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Telecom companies may report robust earnings in the fourth quarter, generally a strong quarter for the sector, largely due to an uptick in minutes of usage and growing number of data subscribers.
Reports by leading brokerages suggest that Bharti Airtel, Reliance Communications and Idea Cellular collectively record a 31 per cent rise in net profit on a sequential basis on the back of revenue growth of 3.3 per cent. “We expect a robust quarter for the Indian wireless names led by a modest rebound in voice volume growth and sustained healthy data revenue growth. Voice revenue per minute (RPM) uptick will likely be muted and we expect Bharti Airtel to do better than Idea on this metric,” Kotak Institutional Equities said in a research report.
Voice revenues are expected to be under pressure because of slowing economic growth, heightened competition from smaller rivals and the tariff hikes of the previous quarters. “Our industry interactions indicate certain circle-level pricing disruptions during the fourth quarter, which could have some adverse impact on voice RPM, particularly for Idea. However, we now expect renewed industry-level initiatives to reduce discounts and improve voice realisations,” said a research report by Motilal Oswal Securities (MOSL). The brokerage firm expects GSM incumbents to report 0-1 per cent rise in blended RPMs.
OUTLOOK FOR FY15Data use, driven by video downloads, has been steadily increasing its contribution to revenues of telecom operators. Data revenue accounted for seven per cent of telecom operators’ overall revenue in 2012/13, and is expected to go up to 21.7 per cent in 2017/18, according to equity research firm PhillipCapital India.
For fiscal 2015, most brokerages have painted a rosy picture. “Easing competitive pressure would cause telecom sector’s earnings to rebound in FY14 and FY15 after four consecutive years of net profit decline. We expect the sector to report 58 per cent and 65 per cent in FY14 and FY15, respectively,” the MOSL analysts said.
Key events to watch out for would be the next round of spectrum auction, which is likely to be scheduled in the second quarter, for licenses that are up for renewal in fiscal 2016. The 4G launch plans of Reliance Jio Infocomm and GSM incumbents would also be important milestones for the sector next year.
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