Bharti Airtel, Idea Cellular, Reliance Communications may make profit in Q3 riding on data wave
Cos are expected to report flattish voice revenue per minute, but an increase in call minutes is likely to drive revenue growth in Oct-Dec quarter.
Sequentially, all three companies are expected to report flattish voice revenue per minute, but an increase in call minutes is likely to drive revenue growth in the October-December quarter, they say. Robust revenue growth from data amid reduced competition has been a big plus for the sector, with pricing power returning after several quarters of tariff wars.
Sector watchers expect margins to improve by about 20-30 bps due to reduced diesel prices and operating leverage, but accelerated network expansion and the associated increase in network operating expenditure will take away some of the benefits.
“The three incumbents continue to gain share of hi-speed wireless broadband subscribers as data consumers in India continue to vote in favour of quality over price. This is a critical difference versus the voice market,” Kotak Institutional Equities said in a report.
Credit Suisse said after the results, the focus of telcos will quickly shift to spectrum auctions. “The incumbents will likely bid for 2100 MHz spectrum as bulk of the future growth has to come from data services. While any new spectrum release to industry is positive long term, the immediate impact is likely to be negative on cash flows or returns,” it said.
India’s No. 1 carrier, which reports results on February 4, is expected to post a 90 per cent-136 per cent on-year jump in net profit from Rs 610.2 crore a year earlier. Revenue is expected to grow more than 2 per cent over the July-September period and by almost 7 per cent from a year earlier, analysts say. However, Morgan Stanley expects Bharti Airtel’s net profit to fall 4.8 per cent sequentially, largely due to a decline in revenue and earnings before interest, tax, depreciation and amortisation from African operations.
No. 3 Idea’s net profit for the third quarter is expected to rise by 63 per cent-82 per cent from Rs 467.7 crore a year earlier on the back of a threefold growth in voice volumes and a 95 per cent increase in data revenue. The company, reporting results on January 27, is expected to post a sequential gain of 4 per cent-6 per cent in revenue compared to the July-September period and a 20-21 per cent increase over the same quarter last year, as per Morgan Stanley and Credit Suisse.
While Credit Suisse expects RCom’s third-quarter net profit to rise 97 per cent to Rs 213 crore from Rs 108.4 crore a year earlier, analysts at Kotak predict a 38 per cent increase in net income to Rs 153 crore.