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UBS Investment Research
India Mobile Sector
M odest revenue growth likely in 2QFY12
Revenue growth to be supported by improving realisation rates
2Q is seasonally weak due to monsoon with flat/negative revenue growth. Given
revenue per min realizations have stopped declining; we expect Bharti and Idea to
post steady mobile revenue growth of 2.3% and 3.2% respectively in 2QFY12. We
expect minute growth to be subdued at 0-2% for the Indian mobile operators due to
weak seasonality.
EBITDA margins likely to be flat
We expect Bharti's EBITDA margins to improve by 50bps in the quarter
benefitting from the restructuring exercise taken earlier in the quarter. For Idea and
RCom, we are modelling flat EBITDA margins in 2QFY12. We are building in full
impact of 3G expenses (D&A & interest expense) from 2QFY12 onwards. On FX
impact, the rupee has depreciated by 10% against US$ in the quarter, we are
estimating an impact of Rs5.5bn on Bharti's P&L in 2QFY12. We are reducing our
FY12E EPS estimate for Bharti by 8% due to rupee depreciation in 2QFY12.
Bharti & Idea are our top-picks
During the quarter effective July 21, major operators hiked tariffs across service
areas. Investors will be keenly looking at voice rev/min and minutes usage to
ascertain any impact on metrics due to tariff hike. On realization rate, we believe
the full impact will be visible over the next 12 months. Based on discussion with
various mobile players, we believe that there is no evidence of negative elasticity.
We remain positive on the outlook of Indian mobile sector given improving pricing
environment and regulatory outlook. Bharti and Idea are our top-picks in the
sector.
Statement of Risk
Changes in the competitive and regulatory landscape and technology advances
could have an impact on our estimates and valuations for the operators. We
believe irrational competition among existing operators presents the biggest risk
to our forecasts, ratings, and price targets.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Mobile Sector
M odest revenue growth likely in 2QFY12
Revenue growth to be supported by improving realisation rates
2Q is seasonally weak due to monsoon with flat/negative revenue growth. Given
revenue per min realizations have stopped declining; we expect Bharti and Idea to
post steady mobile revenue growth of 2.3% and 3.2% respectively in 2QFY12. We
expect minute growth to be subdued at 0-2% for the Indian mobile operators due to
weak seasonality.
EBITDA margins likely to be flat
We expect Bharti's EBITDA margins to improve by 50bps in the quarter
benefitting from the restructuring exercise taken earlier in the quarter. For Idea and
RCom, we are modelling flat EBITDA margins in 2QFY12. We are building in full
impact of 3G expenses (D&A & interest expense) from 2QFY12 onwards. On FX
impact, the rupee has depreciated by 10% against US$ in the quarter, we are
estimating an impact of Rs5.5bn on Bharti's P&L in 2QFY12. We are reducing our
FY12E EPS estimate for Bharti by 8% due to rupee depreciation in 2QFY12.
Bharti & Idea are our top-picks
During the quarter effective July 21, major operators hiked tariffs across service
areas. Investors will be keenly looking at voice rev/min and minutes usage to
ascertain any impact on metrics due to tariff hike. On realization rate, we believe
the full impact will be visible over the next 12 months. Based on discussion with
various mobile players, we believe that there is no evidence of negative elasticity.
We remain positive on the outlook of Indian mobile sector given improving pricing
environment and regulatory outlook. Bharti and Idea are our top-picks in the
sector.
Statement of Risk
Changes in the competitive and regulatory landscape and technology advances
could have an impact on our estimates and valuations for the operators. We
believe irrational competition among existing operators presents the biggest risk
to our forecasts, ratings, and price targets.
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