Telecos eye robust Q4

Private telecom service providers are expected to post a robust growth in net profit during the fourth quarter ended March 31, riding on subscriber additions and by eating into the market share of Bharat Sanchar Nigam.

Going forward, the average revenue per user (ARPU) is expected to slide further with operators adding over 8 million subscribers every month.

Leading private telecom private operator Bharti Airtel is expected to post a 38-42 per cent rise in net profit, which is likely to be 24-27 per cent for Reliance Communications and 32-35 per cent for Idea Cellular, according to analysts' estimates.

Bharti Airtel had posted a net profit of Rs 1,353 crore during the fourth quarter of the previous financial year, RCom Rs 1,024 crore and Idea Cellular Rs 193 crore.

"The robust subscriber additions remain as the single main reason for the telecom companies posting robust growth during the quarter. The industry added over 8 million subscribers per month, while on a year-on-year basis the additions were as high as 40 per cent," according to Himanshu Shah, an analyst with Religare Securities.

As on February 29, the total number of telephone connections stood at 290.11 million, increasing the overall tele density to 25.31 per cent.

Moreover, infrastructure sharing was another reason fuelling growth as savings on operational expenditure were beginning to reflect in the net profits of the service providers, he added.

Mirroring the sentiment, N M Rothschild & Sons (India) Assistant Director Anshuman Thakur said, "The financial health of these companies is expected to Become stronger from the fourth quarter as infrastructure sharing will begin yielding results."

According to Frost & Sullivan Industry Manager (ICT Practise) South Asia and West Asia Sourabh Kaushal, even though subscriber addition is the main reason, companies are also expecting increased revenues from the enterprise segment. There has been an increased focus on enterprise segment during the recent quarter.

However, increases competition and subscriber addition at lower end would pull down ARPUs further, though marginal for the major companies, Kaushal said.

At present, the industry's blended ARPU is around Rs 275 per month with Bharti Airtel having the highest ARPU of Rs 358, followed by RCom at Rs 339 and Idea Cellular at Rs 279.

Another analyst, requesting anonymity said that the aggressive private operators were increasing subscriber base by poaching from BSNL. This is evident from the telecom major's declining market share, which stands at around 15.5 per cent as on March 31, 2008.

According to a Press Information Bureau (PIB) release, the market share of BSNL has declined to 31.29 per cent as on March 31, 2007, from 39.27 per cent recorded by the end of 2006.