Telcos might not report growth in realisation during Q4

Bharti Airtel and Idea Cellular are likely to post less than a 1% increase in RPM due to slowing growth and increased competition from smaller operators

Telecom companies are expected to report flat realisation per minute (RPM), which determines profitability of a cellular operator, during January-March 2014.

Two of the country’s top three cellular operators, Bharti Airtel and Idea Cellular, which reported steady growth in RPM during the previous three to four quarters, may post less than a one per cent increase in RPM due to slowing economic growth and increased competition from smaller operators, equity analysts point out.

But the total minutes of usage (MoU) on their networks are expected to increase in the range of 2.5-5.3 per cent, as rates remained unchanged during the quarter.

In a note on listed telecom companies, Goldman Sachs analyst Sachin Salgaokar says Bharti Airtel’s revenue was expected to increase by 4.3 per cent, while the company might report a marginal (around one per cent) decline of revenue from its Africa business. Idea Cellular, the country’s third-largest mobile operator by subscriber base, is likely to report a 5.3 per cent increase (quarter on quarter) in revenue, notes Salgaokar.

“We expect a marginal increase of up to 0.5 per cent in RPM, while MoU will rise three-five per cent on a sequential basis. The revenue increase will remain in the low single digits. However, Bharti may have some impact in Africa revenues because of rupee appreciation,” says Ankita Somani, telecom analyst with Angel Broking.

Goldman Sachs, in its note, has said both Bharti Airtel and Idea Cellular will have a debt impact for the money they had to shell out for acquisition of fresh spectrum at the February auction. “We expect Bharti to post a forex gain of Rs 90.6 crore in the fourth quarter,” says Salgaokar.

Analysts estimate Bharti Airtel will report an increase in Ebitda (earnings before interest, taxes, depreciation, and amortisation), while Idea Cellular may have flat Ebitda during the January-March quarter. “We estimate Bharti’s Ebitda margin to rise 17 basis points quarter on quarter,” Salgaokar says, adding that Idea Cellular’s Ebitda margin will remain flat quarter on quarter at 31 per cent due to higher network expenditure and other expenses.

Reliance Communications is also expected to have a flat quarter while there could be smarginal change in MoU, says Somani.