Telcos' revenue growth in Sept quarter to be hit

Voice volumes are expected to dip between 3-4% during the quarter, which would impact revenues of Idea and Bharti

Telecom companies are likely to report muted earnings in the September quarter, as it is a seasonally weak quarter for the sector and consumers tend to make fewer calls during this period. Analysts expect the top listed telecom players to report a sales growth of 6.5 per cent in the quarter, compared to the corresponding quarter last year.

Bank of America Merrill Lynch expects the weak performance of telecom firms to drag down the overall earnings of Sensex companies.

Revenues of leading companies are expected to be impacted due seasonality issues and an unexpected weakness in data consumption. Additionally, the revenue growth will continue to be hit by interconnect user charges, were reset in March. Kotak Institutional Equities expects Bharti’s India wireless revenues to be flat sequentially and up nine per cent year-on-year (y-o-y). The brokerage expects Idea's revenues to decline 1.6 per cent sequentially, but expects  growth of 15 per cent in pure wireless service revenues compared to last year. Given that it is a seasonally weak quarter, voice volumes are expected to drop between three and four per cent during the quarter, which would impact revenues of Idea and Bharti. While voice revenues are expected to remain largely flat for Bharti y-o-y, Idea's voice revenues are expected to grow six per cent during the quarter compared to the last year. Sequentially, both Idea and Bharti are expected to report a decline in mobile traffic. Other than revenue pressures in India,

Bharti's consolidated revenue will continue to show weakness, owing to operational issues in Africa and currency-related problems. Bank of America Merrill Lynch expects Bharti’s forex impact to be  Rs 1,400 crore in the September quarter.

Decline in revenues and voice minutes will also impact the margins of telecom companies during the quarter, due to the fixed cost structure of the sector and higher operational expenditure on networks. Operating margins are expected to decline sequentially even as they show an improvement compared to last year. According to Kotak Institutional Equities, Bharti’s India wireless margins are expected to decline 90 basis points for Bharti and 170 basis points for Idea. However, the same would increase on a y-o-y basis.

Data volumes are expected to cool down from double-digit to high single-digit during the September quarter. Analysts believe that with the expected delay in the launch of Reliance Jio's services, incumbents can gather further momentum and gain higher market share and consumers.

EXPERTSPEAK

• Analysts expect the top listed telcos to report a sales growth of 6.5% in the Sept quarter, against the same quarter last year
   
• Revenues of leading firms are expected to be impacted seasonality issues and an unexpected weakness in data consumption
   
• Voice volumes are expected to dip between three and 4% during the quarter, which would impact revenues of Idea, Bharti