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India telco profits to grow

Taking the pulse: It's a bit of pull and push for Indian telecommunications companies this time around - but they're still likely to have come out well in the black in the three months ended June 30.

Strong subscriber additions of more than 10 million a month by Indian telecommunications companies will likely continue to drive revenue in the three months ended June 30, though a reduction in call termination charges is likely to limit growth by 3%-7% and hurt average revenue per user, analysts say.

The government earlier this year reduced the termination charge - a fee which the call-originating company pays to the called network - for domestic calls to INR0.20 per minute from INR0.30 earlier.

On the flipside, the termination fee cut may help the earnings before interest, tax, depreciation and amortization, or EBITDA, margins due to lower costs.

Also,"foreign exchange gains owing to the rupee appreciation (about 6% against the U.S. dollar) provide a potential upside to our earnings estimates for Bharti and Reliance Communications," said Mumbai-based brokerage CLSA.

Companies to watch:

Bharti Airtel Ltd. - Reporting July 23

Market Expectations: The first quarter net profit is likely to grow 10% to INR24.32 billion from INR22.10 billion a year earlier, according to a Dow Jones Newswires poll of 14 analysts. It forecasts revenue to rise 20% to INR102.27 billion from INR85.06 billion a year earlier.

Bharti, India's largest telecommunications company by subscribers, posted a net profit of INR20.96 billion on revenue of INR102.55 billion in the quarter ended March 31.

Key Issues: The main focus will be on any updates about Bharti Airtel's ongoing exclusive talks with South Africa's MTN Group Ltd. The exclusivity period expires July 31.

Brokerage Credit Suisse expects mobile average revenue per user, or ARPU, to decline by 7% on-quarter to INR284.

The EBITDA margin will likely expand by around 125 basis points sequentially to around 42%, says Motilal Oswal.

Reliance Communications Ltd. - Not yet announced

Market Expectations: The average forecast of 13 analysts in a Dow Jones Newswires poll has the company posting a first quarter net profit of INR13.07 billion, down 17% from INR15.75 billion a year earlier. Revenue is likely up 21% at INR63.45 billion, compared with INR52.29 billion a year earlier.

The company posted a net profit of INR15.17 billion in the previous quarter on revenue of INR57.98 billion.

Key Issues: Despite strong subscriber additions after its foray into GSM mobile services in addition to its code division multiple access technology services, wireless ARPU likely declined by 7.5% sequentially to INR207.

"(The first quarter) EBITDA margin would expand 135 bps (from the previous quarter) but decline 200 bps (from a year earlier)," said Motilal Oswal, adding that "significant" volume growth, the cut in call termination charges and withdrawal of discounts would help margins.

Idea Cellular Ltd. - Reporting July 23

Market Expectations: Eleven analysts polled by Dow Jones Newswires on average expect a first quarter net profit of INR2.65 billion, up a marginal 1% from INR2.63 billion a year earlier. Revenue is expected to be INR31.0 billion, up 43% from INR21.73 billion a year earlier.

The company posted a net profit of INR2.74 billion on revenue of INR29.36 billion in the fourth quarter.

The estimates include revenue from Spice Communications Ltd. Idea bought 41% of Spice in July last year.

Key Issues: Analysts expect EBITDA margins to be flat at around 28%.

Motilal Oswal expects margins in established circles to expand sequentially, but continued EBITDA losses - though lower sequentially - in Mumbai and Bihar states and additional losses from newly launched services in Orissa and Tamil Nadu provinces will weigh the numbers down.

Источник: Total Telecom

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