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With more control over rates and rising data usage, telecom operators are expected to report significant year-on-year growth in net profit in the July-September quarter, a seasonally weak one.
Bharti Airtel, the largest cellular operator, and Idea Cellular, the third largest, are expected to report a significant jump in net profit. Reliance Communications (RCom) is expected to take a hit, say equity analysts.
Voice revenues are estimated to stay flat or witness a marginal decline.
A Morgan Stanley report says all the three listed cellular operators might report a marginal one per cent sequential decline in profit after tax, while consolidated revenue will stay flat. The margins are estimated to be stable, essentially backed by strong growth in data usage.
“Increased contribution of data is expected to mean the impact of voice-led seasonality is not as pronounced as in the past two years,” Kotak Institutional Equities said. Credit Suisse analysts, on the other hand, believe realisation per minute in both voice and data will increase by one per cent in July-September, primarily because of a fall in data revenue.
A Motilal Oswal report said it expects average wireless traffic to decline about two per cent over the earlier quarter, slightly better than the previous one. The same measure is estimated to grow at least seven per cent over a year before, backed by lower seasonal impact during July-September. Idea Cellular is likely to have a 15 per cent year-on-year growth in wireless traffic, they say.
Bharti Airtel is estimated to report a growth of 182-194 per cent in net profit, backed by stable Africa operations, lower foreign exchange losses and capital expenditure. The company has also reduced debt by de-leveraging its infrastructure assets in Africa. Morgan Stanley is optimistic about Bharti’s results, while Credit Suisse says the company might have a flat quarter.
Idea Cellular is estimated to report a 44-56 per cent sequential growth in net profit in the quarter, backed by wireless data revenue.
Credit Suisse says RCom might report a huge drop in net profit at Rs 271 crore from Rs 675 crore in the same quarter of last year.
Kotak analysts have indicated a 76 per cent decline in net income to Rs 156 crore.
Analysts at HSBC, which has downgraded Idea Cellular, has said they expect voice rates to increase slowly. “In our view, that is positive as a sharp increase in voice rates will delay consolidation. That said, present merger and acquisitions rules are a deterrent and we might not see an actual reduction in number of players. We might remain an eight-player market but quasi consolidation may continue,” HSBC analysts said.
Incrementally, data growth will be a key driver for revenue growth, said the HSBC analyst, adding it would require significant investment in spectrum and back-haul, which would favour the market leaders. “Unlike voice, which has seen growth being concentrated among the top three, data could see disproportionate gains for top two. The upcoming spectrum auction could limit Idea's ability to invest in data spectrum, data coverage and fibre backhaul. Moreover, the top two players are likely to pursue additional 900 MHz footprint to monetise data growth and this could hurt Idea. Separately, RCom with its stretched balance sheet and no back-up spectrum in the 1800 MHz band is most vulnerable in the coming auctions,” HSBC said in its earlier report.
