The performance of telecom companies in the quarter ended September isn’t going to be very much different from that in the preceding few quarters. While monthly net subscriber additions are likely to remain robust at 9 million-plus, the average revenue per user (ARPU) will remain under pressure. While Reliance Communications (RCom) saw its ARPUs decline 11 per cent q-o-q in the quarter ended June, in Bharti Airtel’s case, the drop was about 2 per cent. The trend is set to continue in the September quarter too.
BHARTI: India’s biggest wireless company’s revenue is estimated to increase by 6-8 per cent sequentially (8.5 per cent in the June quarter) due to healthy mobile subscriber additions. However, operating margins (41.5 per cent in the preceding quarter) could be under pressure because of higher carriage charges. Bharti had reduced its sales, advertising and employee costs last quarter to offset the increase in network operating costs.
RCOM: The ADAG company is expected to ride high on its global operations. The integration of Vanco, the UK-based managed network provider, should see the consolidated top line grow by 8-10 per cent compared to the almost flat growth in the June quarter. The absence of integration costs should also improve operating profit margins.
RCom, which offers mainly CDMA services now, will start rolling out its GSM network towards the end of the year in 14 additional circles. Analysts believe the dual network strategy could help the company acquire a better mix of customers and help grow market share.
IDEA CELLULAR: Falling ARPUs may hit the Aditya Birla group company hard, with analysts expecting revenue growth to decline to 4-6 per cent from 10 per cent in the preceding quarter. Operating margins could also be under pressure due to higher carriage costs and the high expenditure for the Mumbai launch.
TATA COMM: The Tata group company’s renewed focus on data services for the enterprise segment is a good sign, but the huge competition in this space could hamper its efforts to reap the fruits of the Tyco and Teleglobe acquisitions. Tata Comm is also hoping that data services will improve operating profit margins further.
Revenues grew just 1.5 per cent in the June quarter and operating profit margins by 500 basis points to 22.3 per cent sequentially due to lower network costs.
Tata Comm needs to invest around Rs 4,000 crore in the next two to three years on two undersea cables and the rollout of WiMax in 110 cities. This project has already been delayed and the company faces stiff competition from players such as Bharti and Reliance. The broadband segment too is highly competitive and could take time to break even.
Bharti at Rs 790 trades at 16 times its estimated FY09 earnings, while Idea trades at 18.5 times its forward. RCom at Rs 343 trades at 12 times its estimated FY09 earnings.
