Telcos may report 10% sales growth in Q4

Telecom companies (telcos) are expected to exit FY16 on a good note, as most analysts expect the firms to report revenue growth of around 10 per cent compared to last year. After the decline in voice revenues seen in the December quarter, listed telecom companies are expected to report either stable or a modest improvement in the traditional voice business. The revenue growth will largely be driven by data revenues, while voice business is expected to stabilise.

Like the December quarter, analysts expect data growth to moderate. Religare Institutional Equities, data volumes for Bharti and Idea are likely to moderate to 13 per cent and eight per cent quarter-on quarter and adoption will be the key focus. “On a y-o-y (year-on-year basis), data revenue for Bharti/Idea is projected to grow at 49/34 per cent.”

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Analysts expect Bharti Airtel to report a sequential revenue growth of 3.5 per cent and eight per cent y-o-y. Idea's revenues are expected to grow 2.5 per cent sequentially and 9.5 per cent y-o-y. Bharti Infratel’s revenues could grow by one per cent sequentially and 6.6 per cent y-o-y.

Telecom analysts expect the voice business to fare better on the back of higher subscriber additions. Bharti added seven million subscribers in the March 216 quarter, compared to the addition of eight million in the December 2015 quarter.

However, new subscribers might put pressure on revenue per minute (RPM), a key measure of profitability for the voice business. Idea, on the other hand, is expected to report an improvement in RPM even though its minutes growth might decelerate.

Bharti's operating income is expected to grow by 10 per cent y-o-y and four per cent sequentially. According to ICICI Securities, Bharti Airtel’s Africa operations are likely to be hurt by depreciation of African currencies and completion of tower deals.

The telco’s depreciation and interest cost is likely to increase by seven per cent and 19 per cent sequentially, respectively, due to spectrum investments, which in turn will hurt net profit.

Idea's operating income is expected to grow by nine per cent YoY and 6 per cent sequentially. While Idea's margins could expand sequentially, they will decline compared to last year. Average revenue per user (ARPU) is also expected to decline for both Idea and Bharti.