Telcos back on growth path as discounts, offers vanish

Written by fe Bureau | Mumbai | Updated: Nov 16 2013, 10:04am hrs
A stable tariff regime with the end of price wars saw mobile operators returning to health during the July-September quarter. Since most of the newer operators have either shut shop or reduced their footprint from pan-India to token presence in only a few areas, the worst seems to be over for the sector as incumbent operators improve their realisations by doing away with discounts and freebies.

Not surprisingly, the quarter saw noticeable change in average revenue per minute (ARPM) of the major companies. Market leader Bharti Airtel, Vodafone India, Aditya Birlas Idea Cellular and Anil Ambani-owned Reliance Communications (RCom) reported higher realisation sequentially, as well as last year. During the quarter, Bharti Airtels ARPM rose to 36.7 paise from 36.3 paise in the April-June quarter.

Although Bharti and Idea Cellular reported quarterly decline in net profits, the numbers were better than expected. The September quarter is usually seen as seasonally weak for mobile operators.

Bharti reported a net profit of R512 crore, a sequential drop of 25%. Barring the net profit, the other numbers were in-line or surpassed expectations.

In short, solid operational set of numbers despite the miss at the net income level, said Kotak Institutional Equities in its report dated October 30. A Nomura report said Bharti was beginning to surpass market expectations.

Vodafone India reported a 16.5% increase in net profit from the year-ago period. Vodafone results (strong y-o-y growth and margin improvement) imply to us that the larger telcos like Bharti, Idea Cellular along with Vodafone, continue to benefit from a benign competitive environment, Goldman Sachs said in a report dated November 13. Vodafone India, too, saw an uptick in ARPM to 46.7 paise for the April-September period, from 44 paise in the year-ago period.

Price stability along with regulatory clarity in terms of a proposed spectrum price cut, a liberal mergers and acquistions guidelines, are expected to further infuse investment in the sector.

Indian telecom sector now has only five pan-India private operators. We hope that progressive M&A policy can further help industry consolidate in terms of total number of players including regional players to bring more sanity and synergies in the sector, said RCom chief executive officer (wireless) Gurdeep Singh.

People had wondered if it was a one-off performance during our results in the previous quarter. We are happy we could sustain our good performance, Idea Cellular CFO Akshay Moondra said. Idea is the third-largest mobile operator in terms of revenue and subscribers. Although Ideas net profit dropped 3.2% sequentially to R447.6 crore, the numbers beat analysts estimates.

RCom, which is the fourth-largest telecom company, surpassed analysts estimates while reporting profits that more than doubled at R234 crore. RCom had raised some tariffs during the quarter and expects more hikes over the next 12-18 months it expects these price hikes to stick unlike last year, given a more consolidated market now, Nomura said in a report.