Subscriber addition may boost Bharti Airtel growth

Written by Vrishti Beniwal | New Delhi, Jan 28 | Updated: Jan 29 2008, 07:28am hrs
Bharti Airtel, the countrys largest mobile operator, is likely to report a 39.78% on-year rise in its net profit and 41.50% rise in its revenue for the fiscal third quarter that ended December 31. Bhartis robust growth would be supported by a very healthy mobile phone subscriber addition during the quarter.

The company is likely to report its October-December period net profit at Rs 1,698.5 crore and revenue at Rs 6, 952.2 crore, as per an average of five analysts' estimates of the telecom companies' third quarter earnings. Bharti is likely to have added about 6 million customers during the quarter, Religare Securities said in a research note.

Bharti Airtel's on-year net profit growth, however, is likely to be impacted by the lack of major derivative gains on foreign exchange movements, according to Motilal Oswal.

Reliance Communications, the country's second largest mobile operator, meanwhile is likely to report a 43.5% on-year rise in net profit to Rs 1,328.1 crore on the back of a 31.68% growth in revenue to Rs 4,944.9 crore. The high-growth in sales is expected to have come from growth in mobility and broadband segments and high subscriber addition due to selling low-priced handsets.

RCom added 4.5 million telephone subscribers during the three-month period ending December 31, Religare said.

Bharti Airtel's EBITDA margins for the third-quarter are also expected be stable on quarter at about 43%, while the same is likely to expand on-year from 40.8% in the corresponding quarter previous year. Motilal Oswal expects company's average revenue per user (Arpu) to decline about 2% on-quarter to Rs 359.

"Expected improvement in usage trend will moderate the third-quarter Arpu drop versus approximate 6% on-quarter drop witnessed in the second quarter," Merrill Lynch adds.

RCom's overall EBITDA margin is also expected to remain largely flat on-quarter at about 43%, Motilal Oswal said. "We expect a 3% ARPU decline on on-quarter basis (for RCom)," it adds.

Going forward, Religare expects telecommunications companies' Arpu to remain strained in near term as players expand their services in B and C category circles, which are likely to have a larger proportion of pre-paid subscribers, putting downward pressure on Arpu. It adds, however, "The downtrend can be mitigated to some extent by an increase in value-added services."