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| Telecom: Bharti and Idea to see 1-2 percent sales growth in Q2 Tue, 09 Oct 2012 00:41:00 +0530 |
| Business Standard Economy Policy News The woes of the telecom sector are far from over, though shares of Bharti and Idea rallied on Monday on news that the empowered group of ministers has decided to impose one-time fee for spectrum held over 4.4 MHz on a prospective basis. While regulatory uncertainty is the biggest overhang for the sector, operationally too the sector is seeing moderation in growth. In what is a seasonally weak period, telecom companies are expected to see modest volume growth (lower minutes under usage), lower subscriber additions and flat margins in the September quarter. Analysts expect telecom companies to post a quarter-on-quarter (q-o-q) revenue growth of just one to two per cent. In the September quarter, telecom companies undertook a major exercise to weed out inactive subscribers. Lower subscriber additions would also put pressure on voice traffic. Some analysts expect domestic voice traffic to grow at a very modest pace of one to two per cent sequentially as this is not a strong quarter for telecom, while others expect a decline in volumes. On the data side, though companies have cut 3G tariffs recently, the benefits will translate only over the medium term. Clearly, the steroidal growth that the sector has seen over the last few years is over now, with subscriber additions falling sharply from five to six million in the first quarter of FY13 to 1-1.5 million in the second quarter. Despite the slowdown in minutes under usage and lower subscriber additions, realisations are not likely to come down this quarter. Brics Securities expects operating margins of Bharti Airtel and Idea to remain stable as the benefits of lower subscriber additions will be offset by higher network operating costs, as a result of hike in diesel prices and expansion of 3G/4G services. The brokerage expects Bharti’s operating margins to decline by 20 basis points (q-o-q) to 30 per cent, while it expects Idea to maintain its margins at 26 per cent. A key tailwind for the sector now is contraction in volumes. With subscriber additions moderating and the market nearing saturation, telecom companies desperately need the data push. The big daddy of the sector, Bharti Airtel, is facing challenges in the domestic market. Kotak expects the company’s domestic wireless revenues to decline by 1.8 per cent q-o-q led by a volume decline of two per cent. The company’s Africa business is expected to grow revenues at 2.5 per cent sequentially and margins by 80 basis points. Idea too, is expected to see a 2.5 per cent q-o-q decline in wireless minutes and 2.2 per cent decline in consolidated revenues. |
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