Following the seasonally strong December 2009-10 quarter, the Indian wireless sector is expected to experience a relatively stable March 2009-10 quarter. However, sharp tariff cuts in the last quarter will continue to haunt telecom operators in the form of their eroding average revenue per minute (ARPM), thus hampering their revenues and profit growth. This will be mainly led by the residual impact of tariff cuts taken during the December quarter as more subscribers at that time migrated to new tariff plans. Bharti Airtel, Reliance Communications (RComm), amongst others, were forced to cut tariffs owing to fierce competition in the market fuelled by Tata Docomo’s per second billing.
“We expect a blended RPM decline of 5-6% sequentially, resulting in largely flat quarter-on-quarter (q-o-q) wireless revenues for Bharti and RComm,” said Motilal Oswal Securities telecom analyst Shobhit Khare. “We expect Idea to post sequential revenue growth of about 5% driven by higher traffic growth and impact of 100% consolidation of acquired Spice circles for one month as against 41% earlier,” Khare added. Idea’s revenue growth will be driven by the traffic growth in seven new circles that it launched in FY2010.
Emkay expects Bharti’s profit after tax (PAT) to decline by 15.8% q-o-q to Rs 1,860 crore. Ebidta margins are estimated to shrink to 38.7% due to realisation dip. “We estimate increased network operating expenses to reduce Ebidta margins sequentially to 31.7%,” said Ajay Parmar, head research, institutional equities, Emkay. Further RComm’s q-o-q PAT is expected to decline of 27.4% to Rs 820 crore.
Emkay estimates Idea Cellular’s PAT to decline by 18.6% to Rs140 crore. The higher operating cost in its new circles is likely to reduce its Ebidta margins to 23.4% on qoq basis.
The minutes of usage will be strong but will be lower than that in last quarter, which will be on account of the growth in multiple card ownership due to new operators launching their services in this quarter. Although total network minutes are expected to grow, an increasing proportion of multiple sim users will restrict the growth in MoU per subscribe, thus impacting revenues.