Strong subscriber adds to drive telecom sector's Q4 numbers

Bharti, Idea add 11 mn subscribers in January-February, which is likely to boost volumes and sales

Telecom companies are expected to exit FY15 with robust revenue and profit growth, if March quarter estimates are anything to go by. The March quarter performance of Bharti and Idea would be driven by higher subscriber additions and an uptick in traffic on their respective networks.

In the first two months of the quarter, Bharti and Idea together added 11 million new subscribers. While Bharti added 5.9 million, Idea added 4.9 million over January and February alone.

Strong subscriber additions would drive volumes during the quarter, say analysts, which in turn would give a leg-up to revenues. Edelweiss Securities has built in volume growth of 3.3 per cent and five per cent for Bharti and Idea, respectively. Analysts expect the overall telecom traffic (voice) to grow 3.3 per cent sequentially for the sector. ICICI Securities expects Bharti's minutes on the network to grow three per cent sequentially to 276 billion minutes. Idea's traffic is expected to grow 5.3 per cent to 180 billion minutes during the quarter.

Improved volumes and growth in data would have a positive impact on revenue growth, too. Bharti's India business is expected to report a sequential revenue growth of 4.3 per cent to Rs 17,090 crore during the quarter, while Idea is expected to grow revenues by 5.9 per cent to Rs 8,490 crore, says Edelweiss. However, Bharti's consolidated revenues might be impacted negatively, owing to the cross-currency risks and strong dollar. Bharti's Africa business is expected to report a five per cent decline in revenues at $1.04 billion, owing to the currency risks.

The Street also expects Bharti and Idea's operating margins to expand on tariff hikes and lower costs (fall in price of diesel). Sequentially, Bharti's operating margin is expected expand 30-50 basis points (bps) from 38.3 per cent it clocked in the December quarter. Idea's operating margin is expected to expand 50 bps sequentially to 34.8 per cent.

Analysts will keep a keen watch on management commentary as capital expenditure is likely to rise in FY16 as most players will focus on data services. Analysts expect the overall share of data revenues to increase in the March quarter. Currently, data accounts for 18.2 per cent of Bharti’s revenues and 17.5 per cent of Idea's revenues. Analysts will look for colour on how the data traffic is growing across the country.