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Tata Teleservices (Maharashtra)
Aggressive cost-control offsets revenue miss in 3QFY11
TTML’s 3Q revenue belied our estimate by 4%. EBITDA, however,
was ~9% higher, following the aggressive reduction in sales and
marketing expenses. Contrary to our expectations, TTML has not
yet started charging amortization of 3G spectrum fee and interest
on 3G loans to the P&L. As a result, net loss fell qoq to `796m as
against our estimate of qoq increase to `1.3bn.
Continues to lose traction in revenue. Revenue grew a mere 1%
qoq, belying our expectation of a seasonal uptick. Wireless minutes
growth was 1.2% qoq, significantly lower than the 10.3% recorded by
Idea Cellular. This, in our view, demonstrates competitive challenges
faced by the company. Data contribution to wireless revenues rose to
24.1% (vs. 22.1% in 2Q), possibly aided by the 3G launch. Other
operating parameters (ARPU, MOU, churn etc., for wireless/wireline
segments) have not yet been disclosed.
Aggressive cost-control. Sales and marketing (S&M) costs dipped
14.5% qoq despite similar net-adds; S&M cost-to-sales declined
233bps to 12.9% (Idea’s S&M cost-to-sales in 3Q was 13.9%).
TTML’s S&M costs in 3Q were the lowest of the past six quarters.
3G-related capital costs (amortization/interest) not reflected in
3Q, as 3G rollout is still in progress, as per management. We expect
3G to add ~`150m/`300m to amortization/interest charges per
quarter (interest on 3G-related loan is currently capitalized).
Earnings to be under pressure. We await detailed disclosures/
earnings call (to be hosted on 31 Jan, 14:30 IST) to understand sales
weakness and sustainability of control seen in 3QFY11. However,
earnings would be under pressure in the next few quarters due to
keen competition (increase in S&M costs) and 3G-related costs
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Teleservices (Maharashtra)
Aggressive cost-control offsets revenue miss in 3QFY11
TTML’s 3Q revenue belied our estimate by 4%. EBITDA, however,
was ~9% higher, following the aggressive reduction in sales and
marketing expenses. Contrary to our expectations, TTML has not
yet started charging amortization of 3G spectrum fee and interest
on 3G loans to the P&L. As a result, net loss fell qoq to `796m as
against our estimate of qoq increase to `1.3bn.
Continues to lose traction in revenue. Revenue grew a mere 1%
qoq, belying our expectation of a seasonal uptick. Wireless minutes
growth was 1.2% qoq, significantly lower than the 10.3% recorded by
Idea Cellular. This, in our view, demonstrates competitive challenges
faced by the company. Data contribution to wireless revenues rose to
24.1% (vs. 22.1% in 2Q), possibly aided by the 3G launch. Other
operating parameters (ARPU, MOU, churn etc., for wireless/wireline
segments) have not yet been disclosed.
Aggressive cost-control. Sales and marketing (S&M) costs dipped
14.5% qoq despite similar net-adds; S&M cost-to-sales declined
233bps to 12.9% (Idea’s S&M cost-to-sales in 3Q was 13.9%).
TTML’s S&M costs in 3Q were the lowest of the past six quarters.
3G-related capital costs (amortization/interest) not reflected in
3Q, as 3G rollout is still in progress, as per management. We expect
3G to add ~`150m/`300m to amortization/interest charges per
quarter (interest on 3G-related loan is currently capitalized).
Earnings to be under pressure. We await detailed disclosures/
earnings call (to be hosted on 31 Jan, 14:30 IST) to understand sales
weakness and sustainability of control seen in 3QFY11. However,
earnings would be under pressure in the next few quarters due to
keen competition (increase in S&M costs) and 3G-related costs
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