Telecom firms: Revenues remain flat in Q2

Bharti Airtel’s strong rural base is affected by seasonality issues, hurting its revenue market share.

When India is in trouble, Bharat, typically, acts as a good hedge. Telecom companies with a strong rural base are now waking up to the vagaries of seasonality that affect rural incomes and consumer behaviour. While the sector’s wireless revenues have remained flat on a sequential basis in the second quarter, companies with a large rural base have seen revenue market shares fall due to seasonality. Apparently, the second quarter is not a very good period for rural consumers.

Given that Bharti Airtel has the largest base of rural customers, its revenue market share declined sequentially by 70 basis points in the July-September quarter to 30.1 per cent. On the other hand, Vodafone and Uninor saw their revenue market shares increase by 30 basis points each. According to HSBC Global Research, key reasons for seasonality are lower rural income and the migrant population moving back to their home towns during the quarter.

Apart from the loss in revenue share to seasonality in rural areas, Bharti’s revenues have also been badly hit in Rajasthan, Madhya Pradesh, Karnataka, UP (east), Delhi and Andhra Pradesh. While the company was hit by BSNL’s aggressive consumer acquisition strategy in Madhya Pradesh, it was affected in Rajasthan by Vodafone and Idea’s lower rates and continued addition of new subscribers. However, analysts do not believe this to be a major concern, as revenues would bounce back in the next few quarters.

Unlike most other players, Uninor has continued to play the low rate game to attract new subscribers. Analysts say if it continues the strategy, others may respond over the next couple of quarters. Going forward, analysts forecast a growth of three per cent in minutes over the next two quarters, and, along with rate increases, the sector’s revenues could grow by five per cent.