2011
72
73
109
60m
182m
3.8bn
2012
72
150
82m
224.2m
4.6bn
2013
84
219
203m
431m
7.4bn
2014
89
255
299m
717m
16.3bn
2015
93
271
411m
1,000m
n.a.
Comments
SMART Money launch in Philippines in 2001; Safaricom floats the mobile money service,
M-Pesa concept (pilot program) in Nigeria
Vodafone company Safaricom launched M-Pesa in Kenya
Vodacom launched M-Pesa in Tanzania in 2008
MTN launched MTN MobileMoney in Uganda in 2009; Tameer Bank and Telenor Pakistan
launched EasyPaisa; In Afghanistan, Roshan launched M-Paisa in collaboration with
Vodafone and the Ministry of the Interior
Vodacom and Nedbank launched M-Pesa service in South Africa in 2010
33 markets have 2 or more mobile money services; ICICI bank launched M-Pesa in India in
2011; bKash launched in Bangladesh in 2011
40 markets have at least two mobile money services, 18 have more than two services and
10 have more than three
52 markets have at least 2 mobile money services ; Some of markets initiated in 2013 are:
Bolivia, Brazil, Egypt, Ethiopia, Guyana, Jamaica, Tajikistan, Togo, and Vietnam; 13%
mobile money services are delivered over the counter
56 markets have at least two mobile money services; Interconnection services started in
Pakistan, Sri Lanka and Tanzania; Some of the new markets entered – Dominican
Republic, Myanmar, Panama, Romania, Sudan and Timor-Leste; 10% mobile money
services are delivered over the counter
At the end of December 2015 there were 60 markets with at least two mobile money
services, and many even have three or more; more than half of the new services launched
in 2015 were outside the Sub-Saharan African countries; over 100 new service launches
are planned
Source: GSMA, HSBC: Note: the monthly transactions data and value is for specific months as noted here. 2011- the data is for December 2011; 2012 and 2013- the data is for June 2012 and 2013 respectively, 2014- the data is for December 2014 , n.a. is
not available
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6 April 2016
How is mobile money different from mobile banking?
Mobile money facilitates many day-to-day activities (see chart below), similar to mobile banking.
However, a mobile money account holder does not necessarily need a bank account to perform all
these activities – unlike a mandatory bank account for mobile banking. The other key difference
currently in the two services relates to the limits on cash input and output, interoperability and
international transfers in many cases. Some of these differences are reducing and are likely to
disappear over coming years, at least in few markets, if not globally.
Mobile money serves multiple purposes
Register at local
shops/ easily
accessible outlets
Remit money
affordably at anytime
and to anywhere
Store money
safely and earn
interest
Convert e-money
to cash (cash-out)
Ease-of-use is at the heart of m obile money service
Convert cash to
electronic (e)
money (cash-in)
Pay utility/ online
purchase bills
Make payments at
stores through
prepaid mobile
money cards
Earn discounts on
purchases or free
airtime
Source: HSBC
Market estimated to grow over six-fold to USD78bn by 2019
Middle East and Africa is the
largest market, followed by
Asia-Pacific
A research agency “Markets and Markets” estimates the mobile money market will grow to USD78bn
by 2019, from cUSD12bn in 2014. The agency expects Middle East and Africa (MEA) to remain the
largest in terms of market size, whereas Asia-Pacific (APAC) and North America (NA) are expected
to experience increased market traction during the forecast period.
Whilst Sub-Saharan Africa still accounts for c52% of live services globally, half of all new launches in
2014/15 were outside the region. During 2015, 16 new services were rolled out in eight new markets
– Bolivia, Brazil, Congo, Ethiopia, Ecuador, Peru, Somalia and Seychelles.
We list below some of the key catalysts which in our view will continue to drive the market (see the
chart on the previous page). For markets where financial inclusion is already high, the rise of e-retail
consumerism could drive growth.
Six key drivers of mobile money growth
Low financial
inclusion
Increasing
mobile
penetration
Supportive
regulation
Mobile
m oney
Better service
proposition
Easy & secure
transaction
Interconnection
&
interoperability
Source: HSBC
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6 April 2016
1.
Financial inclusion in some
of the developing economies
is in 20’s too, way below the
ratio in developed world
countries
Low financial inclusion
The percentage of the population with bank accounts in developed countries is significantly more
than in the emerging markets (see chart below), mainly due to the poor penetration of banks.
The chart below shows the number of bank accounts and ATMs in some of the high income and low
and middle income countries. There are on average 24 bank branches and ATMs per 100,000
people in low and middle income countries versus 93 in the high income countries. Lower per capita
income in rural areas and a higher cost of bank operations are the key reasons for this poor bank
penetration.
Percentage of populations with bank account in banks/ any financial institution
%
100
99
99
94
94
79
80
69
68
57
60
55
53
39
40
36
29
20
Bangladesh
Indonesia
Mexic o
India
Kenya
Turkey
Brazil
S Africa
China
United
States
S Korea
Australia
United
Kingdom
0
Source: World Bank 2016 database
Number of bank branches and ATMs per 100,000 people
Nos. per 100,000 people
300
266
146
66
62
57
50
28
25
18
13
9
Bangladesh
100
Kenya
163
150
India
184
Indonesia
205
200
ATMs
China
250
Branches
Mexic o
S Africa
Turkey
United
Kingdom
Brazil
Australia
US
S Korea
0
Source: World Bank 2016 database; Note: All figures are pertaining to 2014 figures; US ATM data is of 2009, UK commercial branches data is of 2013
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2.
Developing countries are
seeing rapid growth in mobile
penetration
Increasing mobile penetration
While mobile penetration in the developed world is fast approaching maturity, some of the developing
countries are not too far behind. However, there is a still a segment of populations in some of the
emerging countries that is yet to be brought within the mobile network. The wide variation across
countries, especially the key Ems, implies significant growth potential for mobile money. See chart
on page 21 and the Appendix for more details on the individual market potential.
Mobile subscriptions (per 100 people)
United
States
S Korea
United
Kingdom
Indonesia
Australia
Brazil
98
95
92
83
76
74
74
Kenya
116
India
124
Bangladesh
126
Mexic o
131
China
139
Turkey
150
S Africa
Nos.
160
140
120
100
80
60
40
20
0
Source: World Bank 2016 Database
3.
One of the central objectives of
the mobile money concept was
to allow easy money transfer
for people not used to banking
Ease of operations and security
The ease of conducting this activity has been one of the key growth drivers for the industry. Mobile
money can remove the need for people in rural and remote locations to miss work and lose wages in
order to visit a bank branch. Mobile money operations can be taken to the doorstep of un-serviced
individuals in remote locations through business correspondents, for example, local shop owners.
Mobile money service providers are required to perform their fiduciary duty and also safeguard the
interests of customers by deploying a stable, sustainable, secure and responsible system for
financial transactions. The key features of the service cover: (i) protection of electronic money
generated and the fund deposited in an escrow account, (ii) secure customer identification on the
device and information exchange on the network, (iii) legal compliance as well as mitigating
reputational risk, and (iv) a customer data protection and effective complaint redress procedure.
4.
By end 2015, there were at
least five interoperable
markets: Pakistan, Sri Lanka,
Tanzania, Indonesia and
Madagascar
Interconnections and Interoperability between telecom operators
Globally, 56 markets now have at least two live mobile money services, and 38 of these markets
have three or more live services. As markets become increasingly competitive, mobile operators are
showing a growing interest in the development of interoperable solutions. By end 2015, there were at
least five interoperable markets: Pakistan, Sri Lanka, Tanzania, Indonesia and Madagascar. In
addition, operators in other markets are looking to interconnect their services. It is likely that accountto-account interoperability will increase transaction volumes and revenues by making it easier for
consumers and businesses to send money domestically across networks.
5.
Enhancing the service proposition
The range of payment services offered by mobile money providers is increasing, enhancing the
attraction of mobile money propositions and delivering greater benefits to customers. These new
services include international remittances, merchant payments, and bulk payments such as salaries
and sort of government to people transfers such as subsidies.
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6 April 2016
Various financial services that
can be offered include credit,
insurance, savings benefits,
international remittances,
merchant payments and
bulk payments

Mobile credit services are being fuelled in part by new partnerships between mobile operators
and banks. Of the 32 live services across the globe in 15 countries, 12 were launched in 2014.

Sixteen new mobile insurance services were launched in 2014, taking the total to 100 live
services, and as of June 2014, 17 million policies had been issued.

Financial services companies and mobile operators are making increasing use of the
mobile money infrastructure to offer saving facilities: 10m dedicated mobile savings
accounts had been opened worldwide by December 2014. Some service providers are
beginning to pay out interest accrued on the trust or escrow account, thereby incentivising
customers to use their mobile wallet.
6.
Supportive framework
More countries are now framing regulations to support the penetration of mobile money services:

India: During 2015, the Reserve Bank of India (RBI) approved "in-principle" 11 players to set up
payments banks (PBs). These PBs can accept deposits from individuals and businesses with a
limit of INR100, 000 per customer and can also provide payments and remittance services
through their branches, ATMs and business correspondents (BC). The central bank is also
looking at the development of the unified payments interface (UPI) which will enable seamless
interoperability among banks and mobile wallets.

Kenya: The National Payment System Regulation of 2014 mandates Interoperability, as well as
allowing a non-exclusive mobile money distribution channel.
Supply chains challenges
The figure below gives the supply chain of mobile money service. It clearly highlights the importance
of agents and the role they play with collection, deposit and withdrawal of cash. We note that:

Agents remain the physical backbone and face of mobile money to digitise and disburse cash
(versus ATMs, banks, etc.), representing more than 90.5% of the cash-in and cash-out footprint.
Schematic of M-PESA
Cash to e-money
E-money to cash
Electronic money trail
Remittance
Customer B
Customer A
Customer deposits cash with the
agent to buy e-money
Agent to customer
account
Physical money
trail
Customer
account
Source: HSBC
18
Customer gets cash from the
agent in ex change for e-money
Effective e-money transfer
Agent
account
Customer
account
Agent buy s e-money with
cash to maintain float
Customer to
agent account
Agent
account
Agent w ithdraw s cash to
reduce float
Mobile money escrow account
(MNO holds the account in a bank)
Agent X
Agent Y
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6 April 2016

They also account for a significant cost of doing business, with an average of 54.4% of the top10 providers’ revenues going to agent commissions.

Mobile money is helping to empower women in Sub-Saharan Africa (SSA) through financial
independence, as according to the Cherie Blair Foundation, across Africa, 50% of agents
are women albeit most of them run small-scale operations. Potential for growth is strong,
however, as in markets with a high degree of gender segregation, female sales agents can
potentially access previously unserved female markets.
Summary of mobile money services across selected countries
Examples of mobile money / financial services
Countries
Ghana
Bangladesh
Bangladesh
Brazil
Tanzania
Romania
India and Uganda
India
Mali, Senegal and Côte d’Ivoire
Pakistan
Mexico
Guyana
Brazil
Jamaica
Bolivia
India
Pakistan
Srilanka
Idonesia
Mexico
Papua New Guinea
Bangladesh
India
Venezuela
India
Pakistan
Malaysia
Tanzania
Countries with Orange money
operations(1)
Indonesia
Key African Markets(2)
Idonesia
China
China
Service Name
‘3 for free’
Start Year No of users/ target users/ Transaction value
2014
One million policies initiated by 2014 end ( Airtel subscribers who top-up more than GHS 5
(USD 1.50) per month receive free life, accident and hospital cover for the following month)
Nivroy Life Insurance
2013
3.6m customers as of 2014 ( Grameenphone subscribers get free life insurance cover
based on the amount of airtime used in the previous month)
Bima Islamic Life
2012
5m customers as of Nov 2014 ( A free life insurance product by Telecom operator Robi
Insurance
underwritten by Prime Islami Life Insurance and powered by BIMA)
TIM Multibank Caixa
2015
Targeting 50% of the one million subscribers
TigoPesa
2014
3.5m customers (2014)
M-Pesa
2014
Obopay
2014
Mobikwik's Mobile wallet 2014
8m users(2015)
Orange Money
2013
EUR30m was exchanged via Orange Money in 2014
Mobicash
2013
2.5m mobile accounts registered by Mobicash (2015)
Ezuza
2013
Mobile Money Guyana Inc 2013
Potential market is 600,000 cellular subscribers in Guyana(2014)
Zuum
2013
170,000 active customers (2014)
CONEC Mobile Wallet
2013
3000 customers (Jan 2015)
Tigo Money
2013
Transfers surpassed Bs1bn in 2015 (including Bs690m from unbanked population)
Airtel Money India
2012
1.3m users(2014) and the total value of transactions increased to INR30.5m
TimePey
2012
Ez Cash
2012
One million users(Dec 2013)
XL Tunai
2012
800,000 users(2014)
Boom
2012
MiCash
2012
150,000 active subscribers as of July 2013
bKash
2011
18m accounts(2015)
Zipcash
2011
Movilway eWallet
2011
MoneyOnMobile
2010
121m users (2015) and 236,000 merchants to enable their mobile money solution.
Easypaisa
2009
100m transactions with a throughput of more than USD 1.4bn(2013)
M-money
2009
Zap
2009
4m registered users in Tanzania and 7.5m in Tanzania, Uganda and Kenya (2014)
Orange Money
2008
13m users in (January 2015); more than EUR4.5bn worth of transactions in 2014
Dompetku
M-Pesa
T cash
Tencent's TenPay
Alipay
2008
2007
2007
2005
2004
23.4m active customers of M-Pesa (September,2015)
500,000 registered users(2013)
650m active users(2015)
350m registered users (2015); handled USD778bn in the year ending June 2014
Source: www.tim.com.br, GSMA: Tanzania-Enabling-Mobile-Money-Policies, www.vodafone.com, www.obopay.com, www.orange.com, www.mobilemoney.com.pk, blog-english.ezuza.com, www.inewsguyana.com,
2013.mobilemoneylatam.com, www.airtel.in, www.timepey.com, GSMA: Enabling Mobile Money Policies in Sri Lanka, www.xl.co.id, useboom.com, www.cgap.org, www.medianama.com, www.money-on-mobile.net, GSMA: TelenorPakistan, ir.westernunion.com, www.zain.com, indosatooredoo.com, www.vodafone.com, www.cybersource.com, , www.mozido.com, www.tigo.com.bo, www.microbank.com.pg, www.bnamericas.com, MicroEnsure.pdf,
www.microensure.com, GSMA: 2014 Mobile financial services for the unbanked
Note: 1. Botswana, Cameroon, Côte d’Ivoire, Egypt, Guinea, Jordan, Kenya, Mali, Madagascar, Mauritius, Niger, Senegal, and Tunisia ; 2. Key African Markets includes Kenya, Tanzania, Afghanistan, South Africa, Eastern Europe,
Mozambique, Lesotho, Republic of Congo, India and Egypt
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Key players in mobile money services
Key players include telecom operators with presence in low and middle income countries which
have high share of unbanked population. Other beneficiaries include the banks which have
joined hands with the mobile operators and are seeing the benefits of increasing financial
inclusion through mobile money services. We list below seven mobile operators with significant
presence in Africa and the Indian sub-continent and one Kenyan bank, which in our view are the
likely beneficiaries of mobile money growth. Of the eight listed stocks, seven are covered by
HSBC analysts (see table below).
Eight telecom stocks with increasing exposure to mobile money services primarily from HSBC coverage
Name
Safaricom
Vodacom
Millicom
Telenor
SCOM.NR
VODJ.J
MICsdb.ST
TEL.OL
6,664
15,130
5,459
24,000
KES
ZAR
SEK
NOK
16.9
156.6
444.2
135.6
n.a.
157.0
420.0
150.0
n.a.
0%
-5%
11%
Mobile
MFS
financial
customer
services base as a %
(MFS) of total mobile
revenue share subscribers
NR
20%
60%
Hold
2.3%
15%
Hold
1.9%
18%
Hold
na
16%
MTN
Vodafone
MTNJ.J
VOD.L
15,413
82,532
ZAR
GBPp
128.6
217.9
160.0
260.0
24%
19%
Buy
Buy
na
na
BRTI.BO
21,298
INR
354.5
430.0
21%
Buy
na
Airtel
Ticker Mcap (USDm)
Currency
CP
TP
Upside/
downside (%)
Rating
Analyst
n.a.
Herve Drouet
Luigi Minerva
Dominik
Klarmann
15% Herve Drouet
4% Stephen
Howard
2% Rajiv Sharma
Source: HSBC estimates, Bloomberg, Thomson Reuters Datastream
Two banks with key exposure to mobile money and mobile financial services
Name
Source: HSBC estimates, Bloomberg, Thomson Reuters Datastream
20
Ticker Mcap (USD
bn)
KCB. NR
EQTY.NR
1.2
1.4
Currency
CP
TP
KES
KES
41.75
40
50
48
Upside/
downside
(%)
19.80%
20.00%
Rating
Analyst
Buy
Buy
Henry Hall
Henry Hall
Middle East & N Afr ica
UMS
317m
RMMS
37.9m
AMMS
8.5m
APAC
UMS
1,176m
RMMS
98.7m
AMMS
26.8m
6 April 2016
Mobile money potential across various regions /countries
LatAm & Car ibbean
Legends
Activ e mobile subscriber
UMS
317m
RMMS
14.9m
AMMS
6.2m
Registered mobile subscriber
Sub Sahar an Afr ic a
UMS
Unique Mobile Subscriber
RMMS
Registered Mobile Money Subscriber
AMMS
Active Mobile Money Subscriber
UMS
353m
RMMS
146m
AMMS
61.9m
Financial inclusion*
Mobile subscription (per 100 people)
Source: © GSMA Intelligence 2016, World Bank Database 2016, HSBC calculations Note: financial inclusion* denotes the percentage of respondents who report having an account (by themselves or together with someone else). For 2011, this can be an account at a bank or another type of financial institution, and for 2014
this can be a mobile account as well (see year-specific definitions for details) (% age 15+)
abc
21
abc
6 April 2016
m-Health: third largest service
 Per-capita health spend in developing economies is less than 5% of
that in the developed world
 Three m-Health segments are: connected medical devices, mobile
applications and services
 The market is expected to grow six-fold to USD60bn by 2020; m-Health
services likely to see more rapid growth
80% of the world’s population but 11% of global healthcare bill
Low and middle income
countries have c80% of the
world’s population and
consume just 11% of the
world’s healthcare
Around 80% of the world’s population lives in developing countries but is estimated to consume
just 11% of the world’s healthcare spending. This population suffers from nearly 95% of the
diseases given lack of access to adequate healthcare (GSMA report 2013). The number of
physicians available for a population size of 1,000 is 1.15 vs. a ratio of 3.10 for the developed
world. In addition, developed countries’ populations are ageing, putting an ever-increasing
burden on healthcare services. As a result of these factors, the challenge to ensure quality
healthcare provision is significant across both developed and emerging economies, with
demand for healthcare resources often outstripping governments’ abilities to provide them.
Mobile technology provides solutions to the issues mentioned above, primarily by changing the way
patients communicate with the healthcare ecosystem and the way they monitor their own bodies.
Mobile is already helping to (i) create awareness of various diseases, (ii) monitor patients remotely,
(iii) book/cancel/reschedule medical appointments, (iv) diagnose patients using data transfer
techniques, and (v) provide consultation/advice to patients using video and voice services.
Three segments of m-Health: devices, application and services
The m-Health solutions market is segmented into three: (i) connected medical devices,
(ii) m-Health applications, and (iii) m-Health services.
Connected devices likely to
be the largest of the
three segments
Three segments of m-Health industry
Segments
Connected medical devices
m-Health applications
m-Health services
Description
Blood glucose meters, ECG monitors, blood pressure monitors, pulse oximeters, peak flow meters,
neurological monitoring devices, sleep apnoea monitors, multi-parameter trackers, and others
Comprise healthcare apps for patients and medical apps for healthcare professionals
Segmented into remote monitoring, diagnostic and consultation, treatment, fitness and wellness,
prevention, and healthcare system strengthening services.
Source: MARKETS AND MARKETS
Connected medical devices: Blood pressure (BP) monitors accounted for the largest share of
the global connected medical devices market in 2014, with blood glucose meters (BGM)
another fast-growing product. Various other products with multiple monitoring parameters and
functions are now also available. For example, a company called VEESAG (formerly known as
VESAG) has a Mobile-based Personal Emergency Response System (MPERS) that uses the
mobile network to monitor patients’ health and summon help in an emergency. Functionality
22

6 April 2016
built into a watch can remind the wearer to take medicines and interfaces wirelessly with other
VEESAG products including blood pressure, haemoglobin and heart rate monitors. In all, 17
health parameters can be monitored, which can then be reviewed by a doctor and preventative
action recommended. The watch is connected to a mobile network and allows the user to speak
with emergency responders or a helpdesk at the press of a button. It can even detect a fall and
automatically contact the helpdesk, giving the patient’s location via GPS. The watch is available in at
least 18 countries including Brazil, Russia, India, China, USA, Lebanon, Jamaica and Dubai. Other
opportunities also exist, for example in the field of maternal health.
m-Health applications: The segment comprises healthcare apps for patients and medical apps
for healthcare professionals. The growing trend of leading a healthy lifestyle by monitoring
various health parameters on a daily basis is one of the key factors driving the growth of
healthcare apps and hence the m-Health application segment.
Around 300,000 women die
each year due to pregnancyrelated complications
m-Health services: The market is segmented into remote monitoring, diagnostic and consultation,
treatment, fitness and wellness, prevention, and healthcare system strengthening services. Remote
monitoring accounted for the largest share global m-Health services market (c63.5%). With the
World Health Organisation estimating that almost 300,000 women die each year due to pregnancy
or pregnancy-related complications, mobile technology can be used to educate and inform mothers
and those who deliver children, especially in many low and middle income countries where the
majority of births are performed without a health professional present.
Schematic view of m-Health services supply chain
Hear
Beat
80
BPM
Remote Monitoring :
Monitoring physical
conditions.
1
2 3
4 15 2
16
7 48 5
49
* 70 8#
* 7
0
*
3
6
9
8
#
0
3G Network
2 3
5
Analyzing Physiological
Signals
• Heart Rate
• Step speed
• Posture, etc.
6
9
#
Permitted User
(Ex. Family
Members)
http://WWW
Sensor Middleware
(Web Server)
Wireless Sensor Unit:
• temperature
Environmental Sensor
(e.g., Thermometer)
ISM Brand
2
4
5
6
7
8
9
*
0
#
Data base
Wireless Sensor Unit:
• ECG
• Skin temperature
• 3-axis acceleration
3G Network
1
Analysis
Engine
(SENSORD)
3
Mobile Phone
of Care Person
ISM Brand
Cared Person
(e.g., Elderly Person)
Source: www.intechopen.com
© 2010 Sashima A, Ikeda T, Kurumatani K. Published in [short citation] under CC BY-NC-SA 3.0 license. Available from:
http://dx.doi.org/10.5772/7030http://dx.doi.org/10.5772/7030
23
abc
6 April 2016
Blood pressure monitoring using mobile technology
High blood pressure or hypertension is among the most common diseases in the world.
According to WHO (World Health Organisation) hypertension accounts for close to 10m deaths
worldwide every year. The prevalence of the disease is one of the highest with 22% adults
globally suffering from it. In the US, according to the Center for Disease Control and Prevention
(CDC), c70m American adults have high blood pressure and the nation spends over USD46bn
on the disease every year. Interestingly, even in a developed country such as the US, 39% of
people are unaware they have uncontrolled hypertension and 16% who are aware, do not seek
treatment. This could imply that spending on care of patients with hypertension is likely to grow
in the coming years as more people are treated.
Prevalence of high blood pressure (2014)
Breakdown of hypertension patients in the
US on disease awareness
30%
20%
Unaware
10%
Aware but
untreated
39%
45%
Under treatment
Source: WHO
16%
Africa
E Europe
S E Asia
W Europe
Global
Pacific
Americas
0%
Source: CDC
Self-Measured Blood Pressure Monitors (SMBP): According to the WHO, one of the
strategies to improve health outcomes for people with hypertension is self-monitoring of blood
pressure. SMBP technically refers to the regular measurement of a patient’s own blood
pressure. The current market size of blood pressure monitors globally is USD1bn and is
dominated by Omron, a Japanese manufacturer with 50% market share worldwide.
The first wireless blood pressure monitor that can be connected to smartphones was launched
by California-based start-up iHealth Labs in 2012. Following this, many other small players
including Qarido, Blip, as well as market leader Omron have launched their own versions of
smartphone connecting wireless blood pressure monitors. The devices currently available on
the market generally connect to smartphones through Bluetooth technology and the reading
from the smartphones can then be sent to clinicians through apps via the internet. The first WiFi enabled blood pressure monitor which directly sends data to clinicians through internet was
launched by Blip.
Blood glucose monitoring using mobile technology
Currently, healthcare
spending on diabetes
globally is pegged at
USD673bn, which translates
to c12% of the global
spending on healthcare
24
Diabetes is one of the most prevalent chronic diseases in the world with c415m people currently
affected. According to the International Diabetes Federation (IDF) this number is estimated to
increase to 642m by 2040. Currently, healthcare spending on diabetes globally is pegged at
USD673bn, which translates to c12% of global spending on healthcare. This is estimated to
exceed USD800bn by 2040. Furthermore, currently c47% of people with diabetes are
undiagnosed and so unaware of their condition. Hence the market for treatment, monitoring and
care is set to grow. We look at the diabetes monitoring market in this section and the use of
smartphones to provide better care.
abc
6 April 2016
Diabetes - number of patients and spend on the disease
Region
___ Patients (m) ____
2015
14
60
35
44
30
78
153
415
Africa
Europe
MENA
N America
LatAm
SE Asia
Pacific
World
Expenditure (USDbn)
2040
34
71
72
61
49
140
215
642
2015
3
156
17
348
35
7
106
672
Spending per patient
(USD)
2015
2040
239
161
2,609
2,447
483
430
7,856
6,446
1,169
1,139
94
92
693
619
1,623
1,250
2040
6
174
31
390
56
13
133
802
Source: IDF
Diabetes remains undiagnosed among
47% of the patients worldwide (2015)
Number of diabetic patients (m) in the
world and those using apps for care (m)
million persons
160
million persons
600
120
500
40
Pacific
Europe
SE Asia
Diagnosed
N America
Undiagnosed
MENA
LatAm
Africa
0
Source: IDF
70% CAGR
400
80
million persons
30
25
20
300
15
200
10
100
5
0
2013
Diabetes patients (lhs)
0
2018e
Patients using apps for care
Source: IDF, Sanofi
Self-monitoring blood glucose meters can be broadly classified into two: (1) blood glucose
meters (BGM) which uses blood samples in the device to determine the glucose level and (2)
continuous blood glucose monitors (CGM), which are attached to the body of the patient at all
times and continuously monitor the patient’s blood glucose level.
CGM market: The CGM device market is currently worth cUSD0.5bn and there are two main
players – Medtronic and Dexcom (see the company section of this report for more details on
these companies). According to estimates by Medtronic, the market currently serves much less
than 1% of the target population of 415m diabetes patients, thereby implying significant
potential for this market as companies reach the complete target population. Both Dexcom and
Medtronic launched CGM devices that connect with smartphones in 2015.
BGM market: According to Roche Holding AG, the global blood glucose monitoring market
stood at cUSD8bn in 2014. While there are CGM and BGM devices that can connect directly
with smartphones, it is still a small market. The first BGM that could be connected to a
smartphone, iBGStar, was launched by Sanofi in 2011. There were other small start-ups like
iHealth, TelCare, and Livongo that launched similar devices later. Companies like Roche and
Johnson & Johnson, the market leaders in BGM, started selling devices that could connect to
smartphones in 2014. The potential market opportunity for these devices can be assumed at
cUSD8bn (which is the current market size for BGM) or more with smartphone connectivity
becoming the norm rather than a special addition. Furthermore, with the growing number of
diabetes patients, the potential for growth remains strong.
25
abc
6 April 2016
Connected medical device launches
Device
Blood pressure monitors
Blood glucose meters
Blood glucose meters
Continuous blood glucose monitors
Company
iHealth, Qarido, Omron
Sanofi
Roche, LifeScan (Johnson & Johnson) - top two in traditional BGMs
Dexcom, Medtronic
Year
2012
2011
2014
2015
Source: Company reports
Cardiac monitoring using mobile technology
Two types of cardiac monitor are: 1) External monitors, commonly referred to as Event monitors,
which are designed for short-term use and are more commonly used. These include Holter and
Mobile Cardiac Telemetry Systems (MCT). (2) Implantable or insertable monitors that are
designed for long-term use and are placed under the skin of the patient for up to three years.
Market size: The current size as of 2015 for Event monitors is USD2.3bn and is forecast to
grow at a CAGR of 15% to USD4.7bn by 2020, according the company Biotricity. Implantable
monitors currently have a market size of USD600m but cover only 4% of stroke patients across
the US and Western Europe. Medtronic, one of the leaders in this segment, estimates that by
2020, 20% of the stroke patients will be using these monitors, implying a five-fold growth for
Implantable monitors in five years to USD3bn.
Mobile Cardiac Telemetry Systems (MCT): MCTs are the latest development in cardiac
monitoring devices with the capacity to continuously monitor and transmit data automatically to
remote sites. The sensors in these devices either transmit the data directly to remote sites
through mobile networks or in some cases, transfer the data initially to smartphones through
Bluetooth which is then sent to remote sites through mobile networks.
MCT current market size is USD918m, accounting for a 40% share in event monitor devices as
per Biotricity. Considering the ease of use, these devices are expected to dominate the event
monitor device market and replace most of the Holter monitors by 2020, according to Biotricity,
implying a market size of USD4.7bn for MCTs by 2020.
Stroke cases in the US and Western
Europe and share of people using
implantable monitors
Cardiac event monitor market
persons
400,000
(USDm)
5,000
300,000
4,000
200,000
3,000
100,000
5%
0
20%
2015
2020e
Stroke cases in the US and Western Europe
People using implantable monitors
Source: Medtronic
26
Holter monitors
MCTs
2,000
1,000
0
2015
Source: Biotricity
2020e
abc
6 April 2016
Six-fold growth in m-Health market size to cUSD60bn by 2020
Three different sources forecast the m-Health market to have grown to between USD59bn and
USD61bn from an estimated market size of USD11bn in 2014. North America accounted for the
largest share of the m-Health solutions market in 2014, followed by Europe, Asia-Pacific, Latin
America, and other regions. GSMA forecasts the addressable opportunity size for operators
at USD24bn.
Key market growth drivers, in our view are:

Increasing penetration of smart gadgets and increasing utilisation of connected medical devices
and m-Health apps in the management of chronic diseases,

Reduction in healthcare costs for governments, insurers and individuals through preventative
measures, thereby reducing the requirement for admission to hospital and enabling more
efficient use of doctors’ time,

Robust penetration of 3G and 4G networks to provide uninterrupted healthcare services and
rising focus on patient-centric healthcare delivery.
m-Health market size forecasts (including devices)
Source
2013e
2014e
2015e
2020e
Markets and markets
USD 11bn
USD 14.5bn
USD 59.15bn
Allied Market Research
8.3
PWC
USD 58.8bn
USD 61bn
Source: www.marketsandmarkets.com, allied market research, PWC (http://www.pwcmegatrends.co.uk/mylifeconnected/health.html)
27
abc
6 April 2016
Some examples of m-Health services across select countries
Some m-Health examples
Country
Service Name
Start No of users / target users
year
2014 25,000 doctors on the
platform (2015)
Offering
India
Ask the Doctor
Nigeria and
Ghana
Mobile Midwife
2014 Targeting 200,000 women in
Nigeria (2015) and 37,000
women in Ghana (2014)
The Grameen Foundation’s Mobile Midwife programme sends women daily texts and weekly
voicemails with advice during pregnancy and the first year of their child’s life. The basic version of the
service is free, with add-ons available for a fee.
India
Kilkari
2014 87,876 users (2014); 1,000
villages (2014)
The Kilkari programme (mobile voice message service) aims at delivering weekly messages to families
about pregnancy, family planning, nutrition, childbirth and maternal and child care. The service
comprises 64 messages at a cost of INR1 per message. The programme is expected to benefit 18.4
million pregnant women / new-borns and babies.
South Africa MomConnect
2014 Over 100,000 users(2014)
The primary aim of MomConnect is to improve maternal, new-born and child health through the use of
“sms” service integrated into maternal, new-born and child health services.
Cameron
My Healthline
2014 Orange Cameroon has
6,500,000 customers
(potential users)
With the country having just two doctors per 10,000 inhabitants, “My Healthline” service targets
response time of less than an hour for a personalised advice on contraception, HIV / AIDS, sexuality
and STDs from specialists. Orange will anonymise all questions, and then transmit them to a medical
service consisting of Cameroonian nurses and doctors. After analysis, the answer produced by the
healthcare professionals will be sent back to the customer by Orange.
USA
Telcare Blood
Glucose Meter
2014
Telcare Blood Glucose Meter (BGM) works without having to plug the meter into a computer, due to its
integrated cellular network. It can remind patients to reorder diabetes testing supplies (test strips,
lancets, etc) before they run out. The meter will also send individual data (through a free cellular
network) to the mytelcare.com website and store the readings in a database.
USA
Virtual Visits
2014
Enables patients to request telehealth appointments with physicians for acute conditions, including
colds, flu or sore throats. In addition, physicians will be able to send prescriptions to patients' preferred
pharmacies and provide referrals if they deem more direct medical care necessary
Links pregnant women to a primary healthcare unit through use of mobile phones receiving standard
sms reminders for care appointments and enables to reach a primary provider in case of acute or nonacute problems.
South Africa Wired mothers
2013
Helps users search for and identify the appropriate doctor to ask medical questions along with their
medical files. Doctors set their own rates and the number of follow-up questions that they allow.
India
Ayurvedic mobile 2013
health
Ayurvedic mobile health is an IVR-based Value Added Service (VAS) service in collaboration with JIVA
Ayurveda Group (with 150 doctors) to provide a round-the-clock consultation service.
Nigeria and
Tanzania
Mobile baby
Mobile baby is aimed at reducing mother and child mortality by helping pregnant women in rural areas reach
hospital. It allows medical practitioners to send ultrasound images and 3D scans directly from ultrasound
machines to mobile phones via SMS, MMS and email to provide remote medical diagnostics.
The objective of Aponjon is to register mothers as well as their relatives to influence positive maternal
and child health behaviours. Messages are delivered either via SMS or IVR, and the user can select
the most convenient time for delivery of the messages.
2011 1 million registration(2014)
Bangladesh Aponjon
2012 1,236,919 subscribers(2015)
Tanzania
Healthy
Pregnancy,
Healthy Baby
2012 1 million users(2015)and 55
Million free SMS
USA
Diabetes SelfManagement
Training
Healthy Pregnancy, Healthy Baby is a sms service which offers free text messages in Swahili for
pregnant women, mothers with new-borns up to 16 weeks old, as well as supporters of pregnant
women and new mothers. The service also offers enrolment as a ‘general information seeker’,
providing Tanzanians with a wide-range of information concerning healthy pregnancy and early
childhood care.
2011 29.1m diabetic patients (2014) The diabetes educators will deliver Diabetes Self-Management Training (DSMT) to patients using a
video application on the mobile devices. Training includes tips for eating healthy, being active,
monitoring blood sugar, taking drugs, and reducing risks.
USA
Text4Baby
2010 500,000 mothers(end 2013)
USA
GlowCaps
2010
Text4Baby comprises over 250 educational text messages on nutrition, delivery, pregnancy health,
immunisations and infant health. The service also provides links and toll-free numbers that can be
utilised for additional information and is offered in either English or Spanish
GlowCaps is an embedded wireless connection to respond to the patient with automated calls for any
missed dose, weekly progress reports, and refill reminders. It shares adherence with physicians and a
social network if the patient chooses.
Source: betakit.com, GSMA: Mobile_Midwife_Snapshot_Online, indianexpress.com, www.sanews.gov.za, healthcare.orange.com, www.diabetesnet.com, www.ihealthbeat.org, GSMA: GSMA-mHealth-Programme-high-resolution,
www.digit.in, GSMA: THE MOBILE ECONOMY 2015, www.mobilemamaalliance.org, www.medicare.gov, www.jnj.com, http://www.gsmamobileeconomyafrica.com/GSMA_ME_SubSaharanAfrica_Web_Singles.pdf
28
abc
6 April 2016
Key players in m-Health services
We identify three producers at the forefront of the technology to produce portable devices used
to diagnose and monitor patients for blood glucose or blood pressure.
Three key participants in the m-Health segment
Company
Dexcom
Ticker
Ccy
CP
M Cap
(USD bn)
DXCM.O USD 67.63
6.4
Medtronic
MDT.N USD 75.37
Omron
6645.T
JPY 3,125
Rating
NR
106.5
NR
7.2
NR
Service /
Segment
m-Health
(blood
glucose
monitoring
devices)
m-Health
(blood
glucose
monitoring
devices)
m-Health
(blood
pressure
monitoring
devices)
Exposure to service
Dexacom focuses on diabetes care devices and has c70% market share of continuous blood
glucose monitoring devices (CGM). The current market size of CGM is USD0.5bn vs USD8bn of
blood glucose meters (BGM), which do not perform continuous monitoring. The penetration of
CGMs is currently low, but expected to grow. Dexacom has products capable of sending blood
glucose readings to mobile apps, which can then be used for regular monitoring and patient care.
The company has guided for revenue growth of 35-40% p.a. over the next three to four years.
Medtronic is a competitor of Dexacom with c30% market share of the continuous blood glucose
monitoring devices (CGM). It also has products that can send blood glucose readings to mobile
apps. According to management, revenue for diabetes management business is expected to grow
at double digits, with the growth of CGM exceeding that of other devices.
Omron has c50% market share of blood pressure monitors. The current market for blood pressure
monitors is around USD1bn, which is likely to come from growing usage of these devices in the
emerging markets and growing awareness of hypertension even in developed countries. The
company has products capable of sending blood pressure readings to mobile apps and the
penetration of these products is on the rise, according to research from GfK on four key European
countries (source: Gfk,2014) .
Note: Prices as of 1 April 2016; Source: Bloomberg, Thomson Reuters Datastream, Company websites, HSBC
29
6 April 2016
abc
m-Education: devices are half
the market opportunity
 A theme relevant for all countries but dominated by developed world;
key drivers are improving quality, customisation and accessibility
 Two key segments are: (i) devices and (ii) content and services
 Market size (ex-devices) set to grow five-fold to USD38bn; and
USD70bn including devices by 2020
Theme currently dominated by developed world but key for EMs too
Globally, USD4trn is the estimated spend on education and this number is estimated to double to
USD8trn by 2020 (source: GSMA). Currently, m-Education is small segment of total spend; however,
over the coming years its share is expected to grow given the presence of various drivers. The
developed world – especially the US and Europe – are key markets for this service and the scenario
is unlikely to change at least during this decade.
Around 65% of the global
illiterate population is in Asia,
and another 30% in Africa
Around 58m children of primary age and 64m children of lower secondary school age are still out of
school (2012), with the low and middle income countries accounting for c95% of these children.
According to the World Bank data, c65% of this illiterate population lives in South and West Asia, and
another 30% is in Africa (2013 data). We expect m-Education to play a critical role in improving the
quality of education and reducing the school drop-out rate in developing countries.
Two key segments are devices and content and services
We broadly classify the m-Education industry into two categories, as summarised in the table below.
GSMA classifies m-Education offerings into seven product and solution archetypes: (i) educational ebooks and courses accessed through portable devices; (ii) learning management systems (LMS)
and authoring tools; (iii) game or simulation-based learning tools; (iv) collaboration tools; (v) adaptive
assessment services; (vi) test preparation support; and (vii) distance tutoring and homework support.
For example MobileDu – Pearson’s joint venture with Nokia in China – provides English-language
learning materials and other educational content, from a variety of content providers, directly to
mobile phones. It had over 20 million subscribers as of 2012.
Two key themes of m-Education service
Segments
Devices
Details
Portable devices such as iPad, iPhone, MacBook, iPod and Kindle e-Reader. Smart portable devices with advanced
functionalities, such as accelerometers will lower costs and open a world of new possibilities for m-Education solutions.
Content and Mobile applications are increasingly popular for educational content. The production of digital content and services related to
services
hosting and delivery of content is another key segment
Source: GSMA, HSBC
30
abc
6 April 2016
Market size set to grow to USD70bn by 2020
McKinsey research in partnership with GSMA forecasts the m-Education market to grow to
USD70bn by 2020. This includes a USD32bn opportunity related to devices, which includes
USD30bn for the B2B category and USD2bn for the B2C category. The remaining USD38bn market
relates to the product and service segment. Around 90% of this market relates to content, platform
and software. The remaining 10% is the connectivity market, which refers to data costs incurred in
receiving or sending information over mobile networks while using the m-Education products
(Source: GSMA: THE MOBILE ECONOMY 2013).
Another research agency ‘Markets and Markets’ forecasts the Global mobile learning solutions
market to grow from USD7.98bn in 2015 to USD37.60bn by 2020. We assume this relates to the
content and services segment and the device market is not considered.
Market size of the two themes constituting the m-Education industry
Categories
Devices
Products and Services (rounded off)
Market size (USD bn)
32
38
Source
GSMA
GSMA, Markets and Markets
Source: GSMA, Markets and Markets
Geographical segments: North America (40%) is expected to be the largest market followed
by Europe (23%) and developed Asia (17%), in terms of market size. South Asia is likely to be
the fastest growing market.
Product and service segments: e-books, e-courses and game and simulation tools are c80%
of the market, with the remaining 20% distance tutoring. In the Asian countries such as South
Korea, Japan and India, which have a strong culture of supplementary education, distance
tutoring is likely to grow rapidly.
End-user segments: Corporate training and vocational training will represent the two largest
categories of m-Education opportunity followed with higher education, K-12 and pre-school.
Key catalysts for this market growth:

Increased availability and penetration of smart portable devices with advanced functionalities

Children today are tech-savvy and are adapting well to learning through mobile devices

Overcoming traditional constraints of time and location, especially in remote and underdeveloped locations in the emerging markets, or in the aftermath of natural disasters

Enabling access to best practice through Education Collaboration Services

Many governments and schools are investing in portable devices that enable new ways of
learning in a bid to improve learning outcomes

Simplification and customisation of content using software and interactive media that adapt
levels of difficulty to individual students’ understanding and pace.
31
abc
6 April 2016
Some examples of m-Education services across select countries
Some examples of m-Education
Country
Service Name
Nigeria
Gidimo
Start No of users / target users Offering
year
2014 85,000 (to date)
Gidimo offers a basic management course, complete with videos of locally developed case studies, group
discussions and reading materials, available on any mobile phone or tablet anywhere in Africa with a network signal
Netherlands KPN Classmate
2014 2015 target was to support
1,250 children
KPN Classmate enables chronically ill children at home to communicate with their class via the ‘KPN Classmate’, an
ICT device which is placed in the classroom.
Africa
Instant Network
Schools
2014 62,000 users estimated by
the end of 2016
An integrated platform with internet connectivity, power, tablets, mobile content and teacher training which provides
access to educational of content and resources to educate child refugees
Africa
Vodacom Mobile 2011 81 teacher centres
Education
established to train 20,000
Programme
teachers(2015)
Chile
Puentes
Educativos
(Educational
Bridges)
Bangladesh English in Action
Kenya
A teacher development initiative to improve the quality of instruction in all subjects at every level, with particular
emphasis on Mathematics, Mathematical Literacy and Physical Science in Grades 10 to 12. The teacher
professional development training focuses on ICT Literacy, as well as the effective use and integration of digital
content in the classroom.
2010 660 teachers and 22,000
students as of 2012 end
A teacher training project focused on training teachers to use mobile technologies and digital sources more
effectively to improve the teaching and learning process by delivering deliver mobile technology and digital
educational resources.
2008 Targeting to reach 25m
including 10m school
children and 15m adults
Launched to increase the number of people able to communicate in English, thereby to enhance the socioeconomic opportunities available to citizens of Bangladesh. It seeks to use many different types of technology,
including mobile phones, television, the Internet and print materials. In essence, mobile phones are used to gain
access to content, both in schools and also for adults who want to learn English.
2012 No data available
Safaricom is developing a system that will allow any of the country’s 7,000 state secondary schools – no matter
how remote — to access online educational. The company is providing interactive whiteboards and mobile tablets,
as well.
Source: gidimo.com, KPN_AR13_webready_Social_performance_and_reputation[1].pdf, www.vodafone.com, digitalclassroom.co.za, www.puenteseducativos.cl, www.atkearney.com, www.eiabd.com
Companies with exposure to m-Education services
We identify three companies with exposure to m-Education, which include producers of portable
devices used for reading and the global leaders providing the application platform. Two of these
companies also have exposure to m-Education services (see table below).
Three companies with exposure to the m-Education segment
Company Rating
Name
Amazon
NR
Apple
NR
Google
NR
CMP
M Cap
Services Service segment Exposure to service
(USD bn)
/ Product
598.5
298.6 m-Education
Devices Education and health related applications represent c4% each (total 8%) of the total applications
in Amazon's app store, available mainly on its Kindle devices
109.99
587.3 m-Health &
Devices and Education-related applications represent 9%, whereas the medical, health and fitness related
m-Education
applications applications represent 5% of the total active applications in the Apple's app store
769.67
515.8 m-Health &
Applications Education-related applications represent 8% while health and fitness applications represent 4%
m-Education
of the total applications in the Google's play store available on Android devices
Note: Prices as of 1 April 2016; Source: Bloomberg, Reuters, Company websites, HSBC
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m-Agriculture: bridging the
information gap
 Agriculture employs c900m people in low and middle income countries
versus 16m in the developed world
 Average crop yield in these countries is 40% less than in high income
countries
 Market size of the m-Agriculture service is estimated to double by 2020;
South Asia and particularly India being the largest market
Agriculture is the largest employer in developing countries
45% of the employed
workforce in developing
economies is in the agriculture
sector versus 16% for the
developed world
Low and middle income countries, with c80% of world’s population, have c45% (40%) of the
employed workforce in agriculture (c900m), whereas high income countries, with c20% of the
world’s population, have c4% (3%) of employed population in agriculture (source: World Bank,
2010 data). Despite higher reliance on agriculture in emerging markets, farmers in these
countries are less productive than their peers in developed markets. The average crop yield in
emerging economies is 2,400kg per hectare compared to 4,000kg produced per hectare from
the developed world. One of the key reasons for this poor performance is the lack of access to
critical indicators such as weather forecasts, tips on combatting pests and diseases, soil quality
and its treatment, crop pricing movement and the demand-supply scenario. The information gap
is more predominant among small-scale poor farmers who lack infrastructure.
m-Agriculture has two segments
Summary of m-Agriculture services
M- Agriculture
Advisory Services
Supply Chain Strengthening
Weather Conditions
Field Studies
Soil Conditions
Ware House
Fertilizers and Seeds
Cultivation Techniques
Data Collection
(Soil information, Harvesting, Market
demand and Supply, price variations etc.)
Source: HSBC
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The two segments are:

Advisory services: agrarian advice which includes know-how on soil quality, fertiliser usage,
suitable crop- patterns, farming techniques and items such as information on weather, crop
pricing and others

Supply chain strengthening: financial services and supply chain solutions.
Market size set to more than double by 2020
47m potential Agri VAS users
across sub-Saharan Africa,
South Asia, Latin America
and the Caribbean
GSMA estimates that the number of agricultural workers with a mobile phone is set to grow to
47% of the total labour force by 2020, with 30% being potential users of Agri VAS. Market size
estimates from two sources provide a range of USD400-550m (see table).
Potential market size of m-Agriculture
Market size
Machina Research(USDm)
137
553
2014
2020
GSMA (USDm)
200
> 400
Potential users for Agri VAS
47m
90m
Source: GSMA Market size and market opportunity for agricultural value-added-services (Agri VAS), GSMA report,2015; Agricultural value-added services (Agri VAS): market
opportunity and emerging business models, GSMA Report,2015; Machina Research, HSBC calculations
Geographic segments: According to GSMA, as of end 2015, there were an estimated 47m
potential Agri VAS users across sub-Saharan Africa, South Asia, Latin America and the
Caribbean. 27m (57%) are in South Asia, which includes 22m in India alone. Sub-Saharan
Africa accounts for c16m and Latin America and the Caribbean, over 4m. The number of Agri
VAS users is expected to almost double, to over 90m in 2020.
Some examples of m-Agriculture services across select countries
Some examples of m-Agriculture services
Country Service Name
Offering
Kenya
Aims to help small farmers to store and manage their crops, link farmers to a financial institutions and connect them to
the markets for final sale when prices rebound. It will also enable farmers to access financial services and information
on managing their crops via mobile phones.
Includes information services, education activities and a loyalty club. The club sends free and tailored SMS in order to
influence good agriculture practices and inform farmers on weather conditions, crop and livestock care tips, daily
market prices, regulatory changes, governmental aids and other updates.
Turkey
Start Year No of users / target
users
e-Warehouse
2014
c10bn expected
(target for 70% of
farmers to benefit)
Vodafone Farmers' 2009
903,000 actives users
Club
out of 1,300,000 users
(2014)
Kenya
Airtel Kilimo
2013
22,438 (2014)
Mali
Sènèkèla
2013
177,817 (2014)
Tanzania Tigo Kilimo
2012
398,834 (2014)
India
mKisan
2012
Kenya
M-Farm
2010
Brazil
Digilab Mobile
-
India
e-Choupal
2000
An agricultural value added service that provides customised information about crops (maize, tomato, mango and
rice), weather and market prices to farmers in Kenya via their mobile phones.
A mobile agricultural value-added service offering a range of information from agricultural experts on agricultural topics
and market prices on crops (maize, shallot/onion, shea, cashew, rice, millet, potato and sweet potato).
Tigo Kilimo is an agricultural VAS which provides information for farmers via mobile phone for 26 regions of the
country. It provides agronomic tips and market price information on major crops apart from weather forecasts.
A service initiated by the Government of India (GoI) in 2012 to provide comprehensive information and advisory on
333,758 pieces of
crops and livestock including information on market prices, pest & disease alerts. Until Feb 2016, the count of advisory
advice circulated in
SMSs with count over issued stands at 3 33,758. These were circulated in various Indian languages on SMSs with count over 10bn in total.
10bn in total
M-Farm provides pricing information on crops, facilitates information on what to plant based on price trends, helps to
identify the right time to plant the crops, provides comparison among markets, facilitates the collective buying of inputs
and enables the collective selling of produce.
This helps farmers to capture images of potential pests, diseases and weeds with their smartphones and compare
them to existing images in the database, the goal is to provide faster diagnoses in rural properties and facilitate the
decision making process regarding an eventual pest or disease control, minimising risks of losses.
35,000 villages through e-Choupal link directly with rural farmers via the Internet for procurement of agricultural and aquaculture products like
6500 kiosks (2015)
soybeans, wheat, coffee, and prawns. e-Choupal tackles the challenges posed by Indian agriculture, characterised by
fragmented farms, weak infrastructure and the involvement of intermediaries.
Source: www.grameenfoundation.org, GSMA: Vodafone Farmers' Club , GSMA: Case Study Airtel Kilimo, Kenya , GSMA: Case Study Orange Sènèkèla, Mali , GSMA: Case Study Tigo Kilimo, Tanzania, mkisan.gov.in/,
www.agriskmanagementforum.org, GSMA: Brazil Mobile Observatory 2012, www.itcportal.com, HSBC calculations; Note: For India, the advice count is for the period 25 May 2013 to 04 April 2016
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Disaster response: mobile
technology is crucial
 90% of people affected by global disasters are in Asia
 Mobile communication can be a critical lifeline for those living in
disaster-prone countries
 Mobile technology is now an essential tool for emergency response
and disaster management teams
Asia Pacific: home to disaster-prone countries
Over one million people killed,
c2bn people affected and
economic values loss of at
least USD1.67trn from
disasters in 10 years (2004-13)
Globally, over 1m people are estimated to have been killed in disasters during 2004-13, with
around 2bn people affected and a minimum economic loss of USD1.67trn (source: World
Disasters Report 2014, International Federation of Red Cross and Red Crescent Societies
(IFRC). Asia Pacific is home to some of the most environmental disaster prone countries in the
world. Nine out of every ten people affected by disasters from 1950 to 2011 are from this region.
The Pacific Islands includes some of the most vulnerable states, particularly due to the
incidence of hydrological disasters such as tropical cyclones and floods. Other countries in the
region such as Philippines, Bangladesh and Cambodia also face a very high risk of natural
disasters. In 2012 alone, there were 83 reported natural disasters in Asia killing 3,100 and
affecting 64.5m people, while causing USD15bn in economic damage.
Asia is also politically sensitive, highlighted by various conflicts in the region over the past few
decades. During 2014, more than 48m people were forcibly displaced globally, as a result of
ongoing conflicts. Syria accounted for more than 50% of the population displaced, followed by
Iraq and Afghanistan (all the three countries are in Asia).
Mobile technology is crucial
Mobile technology is now
playing a critical role prior to,
during and following
disasters
Mobile communications is a critical lifeline for those living in countries at high risk of disaster. This
technology play a critical role prior to, during and following disasters, through a range of activities
from supporting early-warning systems, to facilitating access to emergency services and as a tool
through which to access potentially life-saving information. Mobile’s role in disaster response has
continued to grow, both in dealing with the aftermath of natural disasters and helping to address
the humanitarian challenges presented by the growing number of displaced populations.
Mobile technology is now seen as an essential tool for emergency response and disaster
management teams, as well as providing important tools and information to protect and aid
individuals. Collaboration between mobile operators, government bodies and humanitarian agencies
can increase society’s resilience and ability to recover. Meanwhile, the relatively simple ability to send
an SMS to a loved one remains critically important to affected populations.
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Mobile as tool for digital aid
Various organisations are also looking at the potential of ‘digital aid’ and use of mobile phones
as a channel for cash transfers and delivery of aid. With the people most vulnerable to natural
disasters often also being among the poorest or most remote, the mobile phone is unique in its
potential reach and speed in facilitating the communication of information that can save lives
and aid recovery efforts on a very significant scale.
Many fundraising appeals
also leverage the potential of
premium SMS billing and tap
into smaller donations that
can amount to a substantial
boost to funds (not just for
disaster relief)
Many fundraising appeals also leverage the potential of premium SMS billing and tap into
smaller donations that can amount to a substantial boost to funds (not just for disaster relief) –
for example GBP66m was donated via SMS in the UK in 2012 and this figure is expected to
grow to GBP150m by 2015, according to the UK’s phone-paid services regulator. This has been
supported in part by Vodafone’s ‘JustTextGiving’ collaboration with JustGiving, a UK-based
online website that facilitates charitable giving. The service allows charities and individuals to
easily set up a code with which mobile phone users can donate money by sending an SMS
message, with mobile operators waiving fees in various occasions, so that 100% of the donation
goes to the charity.
Some examples of disaster management services in 2015
Some examples of disaster management services in 2015
Disaster name / Country
Disaster management services
Cyclone Pam, Vanuatu (March 2015) In March 2015, Vanuatu in Oceania was hit by tropical cyclone Pam, causing widespread devastation and a number of fatalities. The
mobile operator Digicel responded to the disaster by restoring connectivity in the capital within a few days, deploying public phonecharging stations across the islands and providing a total of USD250,000 of free credit to its customers to allow them to continue to
communicate with their families despite difficulties topping up prepaid accounts
Nepal Earthquake (April 2015)
In April 2015 a 7.8 magnitude earthquake hit Nepal, which killed c8,850 people. The mobile operators in Nepal worked to restore critical
services after hundreds of sites across the country were reported down either due to infrastructure damage or a lack of power. Ncell
(TeliaSonera) supported rescue and emergency response teams and members of the media through the provision of SIM cards and data
connectivity. Operators also provided their subscribers with free SMS and credit to ensure people could connect with their loved ones.
Other developers such as Ericsson Response and Vodafone deployed their Instant Network teams in Kathmandu to provide
communication support for relief efforts. Indosat (Ooredoo Group) also sent back-up equipment to support connectivity on the ground. A
number of operators worldwide, including Verizon and AT&T in the US, offered free SMS and international long-distance calls to Nepal.
Syrian refugee camps
In the Syrian refugee camp in Jordan, Souktel worked on a mobile supply management system as it was becoming increasingly difficult to
get food, water and medical supplies to the right people. The system included a mobile inventory management tool that records incoming
and outgoing shipments and smartphone applications to track packages via satellite and report back on their status and GPS coordinates
in real time. The end result is a faster, more efficient aid supply chain
Source: GSMA: THE MOBILE ECONOMY 2016
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Key stocks in mobile services
 We profile 15 companies that are at the forefront of the shift towards
mobile services, including eight companies under HSBC coverage
 There are seven telecom operators in this list: Airtel, MTN and
Vodafone (rated Buy); Vodacom, Telenor and Millicom (rated Hold) and
Safaricom (not rated)
 The other eight stocks are Kenya Commercial Bank and Equity Group
Holdings (both Buy); and Amazon, Apple, Dexcom, Google, Medtronic
and Omron (not rated)
Growing exposure to social themes
As the market for mobile
services grows, disclosure on
their revenue contribution
should improve
With mobile subscriptions peaking in many countries, telecom operators are shifting focus to
growth via value-added services, including the five mobile services we discuss in this report. From
the perspective of the telecom operators, mobile money has significant revenue share and holds
potentially the largest market opportunity. The markets for m-Education (USD70bn) and m-Health
(USD60bn) comprise a significant proportion of devices used for health monitoring or education
delivery; and a notable proportion of mobile content and service providers. Thus, depending on the
individual offering, the opportunity for telecom operators in m-Health and m-Education is likely to
be less than 50% of the total market size. That said, given the growing market in these services,
various telecom players are positioning themselves for the opportunity.
Currently, most mobile operators do not separately report the revenue stream from these
segments. However, as their market sizes increase, disclosure is likely to improve. The
exception is mobile money, with some key operator’s already disclosing revenue and customer
numbers for this segment.
Seven mobile operators with
mobile money exposure
We identify seven mobile operators that currently make some disclosure on mobile
money services (see following table)

Currently Safaricom (Vodafone’s associate in Kenya) is the only player to generate c20% of
revenues from the mobile money segment.

Vodacom and Millicom both disclose 2-3% revenue contribution from mobile money
services, which is increasing y-o-y.

Some operators, such as Telenor, MTN and Vodafone, disclose the revenue contribution
from mobile money in some of their markets, but not for their entire operations

The proportion of mobile money customers to total customers is in the range of 2-20%, but
this is increasing given the growth of the service segment.
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6 April 2016
Seven telecom operators identified with exposure to mobile money services
Name
Safaricom
Vodacom
Millicom
Telenor
MTN
Vodafone
Bharti Airtel
Ticker
Mcap
(USDm)
Currency
CMP
TP
Upside /
downside
(%)
Rating
SCOM.NR
VODJ.J
MICsdb.ST
TEL.OL
MTNJ.J
VOD.L
BRTI.BO
6,410
15,988
5,526
23,725
16,255
82,963
20,184
KES
ZAR
SEK
NOK
ZAR
GBPp
INR
16.9
159.3
442.4
131.8
130.6
220
335.5
n.a
157
420
150
160
260
430
n.a.
-2%
-5%
14%
23%
18%
28%
NR
Hold
Hold
Hold
Buy
Buy
Buy
Mobile
Mobile financial
Mobile money
financial services customer base
penetration
services rev
as a % of total
share
subscribers
20%
60%
n.a.
2.3%
15%
Herve Drouet
1.9%
18%
Luigi Minerva
n.a,
16% Dominik Klarmann
na
15%
Herve Drouet
na
4% Stephen Howard
na
2%
Rajiv Sharma
Priced as of 1 April 2016; Source: Bloomberg, Reuters, Company websites, World Bank, GSMA, HSBC estimates
We also profile two Kenyan banks under HSBC coverage – Kenyan Commercial Bank and
Equity Group Holding – which are potential beneficiaries of mobile money services given their
product offerings in collaboration with mobile operators in Kenya.
Eight stocks other than
telecom companies with
exposure to these mobile
services
We also profile six other key providers of health monitoring devices, reading devices or gadgets,
application platform and service providers in m-Health and m-Education domains (see the
following table).
Eight other companies including two banks with key exposure to mobile services discussed earlier
Name
Dexcom
Medtronic
Omron
Amazon
Apple
Google
Ticker
KCB. NR
EQTY.NR
DXCM.O
MDT.N
6645.T
AMZN.O
AAPL.O
1GOOG34.SA
Mcap (USD bn)
1.2
1.4
6.4
106.5
7.2
298.6
587.3
515.8
Currency
KES
KES
USD
USD
JPY
USD
USD
USD
CMP
41.75
40.00
67.63
75.37
3,125
598.5
109.99
769.67
Priced as of 1 April 2016; Source: Bloomberg, Reuters, Company websites, World Bank, GSMA, HSBC estimates for KCB and EQB NK
38
TP
50
48
n.a
n.a
n.a
n.a
n.a
n.a
Upside/ downside (%)
19.8%
20.0%
n.a
n.a
n.a
n.a
n.a
n.a
Rating
Buy
Buy
NR
NR
NR
NR
NR
NR
Analyst
Henry Hall
Henry Hall
n.a
n.a
n.a
n.a
n.a
n.a
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6 April 2016
Safaricom (SCOM.NR, Not rated)
One of the largest mobile operators in Kenya: Safaricom, an associate company of
Vodafone, is the market leader in mobile telecommunication services in Kenya. As of March
2015, its mobile subscriber base was c23.3m, implying c67% market share. For the full year
ending March 2015, the company reported revenue of KES163.36bn (+13% y-o-y).
Business segments overview: Safaricom classifies its business as: i)Voice services, ii) Message
services, iii) Mobile data services, iv) Fixed services, v) M-Pesa services, and vi) Others. Voice
service is the major contributor to total revenue followed by M-Pesa.
Mobile money services contribute c20% of total revenue: Safaricom is considered in the
industry to be a pioneer in the mobile money services. The company conceptualised the MPesa in 2005 to enable financial transactions via mobile, which promotes financial inclusion.
The service enables customers to deposit, transfer and withdraw money or pay for goods and
services using a mobile phone. The mobile money segment contributed c20% of total revenues
in FY2015 (March year-end) versus 18% the year before. As of March 2015, Safaricom had
c20.6m mobile money subscribers, implying c76% penetration of their mobile subscriber base.
Safaricom – a market leader in mobile services in Kenya
Mobile subscribers (millions)
Market share by subscribers (%)
Mobile Money subscribers (millions)
Mobile Money market share (%)
Safaricom
Mar -15
23.3
67.1
20.6
76.2
Airtel and Yu
Mar -15
7
20.2
3.1
11.5
Orange
Mar -15
3.8
10.8
0.19
7.2
Source: Company data, HSBC calculations
Other mobile financial services launched in the last few years to continue driving growth:
To continue to drive financial inclusion, Safaricom runs two bank services: M-Shwari and KCB MPESA. It also operates a payment collection service for corporate organisations and merchants:

M-Shwari is essentially a bank service in partnership with Commercial Bank of Africa
(CBA), which allows M-PESA customers to save, earn interest and borrow money using
their mobile phones. The growth of M-Shwari since its launch in November 2012 has been
remarkable and by FY2015 (March end), its customer base has reached c10m.

KCB M-PESA: In partnership with Kenya Commercial Bank (KCB), Safaricom launched
KCB’s M-PESA service, which enables customers to borrow money using their mobile
phones. M-PESA registered subscribers can send and receive money from international
partners. Safaricom has partnered directly with Western Union, Money Gram, Home send
Hub, Vodacom Tanzania and MFS Africa Hub to make this possible.

Lipa na M-PESA is a payment collection service for corporate organisations and
merchants, which enables organisations to accept payments via M-PESA and to transfer
collected funds either to a bank account or to the owner’s M-PESA account. By FY2015,
this comprised 49,413 active merchants (who have conducted trading in past 30 days) and
received payments of KES11.6bn in March 2015 for goods and services.
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Vodacom (VOD SJ, Hold, TP ZAR157)
Herve Drouet*
Analyst
HSBC Bank plc
herve.drouet@hsbcib.com
+44 20 7991 6827
* Employed by a non-US affiliate of HSBC
Securities (USA) Inc, and is not registered/
qualified pursuant to FINRA regulations
One of the largest mobile operators in South Africa and Tanzania: Vodacom is a Vodafone
subsidiary with operations in South Africa, Tanzania, Democratic Republic of Congo (DRC),
Mozambique and Lesotho. Its current customer base is 65.2m and it is the largest mobile service
provider in South Africa (market share c38%), Tanzania (market share c37%) and Democratic
Republic of Congo (DRC) (for which market share figures are not available). The group reported
revenue of ZAR77.3bn in FY 2015 (March year-end), a growth of 2.1% y-o-y.
Business segment overview: Vodacom classifies its business into three segments: i) services, ii)
equipment, and iii) non-service revenue. The service segment is 80% of the total revenue with the
majority from selling mobile voice, interconnect, text and data.

Mobile financial services (M-Pesa and M-Pawa) contributed 2.3% of Vodacom’s
revenue: During 1HFY2016, mobile money and mobile financial services contributed 2.3%
of Vodacom’s revenue. Year on year, this revenue grew 12.5% vs. the group revenue
increase of 6.4%. As of Sep-2015, 15.2% of M-Pesa customers were also using M-Pawa.

The Company’s mobile money service M-Pesa was launched in Tanzania in 2008.

In partnership with the Commercial Bank of Africa, Vodacom also started a mobile financial
service named M-Pawa, which is a savings and loans product.

It also launched International Money Transfer services in 2014.

Vodacom’s customer base of 65.2m includes 9.7m active mobile money and other financial
service users (see table below for more details).
M-Pesa: Vodacom’s mobile financial services (Data as of 31 Dec 2015)
Group
South Africa
International
operations
Total active
customers
65.2m
34.1m
31.1m
M-Pesa
active users
9.7m
One million
registered and
76,000 active
customers
9.6m
M-Pawa Comments
active users
1.5m
M-Pesa soft launched in South Africa in August 2014
1.5m Tanzania and DRC together have c80% of active users
M-Pesa was first launched in Tanzania, where it now
accounts for 22.6% of the service revenue (as of FY15)
Over 3.5 million customers have subscribed to M-Pawa
and over TZS3bn (USD1.4m) has been disbursed in
loans every month
Source: Company reports, HSBC calculations
High share of unbanked population in its key markets to drive growth in the coming
years: Vodacom is a market leader in Tanzania and DRC, which together contribute c80% of its
total customer base outside South Africa. In Tanzania, 93% of rural population does not have a
bank account but 70% has a mobile connection. In Congo, 75% of the population does not have
a bank account, while 53% has a mobile phone. This suggests a possible customer base of
over 50m, leading to strong growth potential from these segments.
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Valuation and risks
We value Vodacom on a DCF basis, using a cost of equity of 14.8%, which we derive from a
risk-free rate of 9.3% based on long-term SA sovereign yield, a beta of 1.0 and a market risk
premium of 5.5%. Our Vodacom TP of ZAR157 implies downside of 2% and we have a Hold
rating. At current valuations, Vodacom is trading at a 2016e EV/EBITDA multiple of 8.3x, much
above the CEEMEA telcos average of 4.9x, thus limiting its further upside potential, in our view.
Key upside risks include: 1) better-than-expected macroeconomic environment in South
Africa; and 2) better consumer demand in South Africa. Key downside risks include: (1) an
intensification of irrational price competition and/or adverse regulatory decisions in respect of
on-net/off-net pricing; (2) increased market fragmentation as a result of new market entrants or
more aggressive market strategy; and 3) delays in spectrum auctions in South Africa.
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Vodafone (VOD LN, Buy, TP 260p)
Stephen Howard*
Analyst
HSBC Bank plc
stephen.howard@hsbcib.com
+44 20 7991 6820
One of the largest global players: Vodafone has sizeable operations in 26 countries across
Europe, Asia and Africa. At end FY2015, the company had over 446m mobile phone
subscriptions including c20m active mobile money subscribers. Vodafone’s exposure to markets
with significant mobile money potential is through its two subsidiaries – Vodacom and Vodafone
India – and its associate company in Kenya, Safaricom.
Business activities overview: The company classifies its business activities into two
segments: i) services, and ii) others. The service segment is c90% of total revenues with the
majority from selling mobile voice, text and data. It also includes broadband, TV, M2M
connections and M-Pesa.
‘M-Pesa’ success story: Mobile money services (branded M-Pesa) were started commercially
in 2007 in Kenya. In 2005, Safaricom, Vodafone’s associate company, had launched the MPesa pilot to facilitate financial inclusion of people in African countries as part of its Corporate
Social Responsibility (CSR) strategy. The service is now available across nine countries –
South Africa, Kenya, Tanzania, India, Egypt, Mozambique, Lesotho, Romania and Republic of
Congo – via a network of 273,000 agents. Mobile financial services now contribute 18-20% of
total revenue in markets such as Tanzania and Kenya.
Vodafone's AMAP CEO made the following comments on the FY2014 results conference call,
reflecting how Vodafone views the M-Pesa business. "..... we need to look at M-Pesa in a
different – with a different view, because it is really generating a commission out of the big
transaction and it's hitting – it's yielding immediately to the bottom line, but you need to look at
this as a different business, I would say, but look at the incremental loyalty effect the M-Pesa is
bringing." (Source: FY2014 results transcript.)
Mobile money expansion in high potential markets such as India will drive growth:
Considering the company’s strong customer base and mobile money subscriber base in Africa
and India (see table below), we see significant growth potential in these markets, especially
India. India is Vodafone’s largest single market, with a customer base of 183m (over 40% of its
total customer base), and the market is rapidly opening up to the idea of mobile money. In 2015,
India’s central bank, the Reserve Bank of India (RBI), provided an "in-principle" approval to 11
players to set up payments banks (PBs), which can accept deposits from individuals and
businesses to a limit of INR100,000 per customer and can also provide payments and
remittance services through their branches, ATMs and business correspondents (BC). The
Central bank is also looking into the development of the unified payments interface (UPI) which
will enable seamless interoperability among banks and mobile wallets.
Potential markets for mobile financial services
Africa (Vodacom Group only)
India
Mobile subscribers (m)
65.2 (Dec-15)
183 (Mar-15)
Mobile money subscribers (m)
9.7 (Dec-15)
3.1*(Mar-15)
Note: *3.1m are registered M-Pesa subscribers. Source: Vodafone
Mobile financial services
contribute 18-20% of total
revenue in markets such as
Tanzania and Kenya
42
Increasing scope of mobile financial services also set to drive growth: In FY2015 Vodafone’s
subsidiary Vodacom launched its first international money transfer corridor between Tanzania and
Kenya. The same year, the company also started M-Pesa services in South Africa, also through
Vodacom. In Tanzania, Vodacom’s collaboration with the Commercial Bank of Africa enables MPesa customers to access interest-bearing savings accounts and small loans.
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6 April 2016
Valuation and risks
We use a multiples-based sum-of-the-parts methodology to reach a fair value target price of 260p.
Our TP implies 18% upside and we rate the stock Buy. We use HSBC’s valuation for covered
companies (Vodacom, VOD SJ, Buy, TP ZAR157) and assign target FY16e EV/EBITDA multiples
(ranging from 6.0x to 11.3x) to the remaining countries. These multiples are assigned relative to the
multiple calculated in our report The 4Cs – stock picks (28 January 2016), in which we derived a
theoretical multiple for a telecoms market undergoing market repair. This multiple, 8.3x, is applied to
German mobile; other mobile markets are set relative to this (ranging from -27% to +8%) reflecting
the likelihood of improved financial performance occurring.
Downside risks to our target price and rating include (1) rivals applying larger discounts to
convergent (triple- and quad-play) pricing, (2) spectrum costs exceeding our assessment, (3)
adverse FX moves and (4) adverse regulation.
Sum-of-the-parts valuation: 260p/share target price
FY16e sales FY16e EBITDA
(GBPbn)
(GBPbn)
6.2
1.9
1.6
0.7
7.8
2.6
6.3
1.3
4.6
1.4
2.7
0.4
1.0
0.4
3.7
0.8
1.4
0.5
0.5
0.2
0.5
0.1
0.7
0.3
1.4
0.4
27.0
7.7
4.5
1.4
4.0
1.5
1.3
0.6
2.0
0.4
1.6
0.4
13.4
4.3
0.6
(0.1)
41.1
11.8
FY16e
FY16e
EV/sales EV/EBITDA
2.6x
8.3x
6.5
14.9x
3.4
10.0x
1.4x
7.0x
2.3x
7.5x
1.2x
7.5x
6.1x
15.4x
2.5x
11.3x
2.6x
7.5x
2.3x
7.0x
1.9x
7.0x
2.7x
7.0x
1.8x
6.5x
2.4x
8.6x
2.4x
7.5x
3.2x
8.6x
2.7x
6.0x
2.0x
9.0x
1.4x
6.0x
2.5x
7.7x
0.0x
0.0x
2.4x
8.4x
EV
Ownership
16.2
10.1
26.3
9.1
10.8
3.2
6.0
9.2
3.6
1.2
1.0
2.0
2.7
66.0
10.6
12.8
3.4
3.9
2.2
32.9
0.0
98.9
100%
76.57%
91%
100%
100%
100%
100%
100%
100%
100%
99.9%
100%
100%
96%
100%
65%
54.9%
100%
79%
80.4%
100%
91%
0.6
0.4
0.7
8.0x
7.5x
6.0x
4.5
2.9
4.2
40%
42%
50%
Germany
Kabel Deutschland
German total
UK
Italy
Spain
ONO
Spain Total
Netherlands
Romania
Greece
Portugal
Others
Europe
India
Vodacom
Egypt
Turkey
Others
AMAP
Eliminations
Consolidated Group
Associate & Investments
Kenya (Safaricom)
Indus towers
Australia
Enterprise value (GBPbn)
Net debt (end FY16) (GBPbn)
Verizon loan notes
Contingent liabilities
NPV of deferred tax assets
12 month dividend adjustment
Market cap (£bn)
Shares in issue (bn)
Stake
(GBPbn)
16.2
7.8
23.9
9.1
10.8
3.2
6.0
9.2
3.6
1.2
1.0
2.0
2.7
63.7
10.6
8.3
1.8
3.9
1.8
26.4
0.0
90.1
GBP/share
% EV
% Equity
0.61
0.29
0.90
0.34
0.41
0.12
0.23
0.35
0.14
0.05
0.04
0.07
0.10
2.40
0.40
0.31
0.07
0.15
0.07
1.00
0.00
3.40
17.0%
8.1%
25.1%
9.5%
11.4%
3.4%
6.3%
9.7%
3.8%
1.3%
1.1%
2.1%
2.9%
66.8%
11.1%
8.7%
1.9%
4.1%
1.8%
27.8%
0.0%
94.6%
23.4%
11.2%
34.6%
13.1%
15.7%
4.7%
8.7%
13.4%
5.3%
1.7%
1.5%
2.9%
4.0%
92.0%
15.3%
12.0%
2.7%
5.7%
2.5%
38.2%
0.0%
130.3%
1.8
1.2
2.1
95.2
(30.3)
3.6
(5.2)
5.8
0.0
69.2
26.53
0.07
0.05
0.08
3.59
(1.14)
0.14
(0.20)
0.22
0.00
2.60
1.9%
1.3%
2.2%
100%
-31.8%
3.8%
-5.5%
6.1%
0.0%
2.6%
1.8%
3.0%
138%
-43.8%
5.2%
-7.6%
8.4%
0.0%
Source: HSBC estimates
43
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6 April 2016
Millicom (MICsbd.ST, Hold, TP SEK420)
Luigi Minerva*
Analyst
HSBC Bank plc
luigi.minerva@hsbcib.com
+44 20 7991 6928
One of the leaders in the LatAm telecom market: Millicom is a telecommunications and
media company with operations in Latin America and Africa. The group provides services to
62.6m people and is amongst the top two players in most of its markets. Millicom reported
revenue of USD6,730m in 2015 (December year-end), representing growth of 5.4% y-o-y.
Business segments overview: The company classifies its business broadly as: i) Mobile
services, ii) Cable and Digital media, iii) Mobile Financial Services (MFS), and iv) Others. Mobile
services accounted for 65% of total revenue in FY2015.
Mobile financial services exposure: During FY2015, mobile financial services contributed
1.9% of Millicom’s revenue, growing 11% vs group revenue increase of 5% (in USD terms).
Revenue contribution of mobile financial services, by geography (FY2015)
________ Customers _________ __________ ARPU ___________
Africa
Central America
South America
Group MFS
Total Group
(Million)
7.6
2.2
1.5
11.2
62.6
(% y-o-y)
23%
14%
1%
18%
11%
(USD)
1.07
0.32
1.73
1.01
(% y-o-y*)
3.3%
-2.5%
2.3%
-1.2%
________ Revenue _________
(USDm)
87
8
30
125
6,730
(% y-o-y)
16%
42%
-8%
11%
5%
Source: Company reports, * Year-on-year growth pro forma from FX
Millicom’s exit from Africa is likely to limit its MFS growth prospects: Millicom’s Mobile
Financial Services (MFS) business caters to 18% of the group’s total customer base. Revenue
generated from the MFS business grew by 11% y-o-y in FY2015, compared to 5% y-o-y growth
reported by the group. However, it is fair to say that MFS growth has fallen well short of
expectations: at the March 2013 capital markets day, Millicom guided for MFS to contribute
USD0.6-1.0bn revenue by end 2017; however these expectations were significantly
downgraded to USD0.2-0.4bn (still by end 2017) in the capital markets days held in September
2014. Tanzania represents the MFS success story in Millicom’s footprint and a template from
which to ideally expand to other African countries. However, we note that Millicom is currently
carrying out a strategic review of its African assets, which in February 2016 led to the disposal
of its DRC operation to Orange; we would not be surprised to see Millicom exiting more of its
African operations (in view of this, in our SOTP we value Africa on transaction multiples). In
LatAm, Paraguay represents a relative MFS success story, but it is important to flag that in
Colombia, which is Millicom’s largest operation (contributing to 27% of group revenue, 19% of
group EBITDA and 14% of group mobile customers as of Q4 2015), there is currently no plan to
launch MFS given the proportion of the population that is unbanked in Colombia is very low.
Despite these limitations, we think MFS is an integral part of Millicom’s strategy and one that
can play an important role, at least as a churn reduction and customer retention tool.
Corporate Governance concerns: Millicom announced on 21 October that “it has reported to
law enforcement authorities in the United States and Sweden potential improper payments
made on behalf of the company’s joint venture in Guatemala”. It clarified that the decision was
taken “in connection with an independent (internal) investigation” conducted by an international
law firm, “with the support of Millicom’s management team”, adding that “Millicom is committed
to fully cooperating with the authorities” while clarifying that “it is not possible at this time to
predict the matter's likely duration or outcome”. Very few details are available at this stage, but
there is a risk of substantial fines. Guatemala is the second most important market for Millicom
after Colombia, contributing about 17% to group revenue. With 100% of Millicom’s footprint in
frontier markets, we think an episode like this increases the overall risk profile of the group. We
incorporated this in our valuation by including an additional corporate governance risk of 1% in
our cost of equity (see our report Millicom: Downgrade to Hold: Macro and governance
headwinds increase risk profile, 22 October 2015).
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6 April 2016
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Valuation and risks
We value Millicom shares using a DCF-based SOTP. Our standard DCF assumptions (Rf 3.5%,
MRP 7.5% and beta 1.25 for Central America; and Rf 4.5%, MRP 6.0% and beta 1.25 for South
America) are unchanged, and we continue to include a corporate governance risk premium of
1% in our cost of equity calculation. We continue to value the African operations on an
EV/EBITDA of 6.2x in line with comparable comps (see our report New CEO brings in a
cohesive cable and mobile strategy, 28 July 2015). For the target price calculation we use an
unchanged SEKUSD exchange rate of 8.3. Our target price of SEK420 implies c5% downside
and we maintain Hold rating.
Downside risks include: (a) more intense price competition in Africa, (b) further aggressive
MTR cuts, (c) further negative FX impacts, and (d) higher fine related to the Guatemala issue
(we have in our SOTP a contingent liability equal to 10% of revenues from Guatemala).
Upside risks include: (a) FX to strengthen vs USD from the current spot levels, and (b) lower
fine related to the Guatemala issue.
45
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6 April 2016
MTN Group (MTN SJ, Buy, TP ZAR160)
Herve Drouet*
Analyst
HSBC Bank plc
herve.drouet@hsbcib.com
+44 20 7991 6827
The largest mobile operator in Nigeria with operations in over 20 African countries: MTN
Group is Africa’s biggest mobile operator with operations in more than 20 countries and a c45%
market share in Africa’s biggest market – Nigeria. The group has a total subscriber base of
232.5m and reported revenues of ZAR146.4bn in 2015 with an EBITDA margin of c41%. Data
revenues contributed 23% to total revenues in 2015 with y-o-y organic growth of 33%.
Business segments overview: MTN’s operations are broadly divided into three segments:
i) Consumer, ii) Digital services, and iii) Enterprise business unit. The consumer unit includes voice
and data services for retail consumers while the digital services include mobile money and eCommerce ventures. The Enterprise unit includes cloud and network connectivity solutions for
business customers and is focused on corporate, public sector and SMEs.
Mobile financial service is MTN’s fastest growing revenue segment: MTN Group has total
mobile money subscribers of 34.7m (56% y-o-y growth) across 15 countries, which is c15% of
its total mobile subscribers. Its mobile money includes services such as banking, international
remittances, savings, micro lending, insurance and retail payments. Mobile money is one of the
fastest growing revenue segments for MTN and its growth is a key strategy for the group.
MTN also has a presence in m-Health and m-Education segments: MTN has also launched
its m-Health product to offer health-related information and services in Afghanistan, Cameroon,
Ghana, Rwanda, Uganda, South Africa, Yemen and Zambia. The m-Health product includes a
range of digital advisory and support services by qualified professionals.
MTN also provides virtual training solutions for universities under its m-Education initiative. The
mAcademy platform in Nigeria offers 300 training courses and educational content for all ages
and professions.
Mobile money consumer base increased to 15% of its total consumer base on 2014: At
the group level, MTN's mobile money users as a percentage of its total mobile subscribers
increased from 7% in 2013 to 15% in 2014, at a CAGR of 53%. Within major operating
countries, the share of mobile money users as a percentage of total mobile users increased as
follows: Uganda: 59% in 2013 to 106% in 2015; Ghana: 16% in 2013 to 35% in 2015;
Cameroon: 15% in 2013 to 22% in 2015; Ivory Coast: 21% in 2013 to 25% in 2015.
MTN group’s mobile money performance (Data as of 31 Dec 2015)
Group
Nigeria
Cameroon
Cote d' Ivore
Uganda
Ghana
Total mobile
subscribers
232.5m
61.3m
Mobile money
customers
34.7m
6.2m
9.2m
8.3m
8.9m
2.0m
2.1m
9.5m
16.3m
5.7m
Comments
MTN's mobile money product, Diamond Yellow, had 6.2m subscribers in
Dec 2015. The company is focusing on partnering with more banks and
financial institutions while expanding the agent network
Mobile money subscribers increased by 24% in 2015 to 2 million
Focus is on channel expansion and introduction of new products
Mobile money revenue increased 56% in 2015 to account for c17% of the
total revenue from Uganda
Mobile money constitutes 6% of the total revenues
Source: Company reports, HSBC calculations
Strong foothold in many of the African countries with high unbanked population is a key
growth driver for MTN’s mobile financial services: Out of a total of 22 operating counties,
MTN is a market leader in 15, and is number two in the remaining seven. With only 34% of
adults in the Sub-Saharan Africa having a bank account in 2014 (source: World Bank),
we see strong growth potential for mobile money products. Furthermore, the growth of
eCommerce transactions and rise of digital content are providing additional avenues for mobile
money transactions. With its market leading position in most of its markets, Mobile money could
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be a significant revenue contributor if MTN can replicate its success in Uganda (where it has
increased mobile money consumer penetration) in few other markets.
Valuation and risks
Our target price is based on an equal weighting of our DCF of ZAR184 and a DCF-based SOTP
valuation of ZAR191, from which we subtract a regulatory risk premium of ZAR27 per share
based on the revised Nigeria fine (In October 2015, the Nigerian regulator imposed the
equivalent of a USD5.1bn fine on MTN Nigeria for failing to timely disconnect approximately 5.1
million subscribers with incomplete registration. The fine was subsequently reduced by 25% to
NGN780bn (USD3.9bn) after negotiations between MTN and the regulator). Our DCF-based
SOTP makes use of a cost of capital ranging between 13% and 21% depending on the region
that we value. Currency volatility and exchange rates across the OpCos (especially the
NGN/ZAR) significantly impact our group estimates and therefore our DCF and SOTP
valuations. For more details see South Africa telecoms: focussing on pricing strategy,
30 March, 2016. For our DCF, we use a cost of equity of 16.5% derived from a risk-free rate of
9.3% based on long-term SA sovereign yield, beta of 1.2 and market risk premium of 6%. Our
beta of 1.2 reflects the legal risk from the Nigerian fine. The impact of the ZAR and NGN
currency devaluation also carries through to our SOTP valuation (also DCF-based). Our target
price of ZAR160 implies c23% upside and we rate the stock Buy.
Key downside risks include: (1) MTN’s growing regulatory challenges, (2) Naira currency
volatility and weakness driven by sustained very low oil price, (3) weakening global commodity
markets impacting mobile spend in Africa, (4) illogical tariff pricing, which could impact
ARPU/margins, and (5) a weakening South Africa macro environment as a result of the power
(utility) crisis.
47
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6 April 2016
Bharti Airtel (BHART IN, Buy, TP INR430): A GEMs Super 15
portfolio constituent
Rajiv Sharma*
Analyst
HSBC Securities and Capital
Markets (India) Private
Limited
rajivsharma@hsbc.co.in
+91 22 22681239
India’s No-1 operator: Airtel’s operations span 20 countries and it is ranked #1 in India on
market share. The company has 324m mobile subscribers, including 240m in India, 76m in
Africa: 76m and 9m in South Asia (excluding India).
Business segment overview: The company classifies its business broadly as: i) mobile services,
ii) Tele media, iii) Digital TV, iv) Airtel services, and v) Tower infrastructure. It derives 85% of total
revenue from mobile services, of which 64% is from India, 2% from other South Asian countries and
34% from Africa.
Mobile money exposure is relatively small vs. many peers: Airtel operates ‘Airtel Money’ to
provide payment and money transfer facilities on mobile phones to users in India, Bangladesh and
17 countries in Africa.
In Africa, Airtel recorded USD11.6bn in mobile money transactions in FY2015, with over 6.2m
mobile money subscribers (its total mobile customer base in Africa is 76m). The latest data from Q3
2016 shows a healthy jump in the customer base and the transaction value for Airtel Money (see
charts below). With the Airtel Money market in a development phase, the margin contribution is
negative (as of Q4 2015). As a key strategy for Africa, the company is looking to induce customer
loyalty and reduce churn through the promotion of Airtel Mobile. However, so far this has not
resulted in any financial gains for the company.
Africa business: customer base and
number of transactions
Customer base
No. of transaction (RHS)
m
10
Africa business: transaction value
+43.5%
+83.1%
m
300
240
6
180
4
120
2
60
3,000
2,000
1,000
0
0
3Q2015
Source: 3Q2016 report, Airtel
+80.9%
4,000
8
0
mUSD
5,000
3Q2015
3Q2016
3Q2016
Source: 3Q2016 report, Airtel
India: as of end FY2015, Airtel had 240m mobile customers in India, of which only 1.7m are
mobile money subscribers. However, looking forward, the scenario is likely to change given the
“in-principle” approval by the Reserve Bank of India (RBI) to Airtel to start its Payment Bank.
South East Asia (ex. India): Airtel has s presence in South East Asian countries including Sri
Lanka and Bangladesh, with 8.6m Airtel mobile subscribers.
Potential markets for mobile financial services
India & South Asia
Africa
Mobile subscribers (m)
249(Mar-15)
76(Mar-15)
Mobile money subscribers (m)
1.7*(Mar -15)
6.2(Mar-15)
Note: Aiirtel has 9m subscribers in South East Asian countries including SriLanka and Bangladesh and has very limited/few Airtel money users. Source: Airtel
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6 April 2016
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Presence in m-Health, m-Education and m-Agriculture services: Alongside mobile money,
Airtel is expanding its CSR activities via m-Health, m-Education and m-Agriculture. In India, mHealth was launched in 2011 and started services like ‘doctor on call’, real time treatment, and
video-diagnostics and remote disease monitoring. Airtel’s m-Education services use mobile and
direct to home (DTH) technology to create educational modules. To empower farmers and
people living in rural India, Airtel formed an alliance with NABARD and ATMA (Agriculture
Technical Management Agency) to provide information on agriculture-related activities. In
Africa, UNICEF and Airtel entered into an agreement in February 2015 to improve access to
health and education related information
RBI’s permission to Airtel for establishing a Payment bank in India is a key growth catalyst
for its mobile money services: In India, Airtel wholly owned subsidiary AMSL has partnered with
Kotak Mahindra bank to receive a license to offer full-fledged mobile money services. The opening
up of policy in 2015 by the Reserve Bank of India (RBI) with its “in-principle” approval for 11 Payment
Banks including Airtel is likely to be a key driver of mobile money growth in Airtel’s largest market,
India, which also has the second highest mobile consumer base globally (453m unique subscribers)
after China (672m unique subscribers). While in the short term, the mobile money service should
enable Airtel to reduce its customer churn-out ratio and hence customer acquisition cost, but over the
medium to long term, it should add to the net income line once volumes pick up and costs are spread
over a larger customer base.
Valuation and risks
We value Bharti Airtel using a DCF-based sum-of-the-parts (SOTP) approach. For our India
DCF valuation, we use a cost of equity of 13.0%, a cost of debt of 11%, and a WACC of 11.7%,
arriving at a fair value of INR463 per share for the India operations adjusted for regulatory
levies. We value the international operations at a negative INR33 per share based on a DCF
methodology, assuming a WACC of 11.7% (a cost of equity of 13.0% and a cost of debt of
11%). Our fair value target price of INR430 per share implies upside of c28%, and we have a
Buy rating on the stock.
Key downside risks: a sharper-than-estimated decline in data tariffs (we expect a 20% y-o-y
decline in FY17e) and Bharti adding 700 MHz spectrum in the upcoming auctions at current
prices proposed by the regulator.
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6 April 2016
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Telenor (TEL NO, Hold, TP NOK150)
Dominik Klarmann*
Analyst
HSBC Trinkaus & Burkhardt AG
dominik.klarmann@hsbc.de
+49 211 910 2769
Significant presence in Europe and parts of Asia: Telenor is a leading mobile operator with
operations in seven European countries (Denmark, Sweden, Norway, Hungary, Bulgaria,
Montenegro and Serbia) and six Asian countries (India, Myanmar, Pakistan, Bangladesh,
Malaysia, and Thailand). Its current mobile subscriber base is 203m. For FY2015, reported
revenue was NOK128bn.
Business segment overview: Telenor classifies its business broadly as services and products.
Services segment includes: i) Mobile communication, ii) Fixed telephony, Internet and TV, iii)
Satellite and TV distribution, and iv) Others. The product segment includes customer
equipment. Mobile communications is the major revenue source, accounting for 69% of total
revenue in FY2014.
Mobile financial services exposure: Telenor expects mobile financial services to become a
substantial new business area and is currently focusing on developing the business segment
across some of its markets in Asia:
Mobicash success story in Bangladesh: Mobicash is one of the first mobile financial services
(launched in 2007) provided by Telenor through its largest subsidiary, Grameenphone. The
service has so far dealt with cUSD100m in transactions and has significant potential, with
Grameenphone already having a c57m active mobile user base in the country, with more than
75% of Bangladesh’s 160m population not using the conventional banking system. As of
end-2014, the number of mobile money users was c21m (compared with the total customer
base of c51m), but the current numbers are likely to be more than 21m. Revenue in FY2015
from Bangladesh was NOK10.9bn.
Easypaisa success story in Pakistan to continue: Easypaisa was launched in 2009, and has
reached 12 million customers according to Telenor Revenues from mobile financial services
constituted c9% of Telenor Pakistan total revenues in FY2015 of NOK7.8bn, from 34.6m active
users in the country. We think the business has significant potential to increase its financial user
base in Pakistan, with only 15% of the population having access to formal financial services.
In India, Telenor is targeting to start operations of its Payment Bank before end-2016: In
India, Telenor has c43m mobile customers. In 2015, the group received approval from the
Central bank, the Reserve Bank of India (RBI), to set up a payment bank, which Telenor expects
to begin operations later this year. The RBI has imposed some limitations on the activities of
payment banks, being confined to the acceptance of demand deposits, remittance services,
internet banking and other specified services. The banks are restricted to hold a maximum
balance of INR1 lakh (cUSD 1,500) and will not be allowed to carry out any lending activities.
Mobile money growth in Asian markets to continue: On the back of its strong presence in the
above-mentioned markets, with the low bank account penetration rate, Telenor’s head of financial
services at Mobile World Congress in March 2015 stated that Telenor aims to become the market
leader in mobile financial services across some of its markets (source: http://www.thedailystar.
net/business/telenor-aims-go-big-mobile-financial-services-71679).
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Valuation and risks
We use a multiples-based SOTP to arrive at NOK150 TP: Please see or report Telenor: Hold: More
uncertainties than usual, 9 Feb 2016. We use 7.0x 2016e EV/EBITDA for Sweden and Norway and
5.0x for the Denmark and Eastern European operations and 7.0x for Pakistan and Bangladesh. Our
NOK150 TP implies 10.6% upside and we maintain our Hold rating as uncertainties prevail on
several fronts with a lack of clear visibility.
We use a multiples-based SOTP to arrive at NOK150 TP: We use 7.0x 2016e EV/EBITDA for
Sweden and Norway and 5.0x for the Denmark and Eastern European operations and 7.0x for
Pakistan and Bangladesh. Our NOK150 TP implies 14% upside and we have a Hold rating as
uncertainties prevail on several fronts with a lack of clear visibility. We use HSBC TPs for listed
subsidiaries DTAC (DTAC TB, THB39.50, Buy, TP THB48) and Digi (DIGI MK, MYR4.91,
Reduce, TP MYR4.1) and USD4.1 per share (carrying amount of Telenor's investment) for
associate Vimpelcom (VIP US, USD4.22, Buy, TP USD5.9). We value DTAC using a DDM
based on a COE of 9.4% (risk-free rate of 3.5%, a market risk premium of 6%, and a beta of
0.98). Key downside risks: irrational competition and any threats to the healthy payout. We
value Digi using a DDM with a COE of 7.7% (risk-free rate of 4%, risk premium of 3.5%, beta of
1.06 and a terminal growth rate of 1%). Key upside risks: better-than-forecast dividends and
lower competition.
Downside risks: expensive expansion in India, sustained deterioration in Thailand and intensifying
competition in Norway. Upside risks: sustained profitable growth in Norway, an exit from India and a
quick recovery in Thailand.
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6 April 2016
Kenya Commercial Bank (KCB NR, Buy, TP KES50)
Henry Hall*
Analyst
HSBC Bank Middle East Ltd
henry.hall@hsbc.com
+971 4 423 6930/ +27 11 880 1855
Mobile money and other mobile financial services have been viewed by many as competition for
banks. However, in the last few years banks have started to collaborate with mobile service
providers. Both the mobile service providers and the relevant banks benefit from the financial
inclusion that results from mobile money services being offered to the unbanked population.
An example of bank benefiting from this is Kenya Commercial Bank. Established in 1896, KCB
is the oldest bank in Kenya and is the largest in terms of assets and deposits with 12% market
shares of each. It also has the highest number of branches in the country. In that sense it is one
of the more traditional banks in Kenya in that it has a large physical presence. KCB’s largest
shareholder is the government with a 17% stake.
KCB has proactively tried to transform itself as part of its 2010-14 strategic plan, which was
devised as a defence against new competition from the mobile banking industry. The plan
focused on using technology to improve reach, reduce costs and increase profitability.
KCB M-Pesa – Strong start but scaling-up to take time
In March 2015 KCB launched a product in collaboration with Kenya’s largest mobile operator,
Safaricom, called KCB M-Pesa. This product offers mobile phone-based lending and deposits.
After only nine months of operations (until December 2015) KCB M-Pesa had achieved:

4.7m customers,

disbursed loans of over KES9.1bn (2.6% of KCB’s net loans), and

total transactions on the mobile platform at KES21.6bn in 2015 – almost double that of 2014.
Given the small ticket size of loans granted using the mobile banking platform, the total value of
such loans remains relatively insignificant as of now. Total loans outstanding that were granted
using KCB’s mobile banking businesses (KCB MPESA + KCB Mobi) were KES3bn at 31
December 2015 or just 0.8% of KCB’s total loans.
In 2015 loan applications at KCB through mobile have doubled as a percentage of total loan
applications (left hand side chart), while non-branch transactions have risen substantially as a
percentage of total loan applications (right hand side chart):
Loan applications through mobile have
doubled as a percentage of total loan
applications
Non-branch transactions (Mobile +
Agency) have risen substantially as a
percentage of total loan applications
100
100
80
5
%
53
58
60
60
95
40
20
%
80
47
70
40
42
20
30
0
0
2014
Mobile
2015
Others
Source: Company data; “Others” include loans to SME, Microfinance Corporates,
Mortgages and Personal loans
2014
Branch
2015
Non-branch
Source: Company data
While we expect KCB’s mobile banking platform to continue to grow at a rapid pace, the primary
financial impact is likely to be felt more through cross-selling opportunities with an expanded
customer base and cost savings through lower customer acquisition and servicing costs. We think
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these benefits will accrue over the long-term though. Thus, while growth in mobile banking may
continue to dominate discussions, the impact on earnings is likely to be small in the short term.
Valuation and risks
The sustainable ROE methodology involves forecasting NAV per share (KES43.61) and
calculating a sustainable ROE (22%). We divide this sustainable ROE by our calculation of
KCB’s COE (18.5%) to arrive at a ‘suggested multiple to book’. Our calculated COE is a function
of our assessment of the risk inherent in the company. We multiply this ‘suggested multiple to
book’ with our forecast NAV per share at the end of Year 3 to arrive at a value per share at the
end of Year 3. We use the company’s COE to present value NAV per share at the end of Year 3
as well as all the dividends that will be paid in the intervening period. The result of the
calculation constitutes our target price of KES50, which implies c19.8% upside.
Downside risks: (1) the bank has proactively tried to increase its presence in SME and Retail
lending over the last year for reasons including wanting to improve margins. However, these
segments have potentially higher relative credit risk than the corporate sector; (2) given its
history, KCB remains closely associated with government (which owns 17% of the company)
and relies on it for business. Thus, it is potentially more exposed to government instability or
poor management of government departments.
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6 April 2016
Equity Group Holding (EQTY NR, Buy, TP KES48)
Henry Hall*
Analyst
HSBC Bank Middle East Ltd
henry.hall@hsbc.com
+971 4 423 6930/ +27 11 880 1855
Equity Group was founded in 1984 as a building society, converted to a commercial bank
(Equity Bank Ltd) in 2004 and finally converted to a non-operating holding company (Equity
Group Holding Ltd) in December 2014. A key focus of the bank has been to target SMEs, retail
banking and microfinance by using technology.
MVNO status to aid growth in Kenya
Equity Group received its mobile virtual network operator (MVNO) licence in April 2014 and
started operations as Equitel. It partnered with Airtel Kenya to offer this service. In a market
dominated by Safaricom, it is a challenge for Equity to increase its customer base. Equitel is
using technology to overcome this, launching a first-of-its-kind ultra-thin SIM card. This SIM is a
0.1mm thin film which sits over a user’s existing SIM card allowing the user to make calls, SMS,
use data and access mobile money services. The strategy has been a success, with Equitel
expanding its subscriber base to 1.7m as of January 2016 (Safaricom had 25.1m subscribers as
of Sep-2015). Consequently growth in the value of transactions conducted by mobile customers
has also been rapid off a zero base.
Equitel subscribers base has expanded
rapidly
Mobile customer transaction value
2.0
140
m
120
+230% y -y
1.5
KES bn
115
97
100
80
1.0
60
40
0.5
20
5 11
17
24
33
42
50
59
70
83
0
0.0
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15
Tech-driven alternative channels have kept fixed costs low
Equity Group has made significant investments in technology since its inception and has
managed to bring down its cost structure. Over the last four years Equity has spent KES43.9bn
on technology (c47% of its total expenses). As a result of this sustained investment in
technology and innovation, its cost-to-income ratio has declined from 60.1% in 2009 to 52.9% in
2015 which is an impressive reduction. We expect Equity to continue to benefit from its
investment in the various technology platforms and expect further improvement in efficiency.
Valuation and risks
We value Equity using a sustainable ROE methodology which involves forecasting NAV per
share and calculating a sustainable ROE (25%). We divide this sustainable ROE by our
calculation of Equity’s COE (18.5%) to arrive at a ‘suggested multiple to book’. Our calculated
COE is a function of our assessment of the risk inherent in the company. We multiply this
‘suggested multiple to book’ with our forecast NAV per share at the end of Year 3 to arrive at a
value per share at the end of Year 3. We use the company’s COE to present value per share at
the end of Year 3 as well as all the dividends that will be paid in the intervening period. The
result of the calculation constitutes our KES48 target price, which implies 20% upside.
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Downside risks: (1) as part of its strategy the bank has been increasing its regional presence.
Given the past history of civil wars and instability in the region we believe this is strategy is high
risk; (2) the bank has focused on technology driven solutions in order to keep its overall costs
lower. However, any unforeseen disruptive technological change could impact our cost
efficiency assumptions.
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Dexcom (DXCM US, Not rated)
Market leader in CGM devices: Dexcom is a US-based medical device company, which since
inception in 2006, has been focusing on developing continuous glucose monitoring systems. As
of end-2015, the group had revenues of USD402m. According to Dexcom, it has a c70% market
share in CGM devices. The company generates 86% of revenues from the US.
First company to launch CGM products that could interact with smartphones in 2015:
Dexcom’s newest device, G5 Mobile, has diabetes sensors that are plugged to the patient’s
body and that can continuously send blood glucose level data to smartphone apps through
Bluetooth. This data can then be sent to caregivers/clinicians via the internet. Since G5 Mobile
was only launched in Q3 2015, there are no data on sales from this specific product reported by
the company. However, the number of patients who use Dexcom products doubled during 2015
to 150k according to the company, which it says was partly due to the launch of the new product
that interacts with smartphones.
Dexcom – revenue (USDm) and growth
USDm
500
sales
400
growth (rhs)
Number of children with type-1 diabetes as
of 2014
80%
million persons
160
60%
120
80
2011
Source: Company reports
2012
2013
2014
2015
Europe
N America
0%
0
SE Asia
0
Pacific
20%
100
40
MENA
200
Africa
40%
LatAm
300
Source: IDF
Significant market potential given the low penetration rate of these devices: Most of the users
of CGM devices have type-1 diabetes. Type-1 diabetes is less common than type-2 and as per IDF
estimates, of the 415m diabetes patients globally only 10% will have type-1, which alone implies over
40m people. Furthermore, these patients require closer monitoring and care, as without insulin, the
disease is life-threatening.
According to Dexcom management, only 15% type-1 diabetes patients in the US use CGM devices,
while most of them need it. The penetration levels of CGM devices in other countries are much lower,
implying significant growth potential just from the increase in adoption of the device, let alone the
increasing prevalence of diabetes. A large section of patients with type-2 diabetes could also benefit
from using CGM devices and according to management, many have started. Currently the company
puts the penetration of CGM devices among type-2 patients in the US at just 1%.
Diabetes in children: According to Dexcom management, there is strong demand for the group’s mHealth CGM devices among paediatric diabetes patients, as they are very easy to use for parents
who want to continuously monitor their children. According to IDF, there are currently 542k children
with type-1 diabetes globally with 86k being added every year.
Dexcom revenue projected by the company to grow 35-40% per annum over the next three to
four years: Management expects revenue to grow by 35-40% per annum over the next three to four
years, which suggests the CGM market itself will grow at that pace, if we consider the group’s
dominant market share. That would put the market size of CGM devices at over USD1.3bn by 2018,
we calculate. Furthermore, considering the ease of use and application of CGM devices with
smartphone connectivity for type-1 diabetes patients, it is likely that most new sales will happen in
these products in the coming years.
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Medtronic (MDT US, Not rated)
One of the leaders in mobile Cardiac and vascular division, Medtronic currently accounts for
46% of the group revenues within which cardiac rhythm and heart failure division, which
includes diagnostic products, generated USD5bn (25% of group revenues) in 2015. The group
has presence in both Mobile Cardiac Telemetry Systems (MCT) and implant monitors. Its two
devices with mobile technology use features – an MCT device called Seeq and an implant
device called Reveal Linq – capable of transferring heart readings through mobile networks
were launched in 2014. Management expects Reveal Linq to generate annual sales of
USD500m by 2016.
No 2 in CGM devices on market share: Medtronic is an Irish medical technology company and
is among the leaders in the medical devices segment, with over USD20bn revenues in 2015.
The diabetes devices division accounts for less than 10% of group revenues and includes
insulin pumps as well as blood glucose monitors. Medtronic is a leader in continuous blood
glucose monitoring devices (CGM), with c30% share. Medtronic’s MiniMed Connect device was
launched in 2015 can send CGM data via Bluetooth/internet to a smartphone app, enabling
remote monitoring of diabetes patients.
Based on the market share and market size numbers reported by Medtronic, its CGM devices
generated cUSD250m in revenues in 2014. Figures are not yet available for sales of the device
with smartphone connectivity, which was only launched in 2015.
Guidance for double-digit growth in revenue of diabetes business segment, with CGM
leading the way: Medtronic management expects double-digit growth for its diabetes
management division to 2018. The global diabetes device market, which includes CGMs, insulin
pumps and insulin pens, was valued by Medtronics at USD2.6bn for 2014 and is expected to
reach USD4bn by 2018, according to Medtronic management with the market for CGMs
growing the fastest. Management also expects its division to see an over 25% CAGR between
2014 and 2020 in emerging markets.
Medtronic – breakdown of revenues
(USDbn)
Medtronic – revenue from diabetes
division (USDm)
USDbn
25
USDm
2,000
20
Cardiac & vascular
Restorative
Minimally invasive
Diabetes
15
12%
10%
1,500
8%
1,000
10
6%
4%
500
5
2%
0
0
FY10
FY11
FY12
Source: Medtronic company reports
FY13
FY14
FY15
0%
FY10 FY11 FY12 FY13 FY14 FY15
Sales
growth (rhs)
Source: Medtronic company reports
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6 April 2016
Omron (6645 JP, Not rated)
Market Leader in blood pressure monitors: Omron is a Japanese manufacturer of sensing
and control products with a presence in over 110 countries around the world. The group’s
product lines include control equipment, electronic components, automotive electronic
components, social infrastructure services, healthcare, and environmental solutions. Omron is
the market leader in blood pressure monitors with a 50% share of global sales.
During FY2015, Omron reported net revenues of JPY847bn with the healthcare division
accounting for JPY101bn. Blood pressure monitors are the biggest contributor to the healthcare
division sales of the group and generated cJPY52bn during FY2015.
Omron – divisional breakdown of revenues
(FY2015)
Current market share of Omron in Blood
pressure monitor markets
80%
Others,
21%
Electronic &
mechanical
components,
12%
60%
60%
Industrial
automation,
39%
60%
50%
40%
20%
Healthcare,
12% Automotive
Electronics,
16%
0%
China
Source: Omron
Japan
World
Source: Omron
Significant growth potential as smart phone compatible meters become the norm: The
global blood pressure monitoring market is currently worth USD1bn. However with wireless
blood pressure monitors coming on to market only recently, their share is currently small.
Omron launched its first wireless blood pressure monitors in 2012 following the launch by
iHealth. Smartphone connectivity for blood pressure monitors is likely in the longer term to
become the norm rather than a special addition. This in turn would mean that market potential
for the wireless blood pressure monitors that can connect to smartphones is at least USD1bn
long-term, with potential upside from the growing awareness of the disease and increasing
numbers of people coming for treatment.
Omron – healthcare division revenue –
strong growth in revenues blood pressure
monitors
JPYbn
120
90
Omron – breakdown of healthcare
revenues based on products (FY2015)
30%
Blood pressure
monitors
20%
Nebulizers
10%
Thermometres
60
30
0%
0
FY2011 FY2012 FY2013 FY2014 FY2015
Other products
Blood pressure monitors
growth in blood pressure monitor revenues (rhs)
Source: Omron
58
Patient monitors
Others
Source: Omron
27%
52%
5%
6%
10%
abc
6 April 2016
Apple (AAPL US, Not rated)
Stands-out in innovation: Apple has evolved from a PC manufacturer into a much more
technology-related company, marking its stronger presence in mobiles and tablets. The
company has a strong footprint in the mobile space, competing against other global majors such
as Samsung, Sony and others. Apple’s focus remains on the growing mobile segment,
highlighted by the new versions of the iPhone launched every year. Apple reported that the
average selling price for iPhones was up 11% y-o-y in FY2015, mainly due the introduction of
iPhone 6 and 6 Plus in September 2014. Apple also continues to expand its platform for the
discovery and delivery of digital content and applications through its internet services. Total
reported revenue in FY2015 was USD233bn.
Operating segments (iPad represents 10% of total sales): Apple reports revenue under five
major categories: (1) iPhone, representing 66% of the total sales in FY2015; (2) iPad,
representing 10% of sales; (3) Mac, which includes sales of PCs and represents 11% of sales;
(4) services, which includes revenue from iTunes, App store, iBooks, and Apple Music
representing 9% of sales; (5) other products, which includes Apple TV, watch and iPod
representing 4% of revenue. In recent years, the trend has been towards iPhones and iPads vs.
Mac, clearly indicating that the market is shifting to hand-held devices. Internet services revenue
is also growing, mainly due to growth in the installed based on the iOS devices and the
expanded offering of iOS applications (source: Apple FY2015 annual report).
Apple – FY15 revenue split
iPhone
iPad
Mac
Services
9%
4%
Google Play
Store
11%
10%
Share of total mobile apps
10%
Apple App Store
48%
66%
Others
Amazon App
Store
Source: GSMA, Note: As of 2014
42%
Exposure to m-Education and m-Health services: Apple’s share from its Apps store revenue
could be USD6.3bn in 2015 (source: calculations based on data from www.computerworld.com,
January 6, 2016). According to Apple company website, as of January 2015, its App store had
c1.4m applications. The website also mentions that c80,000 apps in their App store are related
to education, which translates c5.5% of the total applications. We think medical; health and
fitness related applications could be a similar share.
In October 2014, Apple started an initiative called ConnectED aimed at students with iPads to
connect with a remote instructor. Apple has also partnered with providers of educational content
to ensure access to tailored curriculum solutions to schools. Apple supports mobile learnings
and real time distribution and access to education related materials through iTunes U, a
platform that allows students and teachers to share and distribute educational media online.
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Amazon (AMZN US, Not rated)
Online retailing leader: Amazon is one of the leading online retailers with a strong presence
across the globe. It is the largest internet-based retailer in the United States. Amazon has
diversified from an online bookstore to DVDs, software, electronics, games, apparel, furniture
etc. It also produces electronic gadgets such as Kindle e-book readers, which are widely used
among online book enthusiasts. Apart from Kindle, it also manufactures and sells Fire tablets,
Fire TV and Fire Phones. Amazon’s revenue reached USD107bn in FY2015 with around 60%
coming from North America. Apart from the United States, Amazon has strong presence in
countries including the UK, France, Canada and Japan. It also serves authors and independent
publishers with Kindle Direct Publishing, an online platform that enables publishers to choose a
70% royalty option and make their books available in the Kindle Store along with Amazon’s own
publishing arm, Amazon Publishing. It also enables application developers, musicians to publish
and sell content.
Operating segments: Amazon reports revenue under two major segments: (1) North America
and (2) International. Based on products and services, Amazon reports revenue under three
categories: (1) Media, which includes e-books, was 21% of total sales in FY2015, (2)
Electronics and general merchandise, which includes electronic gadgets and other peripherals,
was 71% of total sales, and 3) Others, which include sales from non-retail activities and
represents 8% of the total sales.
Amazon – FY15 revenue split
Global app revenue (USDbn)
100
Media
80
8%
Electronics and
general
merchandise
Others
21%
60
40
20
71%
0
2013
2014
Source: GSMA, Note: Includes revenue from all App stores
Exposure to m-Education and m-Health segments: Amazon enables parents to add
education goals via Kindle FreeTime software and this is particularly targeted at younger users
who spend a lot of time on gaming. There are features such as “Learn First”, via which users
have to first complete their education goals before other content is made visible. Giving parents
greater control is aimed at improving the penetration rate and boosting sales of Kindle.
Amazon also has an App store similar to Apple’s App Store and Google’s Play Store, which is
predominantly used in Amazon’s Kindle’s e-book readers. Amazon’s App store is not as big as
the Apple or Google and is estimated to have around 400,000 applications (Amazon’s huge
progress-www.cnet.com, 4 March 2015. Education related applications represent c4% of the
total applications; with medical, health and fitness applications also representing c4% of the
total (source: Amazon App store). Amazon is planning to launch a free platform for schools and
other educators to upload, manage and share education materials. It recently opened an
“Amazon Education Wait List”, where educators can sign up to get an alert when a new, free
platform opens for business.
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Google (GOOGL US, Not rated)
Search engine player to a technology giant: Google specialises in the internet technology
space, including online advertising, cloud computing and search engine. Some of its key
products include AdWords, Search Engine, Gmail, Google Docs and Google Translate. Google
also leads the development of the Android mobile operating system and the browser Chrome.
Android operating systems are widely used in mobile phones such as Samsung, HTC, and
Motorola, and Chrome has been widely accepted following its launch, and is similar to
Microsoft’s Internet Explorer and Mozilla Firefox browsers. Google reported revenue of
USD75bn in FY2015.
Operating segments (90% revenue from advertisements): Google primarily reports revenues
under the following two segments: (1) Advertising revenues, representing 90% of total revenue and
including revenue from online advertising and other related activities such as Maps, YouTube,
Applications, etc.; (2) Others, which represents the remainder, comprising businesses such as
Google Capital and other hardware products, internet and TV services through Google fibre.
Google – FY15 revenue split
Share of total mobile apps
Google Play
Store
10%
Advertizing
10%
Apple App Store
Others
90%
Source: Company data, Note: Others include Google Capital, hardware products,
interest and TV Services
Amazon App
Store
48%
42%
Source: GSMA, Note: As of 2014
Exposure to m-Education and m-Health: Google’s Play Store, predominantly used in Android
devices, had around 1.4m applications in 2014 (source: GSMA) and it is estimated that c8% of
total applications are related to the education space, while c4% relate to medical, health and
fitness activities (source: www.pewinternet.org, Google play store).
Google launched an app called Google Classroom in 2014, which is a learning platform for
schools that aims to simplify grading assignments. This app interlinks Google Drive and Gmail
for communication of information and creating assignments. It is estimated that 30m students
and instructors use Google Apps for education, including top universities. Google Play for
Education is a way of bringing better integration between Android and Chrome and also helps in
bringing flexibility to classrooms that use Android tablets and Chromebooks.
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Appendix
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Potential for mobile money
across some key markets
Some of the key markets
Based on an analysis of current mobile penetration levels and the potential for future growth,
the size of the unbanked population, the current mobile money penetration rate and the
country/region specific regulations on mobile money, we conclude that:

The mobile money penetration rate in Africa is now over 50%; however growth potential
still exists

Many other emerging markets, especially the South Asian economies, offer strong potential
with all the right catalysts for growth.
We provide an overview of some of the key growth markets in the following pages.
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Africa
Egypt
Population distribution
Urban
Rural
Banking and mobile penetration
ROW
1.2%
100
Egypt
100%
80
80%
60
60%
40
40%
20
20%
0%
0
Egypt
World (RHS)
Source: World Bank
Per 100 people
140
114
120
100
80
60
40
14
N/A
20
0
Bank penetration Mobile penetration Mobile money
penetration
Source: World Bank; Note: banking penetration is the number of people (age of 15 +
years) among 100 who hold any account in banks or financial institutions
Morocco
Urban
Million persons
40
Rural
ROW
0.5%
Morocco
100%
80%
30
60%
20
40%
10
20%
0%
0
Morocco
World (RHS)
Source: World Bank
Per 100 people
132
140
120
100
80
60
40
N/A
N/A
20
0
penetration
Tunisia
Urban
Million persons
12
Rural
ROW
0.15%
10
Tunisia
100%
80%
8
60%
6
40%
4
20%
2
0
0%
Tunisia
Source: World Bank
World (RHS)
Per 100 people
128
140
120
100
80
60
27
40
N/A
20
0
penetration
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6 April 2016
Cote d'Ivoire
Urban
Million persons
25
Rural
ROW
Cote d'I voire
0.31%
Per 100 people
120
100%
100
20
80%
80
15
60%
60
10
40%
5
20%
0
0%
Cote d'I voire
World (RHS)
Source: World Bank
40
20
106
15
22
0
penetration
Ghana
Urban
Million persons
30
Rural
ROW
0.37%
25
Ghana
100%
80%
20
60%
15
40%
10
20%
5
0%
0
Ghana
World (RHS)
Source: World Bank
Per 100 people
140
115
120
100
81
80
60
35
40
20
0
penetration
Kenya
Urban
Rural
ROW
0.6%
60
50
60%
30
40%
20
20%
10
0
0%
Kenya
66
100%
80%
40
Source: World Bank
Kenya
World (RHS)
Per 100 people
74
80
70
55
60
50
40
30
20
10
0
Bank penetration Mobile penetration
45
Mobile money
penetration
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6 April 2016
Nigeria
Urban
Rural
ROW
Nigeria
200
100%
150
80%
60%
100
40%
50
20%
0
Per 100 people
100
80
60
20
N/A
0
penetration
World (RHS)
Source: World Bank
44
40
0%
Nigeria
78
Tanzania
Urban
Rural
ROW
Tanzania
0.7%
60
50
100%
80%
40
60%
30
40%
20
20%
10
0
0%
Tanzania
Per 100 people
63
70
60
50
40
30
19
20
10
0
World (RHS)
Source: World Bank
61
Mobile money
penetration
Uganda
Urban
Million persons
40
Rural
ROW
0.52%
30
20
Uganda
100%
50
80%
40
60%
30
40%
10
20%
0
0%
Uganda
Source: World Bank
World (RHS)
Per 100 people
60
52
47
28
20
10
0
Mobile money
penetration
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6 April 2016
Congo, Dem. Rep.
Urban
Rural
Million persons
80
ROW
Congo, Dem. Rep.
1%
60
40
100%
50
80%
40
60%
30
40%
20
20%
0
0%
Congo, Dem. Rep.
Per 100 people
60
20
53
11
0
World (RHS)
Source: World Bank
N/A
10
Mobile money
penetration
Ethiopia
Urban
Million persons
120
Rural
ROW
Ethiopia
1.3%
100%
100
80%
80
60%
60
40%
40
20%
20
0
0%
Ethiopia
Per 100 people
32
35
30
22
25
20
15
10
5
0
World (RHS)
Source: World Bank
N/A
Mobile money
penetration
South Africa
Urban
Rural
Million persons
60
ROW
South Africa
0.7%
50
80%
40
60%
30
40%
20
20%
10
0
0%
South Africa
Source: World Bank
68
100%
World (RHS)
Per 100 people
150
160
140
120
100
69
80
60
40
N/A
20
0
penetration
abc
6 April 2016
Asia Pacific
India
Urban
Million persons
1,500
Rural
ROW
India
100%
18%
80%
1,000
60%
40%
500
20%
0
0%
India
World (RHS)
Source: World Bank
Per 100 people
74
80
70
53
60
50
40
30
20
10
0
N/A
Mobile money
penetration
China
Urban
Million persons
1,500
Rural
ROW
China
100%
19%
80%
1,000
60%
40%
500
20%
0
0%
China
Per 100 people
95
90
85
80
79
75
N/A
70
World (RHS)
Source: World Bank
92
Mobile money
penetration
Bangladesh
Urban
Rural
ROW
Bangladesh
2.2%
200
100%
80%
150
100
100
40%
50
20%
0
0%
Source: World Bank
World (RHS)
159
150
60%
50
Bangladesh
Per 100 people
200
50
N/A
0
penetration
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6 April 2016
Indonesia
Urban
Million persons
300
Rural
ROW
Indonesia
3.5%
100%
250
80%
200
60%
150
40%
100
20%
50
0%
0
Indonesia
World (RHS)
Source: World Bank
Per 100 people
126
140
120
100
80
60
36
40
N/A
20
0
penetration
Malaysia
Urban
Million persons
40
Rural
ROW
Malaysia
0.4%
100%
80%
30
60%
20
40%
10
20%
0
0%
Malaysia
World (RHS)
Source: World Bank
Per 100 people
149
160
140
120
81
100
80
60
40
N/A
20
0
penetration
South Korea
Urban
Million persons
60
Rural
ROW
South Korea
0.7%
50
80%
40
60%
30
40%
20
20%
10
0%
0
South Korea
Source: World Bank
70
100%
World (RHS)
Per 100 people
140
116
120
94
100
80
60
40
N/A
20
0
penetration
abc
6 April 2016
Japan
Urban
Million persons
130
Rural
ROW
Japan
1.8%
100%
80%
125
120
60%
98%
40%
115
20%
0%
110
Japan
World (RHS)
Source: World Bank
Per 100 people
140
120
120
97
100
80
60
40
N/A
20
0
penetration
Pakistan
Urban
Million persons
200
Rural
ROW
Pakistan
2.5%
100%
80%
150
60%
100
40%
50
20%
0
0%
Pakistan
World (RHS)
Source: World Bank
Per 100 people
73
80
70
60
50
40
30
20
9
10
0
N/A
Mobile money
penetration
Philippines
Urban
Million persons
120
Rural
ROW
Philippines
1.4%
100
80
60
100%
100
80%
80
60%
60
40%
40
20%
20
0
0%
Philippines
Source: World Bank
World (RHS)
Per 100 people
120
40
20
111
28
N/A
0
penetration
71
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6 April 2016
Latin America
Brazil
Urban
Million persons
210
Rural
ROW
Brazil
3%
100%
200
80%
190
60%
180
40%
170
20%
0%
160
Brazil
World (RHS)
Source: World Bank
Per 100 people
160
139
140
120
100
68
80
60
40
N/A
20
0
penetration
Mexico
Urban
Million Persons
150
Rural
ROW
Mexic o
1.7
%
100
80
100
60
40
50
20
0
0
Total
World share (RHS)
Source: World Bank
per 100 people
90
80
70
60
38.7
50
40
30
20
10
0
Banking
penetration
82.5
N/A
Mobile
subscription
Mobile money
penetration
Colombia
Urban
Million persons
60
Rural
ROW
Colombia
0.7%
50
40
30
20
0
80
60%
60
40%
40
0%
Colombia
Source: World Bank
World (RHS)
102.9
100
80%
20%
10
72
100%
per 100 people
120
29.0
20
N/A
0
Banking
penetration
Mobile
subscription
Mobile money
subscription
abc
6 April 2016
Argentina
Urban
Rural
Million persons
44
43
42
41
40
39
38
37
Argentina
ROW
Argentina
0.6%
Per 100 people
200
100%
80%
60%
100
40%
50
20%
50
N/A
0
0%
penetration
World (RHS)
Source: World Bank
159
150
Peru
Urban
Million Persons
40
Rural
ROW
Peru
0.4
80
30
20
10
World share (RHS)
102.9
100
80
60
40
40
0
Total
per 100 people
120
60
20
0
Source: World Bank
%
100
29.0
20
N/A
0
Banking
penetration
Mobile
subscription
Mobile money
penetration
73
6 April 2016
Notes
74
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6 April 2016
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Notes
75
6 April 2016
Notes
76
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6 April 2016
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Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the
opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their
personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Charanjit Singh, Robert Walker, Herve Drouet, Stephen Howard,
Luigi Minerva, Rajiv Sharma, Dominik Klarmann and Henry Hall
Important disclosures
Equities: Stock ratings and basis for financial analysis
HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's
existing holdings, risk tolerance and other considerations and that investors utilise various disciplines and investment horizons
when making investment decisions. Ratings should not be used or relied on in isolation as investment advice. Different
securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations and
therefore investors should carefully read the definitions of the ratings used in each research report. Further, investors should
carefully read the entire research report and not infer its contents from the rating because research reports contain more
complete information concerning the analysts' views and the basis for the rating.
From 23rd March 2015 HSBC has assigned ratings on the following basis:
The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12
months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will
be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a
Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is
between 5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more
than 20% below the current share price, the stock will be classified as a Reduce.
Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage,
change in target price or estimates).
Upside/Downside is the percentage difference between the target price and the share price.
Prior to this date, HSBC’s rating structure was applied on the following basis:
For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate,
regional market established by our strategy team. The target price for a stock represented the value the analyst expected the
stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as
Overweight, the potential return, which equals the percentage difference between the current share price and the target price,
including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the
succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight,
the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or
10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.
*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12
months (unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However,
stocks which we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the
past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating,
however, volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.
77
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6 April 2016
Rating distribution for long-term investment opportunities
As of 31 March 2016, the distribution of all ratings published is as follows:
Buy
46%
(26% of these provided with Investment Banking Services)
Hold
40%
Sell
14%
For the purposes of the distribution above the following mapping structure is used during the transition from the previous to
current rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current
model Buy = Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis
for financial analysis” above.
Information regarding company share price performance and history of HSBC ratings and target prices in respect of long-term
investment opportunities for the companies that are the subject of this report is available from www.hsbcnet.com/research.
HSBC & Analyst disclosures
Disclosure checklist
Company
BHARTI AIRTEL
MILLICOM
MTN GROUP
TELENOR
VODAFONE GROUP
Ticker
Recent price
Price date
Disclosure
BRTI.BO
MICsdb.ST
MTNJ.J
TEL.OL
VOD.L
353.80
453.30
132.02
139.60
2.22
31-Mar-2016
31-Mar-2016
31-Mar-2016
31-Mar-2016
31-Mar-2016
1, 2, 5, 6
4
7
5
1, 4, 5, 6
Source: HSBC
1
HSBC has managed or co-managed a public offering of securities for this company within the past 12 months.
2
HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3
months.
3
At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this
company.
4
As of 29 February 2016 HSBC beneficially owned 1% or more of a class of common equity securities of this company.
5
As of 29 February 2016, this company was a client of HSBC or had during the preceding 12 month period been a client of
and/or paid compensation to HSBC in respect of investment banking services.
6
and/or paid compensation to HSBC in respect of non-investment banking securities-related services.
7
and/or paid compensation to HSBC in respect of non-securities services.
8
A covering analyst/s has received compensation from this company in the past 12 months.
9
A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as
detailed below.
10
A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this
company, as detailed below.
11
At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in
securities in respect of this company
HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt
(including derivatives) of companies covered in HSBC Research on a principal or agency basis.
Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment
banking, sales & trading, and principal trading revenues.
78
6 April 2016

Whether, or in what time frame, an update of this analysis will be published is not determined in advance.
Economic sanctions imposed by the EU and OFAC prohibit transacting or dealing in new debt or equity of Russian SSI entities.
This report does not constitute advice in relation to any securities issued by Russian SSI entities on or after July 16 2014 and as
such, this report should not be construed as an inducement to transact in any sanctioned securities.
For disclosures in respect of any company mentioned in this report, please see the most recently published report on that
company available at www.hsbcnet.com/research.
Additional disclosures
1 This report is dated as at 0 April 2016.
2
All market data included in this report are dated as at close 01 April 2016, unless otherwise indicated in the report.
3
HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research
operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier
procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any
confidential and/or price sensitive information is handled in an appropriate manner.
79
6 April 2016
abc
Disclaimer
Legal entities as at 30 May 2014
‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation Limited, Hong
Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada, Toronto; HSBC Bank, Paris Branch;
HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and
Capital Markets (India) Private Limited, Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities
Egypt SAE, Cairo; ‘CN’ HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai
Banking Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul
Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Securities (South
Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’ HSBC Securities (USA)
Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple, Grupo
Financiero HSBC; HSBC Bank Brasil SA – Banco Múltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA;
HSBC Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch
incorporated in Hong Kong SAR; The Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch
Issuer of report
HSBC Bank plc
8 Canada Square
London, E14 5HQ, United Kingdom
Telephone: +44 20 7991 8888
Fax: +44 20 7992 4880
Website: www.research.hsbc.com
In the UK this document has been issued and approved by HSBC Bank plc (“HSBC”) for the information of its Clients (as defined in the Rules of FCA) and those of its affiliates only. It is not
intended for Retail Clients in the UK. If this research is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the
recipient and such affiliate.
HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All U.S. persons receiving and/or accessing this report and
wishing to effect transactions in any security discussed herein should do so with HSBC Securities (USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer of this
report.
In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch for the general information of institutional investors or other persons
specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) (“SFA”) and accredited investors and other persons in accordance with the conditions specified in Sections
275 and 305 of the SFA. This publication is not a prospectus as defined in the SFA. It may not be further distributed in whole or in part for any purpose. The Hongkong and Shanghai Banking
Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a "Hongkong and Shanghai Banking Corporation Limited,
Singapore Branch" representative in respect of any matters arising from, or in connection with this report.
In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its
“wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by HSBC Bank Australia Limited (AFSL No. 232595). These
respective entities make no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or
appropriate in accordance with local law. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient.
This publication has been distributed in Japan by HSBC Securities (Japan) Limited. It may not be further distributed, in whole or in part, for any purpose. In Hong Kong, this document has been
distributed by The Hongkong and Shanghai Banking Corporation Limited in the conduct of its Hong Kong regulated business for the information of its institutional and professional customers; it
is not intended for and should not be distributed to retail customers in Hong Kong. The Hongkong and Shanghai Banking Corporation Limited makes no representations that the products or
services mentioned in this document are available to persons in Hong Kong or are necessarily suitable for any particular person or appropriate in accordance with local law. All inquiries by such
recipients must be directed to The Hongkong and Shanghai Banking Corporation Limited. In Korea, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited,
Seoul Securities Branch ("HBAP SLS") for the general information of professional investors specified in Article 9 of the Financial Investment Services and Capital Markets Act (“FSCMA”). This
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the Financial Supervisory Service of Korea. This publication is distributed in New Zealand by The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in
Hong Kong SAR.
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information
obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability as to
its accuracy or completeness. The opinions contained within the report are based upon publicly available information at the time of publication and are subject to change without notice.
Nothing herein excludes or restricts any duty or liability to a customer which HSBC has under the Financial Services and Markets Act 2000 or under the Rules of FCA and PRA. A recipient who
chooses to deal with any person who is not a representative of HSBC in the UK will not enjoy the protections afforded by the UK regulatory regime. Past performance is not necessarily a guide
to future performance. The value of any investment or income may go down as well as up and you may not get back the full amount invested. Where an investment is denominated in a
currency other than the local currency of the recipient of the research report, changes in the exchange rates may have an adverse effect on the value, price or income of that investment. In
case of investments for which there is no recognised market it may be difficult for investors to sell their investments or to obtain reliable information about its value or the extent of the risk to
which it is exposed.
In Canada, this document has been distributed by HSBC Bank Canada and/or its affiliates. Where this document contains market updates/overviews, or similar materials (collectively deemed
“Commentary” in Canada although other affiliate jurisdictions may term “Commentary” as either “macro-research” or “research”), the Commentary is not an offer to sell, or a solicitation of an
offer to sell or subscribe for, any financial product or instrument (including, without limitation, any currencies, securities, commodities or other financial instruments).
HSBC Bank plc is registered in England No 14259, is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation
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© Copyright 2016, HSBC Bank plc, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means,
electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Bank plc. MICA (P) 073/06/2015 and MICA (P) 021/01/2016
[505194]
80
Issuer of report:
HSBC Bank plc
8 Canada Square
London, E14 5HQ, United Kingdom
Telephone: +44 20 7991 8888
Fax: +44 20 7992 4880
Website: www.research.hsbc.com
Main contributors
Charanjit Singh
Analyst
HSBC Bank plc
+91 80 3001 3776 | charanjit2singh@hsbc.co.in
Charanjit Singh joined HSBC in 2006, and is currently a member of the Social and Governance research team. Over the last ten years he has
worked in the Climate Change, Clean Technologies and Utilities research teams at HSBC. Charanjit has been a financial and policy analyst
since 2000, and before joining HSBC, he worked with an energy major, India’s leading rating agency and an Indian consultancy firm. Charanjit
is a Chevening fellow from the University of Edinburgh. He holds a Bachelor’s degree in Engineering and a Master’s degree in Management.
Robert Walker
Equity Strategist, Social and Governance
HSBC Bank plc
+44 20 3359 2082 | rob.walker@hsbc.com
Robert Walker joined HSBC in 2015 as a Director for Social and Governance research. Prior to this, he was a sustainability analyst for
a European equity broker, where he led coverage on governance issues. Previous financial service roles include working at a research
consultancy, and as an analyst for an asset manager. During his career, Robert has been ranked in the Extel survey, ranking #1 in 2015.
Robert holds a BA (Hons) degree in History & Politics from Queen Mary University of London.
Hervé Drouet*
Head of EEMEA TMT Equity Research
HSBC Bank plc
+44 20 7991 6827 | herve.drouet@hsbcib.com
Hervé is Head of EEMEA TMT Equity Research. He has covered the sector for more than 14 years and has been ranked regularly, and
ranked highly in numerous external surveys. He has 20 years’ experience in the media, telecoms and technology sectors, having been a
senior management consultant in the TMT practice at Deloitte Consulting and a project manager for Schlumberger Technologies. He holds
a MBA from London Business School and graduated from Ecole Supérieure d’Ingénieurs en Electrotechnique et Electronique in France.
*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations.

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