For the telecom sector, the first quarter of this financial year is slated to be a favourable one, propelled by tailwinds from the fourth quarter subscriber additions.
This is in stark contrast with the bleak earnings predicted across sectors, including banking and information technology.
“The first quarter would be a good one for the sector with a decent growth on both minutes of usage (MoU) and average revenues per minute (ARPMs),” Shobhit Khare, telecom analyst at Motilal Oswal Securities, told
MoU is the traffic on the network and ARPM is a metric to gauge the usage pattern of a subscriber.
“The earlier withdrawal of promotional schemes, freebies and reduction in tenure plans are now beginning to yield results. These would lead to an increase in average revenue per minute (ARPMs) and thus overall revenues,” Ankita Somani, sector analyst with Angel Broking said.
Angel Broking expects Bharti Airtel, the country’s leading operator by both revenues and subscribers, to post a revenue growth of 1.9 per cent on a quarter-on-quarter basis. It expects GSM operator Idea Cellular to record a 2.6 per cent and Reliance Communications a 1.4 per cent revenue growth during the quarter.
According to Religare Capital Markets, revenues of Bharti Airtel (Asia) and Idea Cellular are likely to grow by 9 per cent and 15 per cent, respectively, on a year-on-year basis.
Bharti Airtel and Idea Cellular may deliver 3-4.5 per cent (QoQ) wireless revenue growth on the back of a 12-13 per cent data growth and tailwinds from fourth quarter subscriber additions.
“This quarter will see strong improvement in revenue per minute at the expense of traffic. In a way it will be a reverse of what happened last quarter…,” said G.V. Giri, analyst with IIFL Institutional Equities.
SECTORAL OVERHANG
The decisions regarding one-time excess spectrum fee, 3G roaming pact cancellations and modalities of spectrum re-farming will continue to be an overhang on the sector, Somani said, adding that the regulatory outlook for the industry looks challenging. “There is no clear implementation of the many of the guidelines proposed in the National Telecom Policy, including the mergers and acquisition (M&A) and free roaming regulations. The needs a clarity on many of these regulations,” said Gartner Principal Research Analyst Rishi Tejpal.
According to Alok Shende, Director and Principal Analyst, Ascentius Consulting, in the quarters to come, the biggest challenge for operators would be managing churn (subscribers moving from one operator to another).
“Companies will need to do more unique things and retain customers through operational excellence,” Shende added.