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Telecom
Peaking subscriber addition, reviving revenue growth
The industry has added 39.8 million subscribers in the first two
months of the quarter. We expect the overall subscriber base to
increase to 804 million by the end of FY11, adding 59 million
subscribers in Q4FY11 against 64 million in Q3FY11. This may be an
early indication of peaking subscriber addition with teledensity
already reaching 67%. With easing competitive intensity, we expect
4-6% QoQ revenue growth for telecom service providers. The sector
is expected to witness strong 17.0% YoY growth (ex-Zain) after
recording moderate 7% YoY growth for the past six quarters.
Traffic growth
Domestic traffic of our coverage universe is expected to post a
modest growth of about 6.9% QoQ in Q4FY11E to 421 billion
minutes as against 4.1% QoQ in Q3FY11. Reliance Communication
would continue to prune free minutes on the network resulting in a
mere 3.2% rise in traffic. ARPM across players is expected to
decline only marginally (41-44 paisa) while it may remain stable for
Reliance Communication with a decline in MoUs.
Softening pace of ARPU decline
The rate of decline in ARPU is expected to taper with softening
competitive activity. We expect our universe ARPU to decline by
about 2.5% QoQ. However, the decline for Reliance Communication
at 4% would be more pronounced due to waning subscriber quality.
EBITDA margin to expand, PAT margin to take a beating
Mobility margin across the board is largely expected to remain
stable. Margins for Bharti Airtel would bounce back due to absence
of one-time rebranding cost in this quarter. Also, we expect an
about 320 bps improvement in margins of African operations to
24.0% with several cost rationalisation measures undertaken. PAT
margins across the industry would contract as operators start
amortising the 3G license with services being launched in a few
circles.
Regulatory developments - positive sentiment for the industry
The regulatory framework has changed for the better in the past
quarter with the new telecom minister assuming office. Though we
await further clarity, currently investor sentiment has started to tilt
positively, especially for the incumbents. With the telecom minister
indicating towards facilitation and a lenient M&A policy, we believe
the sector may witness a re-rating.
Company specific view
Company Remarks
Bharti Airtel Margins in both Indian and African operations would bounce back with the
completion of the rebranding exercise in the last quarter and cost rationalisation
measures in Africa. India APRU would fall 2% to | 197 while that of Africa would
decline 1%. We expect addition of 8.9 million subscribers in India, SA and 2.1 million
in Africa. With the management's focus on increasing usage in Africa, we expect
MoU to increase 5% QoQ to 126. We expect other businesses to grow at a moderate
2-3% QoQ
Idea Cellular We expect Idea to add 6.4 million subscribers with a 2.5% QoQ decline in ARPU to |
164. MoU is expected to increase 1% to 405 resulting in ARPM declining to 40
paisa. Idea may charge interest on 3G related debt and amortisation of license fees
to P&L for the fag end of the quarter
OnMobile OnMobile is expected to have launched services in more countries with Vodafone
and Telefonica. Additional revenue from these operators is expected to flow in this
quarter. Domestic operations may see an up-tick with competitive intensity starting
to ease off
Reliance
Comm.
RCom would add 8.5 million subscribers. We expect ARPU to fall 4.5% to | 107
while MoU would decline 3.5% to 242 and ARPM would remain stable at 44 paisa.
We do not expect any major up-tick from 3G in this quarter. The broadband business
is expected to see the sixth straight quarter of declining revenue. We expect
broadband revenues to de-grow 5% QoQ while global revenues would grow 3%
TTML Subscriber addition is expected to slow down with 0.9 million subscribers against
over 1.1 million in the last two quarters. ARPU is expected to fall 1.9% to | 167 (for
active subscribers) while MoU would remain stable at around 401. Key metrics
would fare better due to increasing usage of data card services
Tulip Telecom We expect improved realisation to aid revenue growth though new client addition
may remain at moderate levels
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Telecom
Peaking subscriber addition, reviving revenue growth
The industry has added 39.8 million subscribers in the first two
months of the quarter. We expect the overall subscriber base to
increase to 804 million by the end of FY11, adding 59 million
subscribers in Q4FY11 against 64 million in Q3FY11. This may be an
early indication of peaking subscriber addition with teledensity
already reaching 67%. With easing competitive intensity, we expect
4-6% QoQ revenue growth for telecom service providers. The sector
is expected to witness strong 17.0% YoY growth (ex-Zain) after
recording moderate 7% YoY growth for the past six quarters.
Traffic growth
Domestic traffic of our coverage universe is expected to post a
modest growth of about 6.9% QoQ in Q4FY11E to 421 billion
minutes as against 4.1% QoQ in Q3FY11. Reliance Communication
would continue to prune free minutes on the network resulting in a
mere 3.2% rise in traffic. ARPM across players is expected to
decline only marginally (41-44 paisa) while it may remain stable for
Reliance Communication with a decline in MoUs.
Softening pace of ARPU decline
The rate of decline in ARPU is expected to taper with softening
competitive activity. We expect our universe ARPU to decline by
about 2.5% QoQ. However, the decline for Reliance Communication
at 4% would be more pronounced due to waning subscriber quality.
EBITDA margin to expand, PAT margin to take a beating
Mobility margin across the board is largely expected to remain
stable. Margins for Bharti Airtel would bounce back due to absence
of one-time rebranding cost in this quarter. Also, we expect an
about 320 bps improvement in margins of African operations to
24.0% with several cost rationalisation measures undertaken. PAT
margins across the industry would contract as operators start
amortising the 3G license with services being launched in a few
circles.
Regulatory developments - positive sentiment for the industry
The regulatory framework has changed for the better in the past
quarter with the new telecom minister assuming office. Though we
await further clarity, currently investor sentiment has started to tilt
positively, especially for the incumbents. With the telecom minister
indicating towards facilitation and a lenient M&A policy, we believe
the sector may witness a re-rating.
Company specific view
Company Remarks
Bharti Airtel Margins in both Indian and African operations would bounce back with the
completion of the rebranding exercise in the last quarter and cost rationalisation
measures in Africa. India APRU would fall 2% to | 197 while that of Africa would
decline 1%. We expect addition of 8.9 million subscribers in India, SA and 2.1 million
in Africa. With the management's focus on increasing usage in Africa, we expect
MoU to increase 5% QoQ to 126. We expect other businesses to grow at a moderate
2-3% QoQ
Idea Cellular We expect Idea to add 6.4 million subscribers with a 2.5% QoQ decline in ARPU to |
164. MoU is expected to increase 1% to 405 resulting in ARPM declining to 40
paisa. Idea may charge interest on 3G related debt and amortisation of license fees
to P&L for the fag end of the quarter
OnMobile OnMobile is expected to have launched services in more countries with Vodafone
and Telefonica. Additional revenue from these operators is expected to flow in this
quarter. Domestic operations may see an up-tick with competitive intensity starting
to ease off
Reliance
Comm.
RCom would add 8.5 million subscribers. We expect ARPU to fall 4.5% to | 107
while MoU would decline 3.5% to 242 and ARPM would remain stable at 44 paisa.
We do not expect any major up-tick from 3G in this quarter. The broadband business
is expected to see the sixth straight quarter of declining revenue. We expect
broadband revenues to de-grow 5% QoQ while global revenues would grow 3%
TTML Subscriber addition is expected to slow down with 0.9 million subscribers against
over 1.1 million in the last two quarters. ARPU is expected to fall 1.9% to | 167 (for
active subscribers) while MoU would remain stable at around 401. Key metrics
would fare better due to increasing usage of data card services
Tulip Telecom We expect improved realisation to aid revenue growth though new client addition
may remain at moderate levels
Source: Company, ICICIdirect.com Research
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