Telcos may report good growth in net realisation: analysts

The expected growth in net realisation is backed by massive reduction in free minutes

Telecom operators are expected to report a better average realisation per minute (ARPM), that ensures profitability during the quarter ended December 2013, equity analysts say.

The expected growth in net realisation is backed by a massive reduction in free minutes that telecom service providers have been offering for many quarters. Use of multiple SIM cards has also declined during the past few quarter after the government imposed stricter customer verification norms, according to analysts.

In its latest report on the telecom sector, Goldman Sachs said Bharti Airtel and Idea Cellular were expected to post “relatively slower” growth in minutes of usage as compared in the October-December quarter of 2013. Telcos generally see healthy increase in minutes of usage during October-December due to festive season.

“However, we expect realisation per minute to inch up for Bharti and Idea as free minutes are curtailed,” Goldman Sachs said, adding realisation could rise by one per cent.

“In the third quarter of 2014, we expect the average realisation a  minute for Bharti and Idea to grow by more than one per cent quarter-on-quarter,” Angel Broking said in its report on Monday.

Average realisation a minute stood at 44-45 paisa a minute for the industry during the previous quarter, while it increased more than 3 paisa a minute during the previous two quarters.

Goldman Sachs, on the other hand, has noted Bharti Airtel might report higher interest expense due to a rise in LIBOR or Euro bond raised at higher cost.  “We expect forex losses of Rs 150 crore in third quarter mainly due to African currency moves,” the report said.

In an analysis Religare said Indian telecom companies were expected to see a healthy growth of four-five per cent on quarter-to-quarter basis in wireless revenue and a strong profit after tax on favourable seasonality.

“We expect the combination of increase in minutes of usage as well as average realization per minute with a modest increase in subscriber base to pull the average revenue per user (APRU) of Bharti’s India operations, Idea Cellular and Reliance Communications (RCom) at more than Rs 200, Rs 171 and Rs 133 per month, respectively,” Angel Broking noted in its report.