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Telecom
Potential Result Outperformers: Idea Cellular
Potential Result Underperformers: Reliance Com
Result Expectations – Key Highlights
All eyes on margins post tariff hikes: We expect investors to focus on strength
in 2Q FY12 margins as a key indicator for future potential. We expect 20-30bps
QoQ uptick in wireless margins led by lower distribution expenses and ~1% QoQ
improvement in voice-revenue per minute, but dragged by higher diesel prices.
Seasonal weakness and slower net adds to drag topline growth: Against an
improving price environment, the telecom majors have witnessed sharply slower
subscriber growth. This coupled with seasonally slower traffic patterns in 2Q
implies that topline growth (~2-3% QoQ) in 2Q FY12 will be slower than 1Q FY12
(~3-4%).
MTM forex losses likely for Bharti & RCom: The rupee has depreciated ~9.5%
versus the USD over the last quarter. Consequently, we expect MTM losses for
Bharti (~Rs5bn; 19% of 2Q EBIT) and RCom (~Rs8bn; ~120% of 2Q EBIT).
Bharti’s total forex loan exposure is ~US$12bn but MTM hit on loans for the Africa
acquisition will be routed via the balance sheet.
Idea seems well placed but regulatory risk is a swing factor: Operationally,
Idea seems well-placed and its single-country operations offer better visibility. A
key swing factor could be the new telecom policy NTP -2011 that is expected in
October. Potential changes in spectrum pricing and roaming in this policy could
hurt Idea’s market-capitalisation more than Bharti’s.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Telecom
Potential Result Outperformers: Idea Cellular
Potential Result Underperformers: Reliance Com
Result Expectations – Key Highlights
All eyes on margins post tariff hikes: We expect investors to focus on strength
in 2Q FY12 margins as a key indicator for future potential. We expect 20-30bps
QoQ uptick in wireless margins led by lower distribution expenses and ~1% QoQ
improvement in voice-revenue per minute, but dragged by higher diesel prices.
Seasonal weakness and slower net adds to drag topline growth: Against an
improving price environment, the telecom majors have witnessed sharply slower
subscriber growth. This coupled with seasonally slower traffic patterns in 2Q
implies that topline growth (~2-3% QoQ) in 2Q FY12 will be slower than 1Q FY12
(~3-4%).
MTM forex losses likely for Bharti & RCom: The rupee has depreciated ~9.5%
versus the USD over the last quarter. Consequently, we expect MTM losses for
Bharti (~Rs5bn; 19% of 2Q EBIT) and RCom (~Rs8bn; ~120% of 2Q EBIT).
Bharti’s total forex loan exposure is ~US$12bn but MTM hit on loans for the Africa
acquisition will be routed via the balance sheet.
Idea seems well placed but regulatory risk is a swing factor: Operationally,
Idea seems well-placed and its single-country operations offer better visibility. A
key swing factor could be the new telecom policy NTP -2011 that is expected in
October. Potential changes in spectrum pricing and roaming in this policy could
hurt Idea’s market-capitalisation more than Bharti’s.
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