Private telecom majors to steal Q4 thunder

State-owned MTNL likely to see a drop in revenues

The Sunil Mittal-promoted Bharti Airtel and the Anil Ambani-controlled Reliance Communications are expected to report good results for the quarter ended March 31, 2007, while state-owned MTNL is unlikely to do so, according to brokerage houses.

Bharti's revenue growth in the fourth quarter of the financial year is expected to be the highest, while its profit growth rate may be lower compared with the first three quarters. RComm's revenues and profits will be considerably higher than the third quarter.

The decline in MTNL's revenues will be sharper in the fourth quarter, while profits will grow by around 20 per cent.

Bharti will speed ahead of RComm in revenue growth rate, while underperforming as far as net profit growth is concerned. MTNL is expected to continue its poor show, with a decline in volumes accompanying a modest growth in profits.

The fourth quarter net profit of Bharti Airtel is estimated to grow around 70-90 per cent, with a quarterly profit of Rs 1,160-1,280 crore. Reliance Communications is expected to outperform Bharti Airtel with a net profit growth rate of 100-150 per cent.

The net profit of MTNL expected to grow at 15-20 per cent, accompanied with a decline in revenues by around 10 per cent.

According to Merrill Lynch, Bharti's net profit is estimated at Rs 1,182 crore for the fourth quarter, up 73 per cent over last year. At the operating level, margins are expected to be strong around 40.7 per cent. Revenue is forecast to grow at 60 per cent.

In Bharti's key wireless business, Merrill Lynch forecasts the operating margin at 37.4 per cent, down 20 basis points quarter-on-quarter owing to a cut in roaming tariffs. Wireless average revenue per user (ARPU) is estimated to fall 3 per cent over the previous quarter.

RComm's net profit is forecast at Rs 902 crore, up 124 per cent year-on-year and down 2 per cent quarter-on-quarter. The fourth quarter result does not factor any hit on account of subscriber re-verification. In the mobility business, RComm's ARPU is expected to drop by 5 per cent quarter-on-quarter.

However, the wireless operating margin is forecast to remain stable at 37.5 per cent.

According to CLSA Research, the roaming rate cut implemented in mid-Feb '07 will impact ARPUs.

However, the overall volume growth is likely to remain healthy for both Bharti (revenues +9 per cent Q/Q) and RComm (+10 per cent Q/Q). MTNL's revenues are expected to decline, considering the pressures on the fixed-line business.

Analysts expect the industry to add 19 million subscribers in the quarter ended March 2007 compared with 19.7 million subscribers added in the quarter ended December 2006. The A and B circles continue to drive subscriber additions.