One of the most eventful quarters for telecom with 3G, BWA auctions and Trai?s 2G recommendations may actually see telcos report stable results. There were no aggressive tariff launches and subscribers addition figures remained robust.
Companies are likely to see a marginal increase in revenues (2-4%) on a sequential basis. Most telecom operators have witnessed strong growth in minutes carried on mobile networks. Analysts expect a healthy traction in overall traffic growth in the range of 5-12% for listed telcos.
?We have modeled sequential minutes growth at 5-8% for companies, which translates to mobile revenue growth of 2-5% for 1QFY11. Lower-than-expected growth in traffic would lead to higher drop in average revenue per user (Arpu), which will impact revenues,? said Amit Ahire, analyst, Ambit Capital.
The mobile industry added 33 million subscribers in April-May 2010 and is expected to add another 16-17 million subscribers in June, taking the total net addition to 49 million for the quarter, compared with the addition of 59 million in the previous quarter.
The pace of net additions has slowed down slightly.
?We believe that the decline in industry additions is partially on account of the gradual decline in multiple-SIMs as tariff plans gradually equalise across operators (though there were no major tariff cuts in the past two quarters). Multiple-SIMs, in the last couple of quarters, were estimated at approximately 20% of incremental wireless subscribers,? a report by Edelweiss Research says. While the growth in revenue in expected to be good, it would be offset by the contracting margins.
Increase in fuel prices and network operating expenses, as well as outflow of 3G license fee, will impact margins. ?Margins should be under pressure on account of higher network opex (increased diesel cost) and higher licence fees,? said Deepti Chauhan, equity analyst from Asit C Mehta Investment Intermediates. Owing to margin pressures, lower forex gains due to rupee depreciation over the quarter and higher taxes, the combined bottom-line is expected to decline by a steep 15% sequentially for the sector.
Bharti Airtel is expected to experience a decline in revenue per minute (RPM) though, slower than the earlier quarter, as circle-level lower tariff schemes have continued. Its Ebidta margins will be impacted by one-time costs associated with the Zain acquisition. Analysts expect its interest cost to rise due to debt assumed for Zain buy.
For Idea Cellular, RPM and minutes of usage is likely to remain stable. Consolidation of Spice will lead to higher revenue growth for the company. Operating losses in new circles, which had increased in previous quarter due to tariff declines, are expected to be lower due to stable tariffs and higher traffic growth.
For Reliance Communications., RPM is expected to remain stable but decline in minutes of usage is likely to continue. Ebitda margin is likely to expand due to improvement in global and broadband businesses.