Seasonal tailwinds, withdrawal of freebies combined with fall in the number of non-paying subscribers, are expected to aid telecom companies’ revenues in the December quarter.

A rebound in Minutes of Usage (MOUs), rise in average revenues per minute (ARPMs) and data revenues gaining traction would be other factors to watch.

“Generally, the third quarter is better than the previous two quarters of the year due to the festive season, including Diwali, Christmas and New Year. This time, the fall in subscriber additions would help operators post better profitability and average revenues per user (ARPUs),” said Sivarama Krishnan, Executive Director, PwC India.

Operators incur anywhere between Rs 250 and Rs 1,000 per customer acquisition, benefits of which would be seen in this quarter, and also in the long run, Krishnan added.

The country's telecom subscriber base fell by more than 13 million to 921.47 million, while total wireless users fell by 1.51 per cent to 890.60 million as of November 2012, according to Telecom Regulatory Authority of India data. The regulator had attributed the decline to “large-scale disconnection by operators”. Since most of these subscribers are non-paying users, operators stand to gain from their exit.

The third quarter result season would be kicked off with billionaire Anil Ambani-controlled Reliance Communications (RCom) announcing the results on January 23. The Aditya Birla group company, Idea Cellular is slated to announce it on January 29, and Bharti Airtel, the country’s leading operator by subscribers, on February 1.

TAILWINDS

The tailwinds for the sector include better capacity utilisation, uptick in realisation and lower subscriber acquisition cost, while withdrawal of freebies in select markets and higher mix of data revenue would help telecom companies, according to a report by IDFC Securities.

The brokerage firm expects domestic traffic to rise by 2-4 per cent quarter on quarter (QoQ) for Bharti Airtel, Idea Cellular and RCom led by festive demand. The domestic wireless business margins are expected to increase by 50-100 basis points, it added.

Bharti Airtel and Idea Cellular would post a revenue growth of 0.7 per cent and 2.6 per cent on a QoQ basis. Bharti Airtel’s EBITDA would to grow by 18 basis points (QoQ) to 31.5 per cent, while that of Idea Cellular and RCom are expected to increase by 29 basis points and 46 basis points to 27.1 per cent and 31.9 per cent, respectively, Angel Broking said in its report.

Revenue growth would be modest on the back of a rise in Minutes of Usage (MOU), a slight increase in Value Added Services (VAS), while Average Revenue Per Minute (ARPM) would be flat in the quarter, said Ankita Somani, sector analyst with Angel Broking.

MOUs and ARPMs are metrics to gauge the financial health strength of an operator.

“A rebound in MOUs would a key factor to watch in this quarter after a disappointing second quarter, while revenues from data operations are expected to gain traction,” said Harit Shah, Senior Research Analyst with Nirmal Bang Institutional Equities.

“The market does not have any great expectations from the telecom sector,” said Jagannadham Thunuguntla, strategist and head (research) at SMC Global Securities.

Announcements from Bharti Airtel on the change of guard and its plans to integrate Africa business and RCom’s plans for its tower subsidiary Reliance Infratel would be watched by the industry, Thunuguntla added.

OUTLOOK

“Post the festive season, there would be less action. It’s not going to be any different this time,” PwC India’s Krishnan said, talking about the outlook for the fourth quarter.

The fall in subscriber additions would result in fall in cost to operators. With an average savings of Rs 200 crore a month, the fourth quarter would be much better, Krishnan added.

“The fourth quarter could be a decent quarter for the sector, while we will have to look at the fall in user numbers before reaching a conclusive decision,” Angel Broking’s Somani said.

rajesh.kurup@thehindu.co.in

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