The total revenues (sales and other income) for the three telecom majors, Bharti Airtel, Reliance Communications (RComm) and Idea Cellular, is expected to rise by 34.5% on an average year-on-year (y-o-y) basis and 7.3% quarter-on-quarter (q-o-q) during Q3 of FY2009. Market leader Bharti Airtel is expected to report a 40.5% y-o-y and 8.5% q-o-q increase in its net revenues (total sales). RComm, on the other hand, is estimated to pull a 22.2% y-o-y and 5.2% q-o-q growth in net revenues, whereas Idea Cellular is likely to ramp up its net revenues by 42.2% y-o-y and 7% q-o-q.
Analysts reckon that even amidst recession, the telecom sector has taken small strides and maintained its growth pace throughout the Q3 of the financial year 2008-09. The mantra for this has been cost cutting, optimising resources and retaining customers.
?The net profit (y-o-y) for Bharti Airtel is expected to surge by 20-25%. The same for RComm is learned to grow by 10-15%, whereas Idea Cellular is likely to dip by 30% on its net profit,? says Harit Shah, research analyst, IT and Telecom, Angel Broking.
According to Gaurav Dua, head-research, ShareKhan, RComm and Idea will have pressure for higher profitability. ?For RComm, it has been a challenging phase as it has incurred forex losses in the last quarter and has been investing in the rollout of GSM operations. Idea has been stumbling due to its losses at the operational level observed in the last quarter,? added Dua.
The reason for the decrease in the net profit for Idea is the Ebitda losses incurred by the company in the newer circles of operations such as Mumbai and Bihar.
Airtel will be exhibiting a strong hold in the telecom market in Q3 of this financial year due to its market share and addition in subscriber base. It has proved to be operational efficient and a pioneer in outsourcing network maintenance and IT infrastructure.
The average revenue per user (ARPUs) has been on a declining trend, which was also observed in the last quarter of the financial year 2008-09. This is due to the fact that most of the newer subscribers are coming from semi-urban and rural areas. Compared to last quarter, ARPUs for the current quarter may dip by 5-6% and 12% (y-o-y) to Rs 317 per user per month. This is due to the penetration of telecom companies into the ?B? and ?C? class cities. Plummeting ARPU has to be supported by strong growth in volume (minutes of usage and subscriber growth) by the telecom players.
Kamlesh Bhatia, principal research analyst, Gartner says that the price strategy to retain the churn will prove to be inefficient; in stead telecom companies have to offer innovative value added services (VAS) and robust network. Launch of 3G services would be a good opportunity for the telecom players to push up their ARPU. MTNL and BSNL have been allotted 3G spectrum ahead of other operators.
?With the tele-density of less than 35% and new operators entering the market, the space will become more competitive in the coming quarter,? opined Girish Trivedi, deputy director, ICT Practice, Frost & Sullivan, South Asia and Middle East. New players will have to invest upfront into network, infrastructure and distribution.
The challenge for them would be to survive and create a niche. Also, with the advent of number portability, the competition between the existing players will tend to intensify, as it will be difficult for them to cope up with newest technology and yet sustain profitability.