Telecom- Seasonal uptake, stable ARPMs to drive robust 3QFY11 : Anand Rathi

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India Telecom
Seasonal uptake, stable ARPMs to drive robust 3QFY11 results
We expect telcos to report a robust 3QFY11, on seasonal pick up in
wireless volume and stable revenue/minute. We estimate qoq
revenue growth in the 4-6% range and ~50bps expansion in
EBITDA margin. We expect EBITDA growth of 4-8% qoq for
leading telcos; net profit growth is likely to be lower due to lower
forex gains in 3QFY11 vis-à-vis 2QFY11. Idea would lead, in terms
of revenue/EBITDA growth.

 Bharti. We expect 5.5%/7.2% revenue/EBITDA growths driven
by robust India/South Asia business (esp. Mobile, Passive Infra)
and ~100bps rise in EBITDA margin in Africa. Net profit growth
would be subdued due to lower forex gains in 3Q vis-à-vis 2Q.
 Idea. Idea reported strong qoq subscriber growth in 3Q (10.2% vs.
6.4% for Bharti), which would reflect in 3Q. We expect revenue/
EBITDA growth of 6% /8.2% qoq. Higher depreciation and lower
forex gains would result in lower PAT growth of 6.5% qoq.
 RCom. We model revenue/EBITDA growth of 4%/3.2% qoq.
PBT/PAT is likely to dip due to 3G-related costs (amortization of
spectrum fee, interest exp) & taxes (absence of deferred tax asset).
 Tulip Telecom. We expect 7.4% / 9.3% qoq growth in
EBITDA/PAT on strong revenue and EBITDA margin.
 Tat Tele (Mah). We expect strong revenue/EBITDA growth of
5%/8%; but losses are expected to mount due to 3G launch.
 Investment thesis. Tulip is our top pick in the sector. We also
like Idea for its operating-leverage potential and India-focus.