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Telecom
India
3QFY12E preview – we expect a solid quarter for incumbents. Return of volume
momentum and modest sequential RPM uptick should aid robust India wireless KPIs and
financials for the three listed Indian wireless names. Strong seasonality and currency
translation benefits are likely to drive particularly strong financial performance from
Bharti Africa. Forex losses will remain high given sharp Re depreciation. On balance,
3QFY12 should allay minutes growth/elasticity concerns in the Indian wireless market.
Regulatory environment remains an overhang. We remain positive on Bharti and Idea.
3QFY12E – expect strong sequential comps
Exhibits 1, 2 and 3 give our Sep 2011 quarter earnings estimates for Bharti, Idea, and RCOM,
respectively. We expect strong sequential comps on operational KPIs as well as financial
performance, driven by volume bounce-back and modest RPM uptick in the India wireless business.
Re depreciation and strong seasonality should aid strong performance from Bharti Africa as well.
Even as forex losses will likely be a tad higher than Sep 2011 levels, strong EBITDA growth should
translate into solid qoq net income performance. Key factors to watch out for
India wireless volume growth – to assess if the recent tariff hikes have induced negative
elasticity and also to get a sense of whether underlying volume growth has slowed
meaningfully. We expect 3-6% qoq volume growth for various players.
RPM trajectory – flow-through of recent tariff hikes and STV rationalization should reflect in
modest RPM uptick (+0.5-1% qoq). We note that our forecasts assume that Bharti and Idea will
continue booking 3G ICR revenues.
India wireless margins – to assess the extent of RPM-uptick-led leverage benefit on margins.
3G investments are likely to exert pressure on margins as 3G growth is likely to remain subdued.
India wireless capex – to assess if slow 3G offtake and Re depreciation have led to a
downward adjustment on capex.
Bharti – strong EBITDA expansion likely driven by strong India and Africa wireless
We expect Bharti to report a strong 9.7% qoq growth in consolidated EBITDA to Rs63.8 bn on
revenues of Rs184.6 bn, +7% qoq. We expect strong qoq revenue and EBITDA growth for both
India as well as Africa wireless. For India wireless, we build in a 5/7% revenue/EBITDA growth qoq,
respectively, driven by volume growth of 4%, RPM uptick of 0.9% and OPM expansion of 60 bps
qoq. Our Africa wireless estimates call for a 5.5% qoq local currency (2.2% in USD terms, 13% in
INR) revenue growth and 80 bps qoq margin expansion. Our net income forecast of Rs13.9 bn
builds in a forex loss of Rs3 bn versus Rs2.5 bn in 2QFY12.
Idea – expect volume leadership, again
We estimate consolidated revenues to come in at Rs49.5 bn (+7% qoq) and EBITDA to come in at
Rs13.2 bn (+11% qoq), implying an OPM expansion of 100 bps qoq to 26.7%. Expect strong
6.5% wireless minutes growth and 0.7% RPM uptick qoq. Our PAT estimate of Rs1.55 bn (growth
of 47% qoq and decline of 36% yoy) builds in forex losses of Rs400 mn versus a loss of Rs313 mn
in the previous quarter.
Bharti is likely to report on Feb 8, Idea between Jan 23 and 25, and RCOM in Feb second week.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Telecom
India
3QFY12E preview – we expect a solid quarter for incumbents. Return of volume
momentum and modest sequential RPM uptick should aid robust India wireless KPIs and
financials for the three listed Indian wireless names. Strong seasonality and currency
translation benefits are likely to drive particularly strong financial performance from
Bharti Africa. Forex losses will remain high given sharp Re depreciation. On balance,
3QFY12 should allay minutes growth/elasticity concerns in the Indian wireless market.
Regulatory environment remains an overhang. We remain positive on Bharti and Idea.
3QFY12E – expect strong sequential comps
Exhibits 1, 2 and 3 give our Sep 2011 quarter earnings estimates for Bharti, Idea, and RCOM,
respectively. We expect strong sequential comps on operational KPIs as well as financial
performance, driven by volume bounce-back and modest RPM uptick in the India wireless business.
Re depreciation and strong seasonality should aid strong performance from Bharti Africa as well.
Even as forex losses will likely be a tad higher than Sep 2011 levels, strong EBITDA growth should
translate into solid qoq net income performance. Key factors to watch out for
India wireless volume growth – to assess if the recent tariff hikes have induced negative
elasticity and also to get a sense of whether underlying volume growth has slowed
meaningfully. We expect 3-6% qoq volume growth for various players.
RPM trajectory – flow-through of recent tariff hikes and STV rationalization should reflect in
modest RPM uptick (+0.5-1% qoq). We note that our forecasts assume that Bharti and Idea will
continue booking 3G ICR revenues.
India wireless margins – to assess the extent of RPM-uptick-led leverage benefit on margins.
3G investments are likely to exert pressure on margins as 3G growth is likely to remain subdued.
India wireless capex – to assess if slow 3G offtake and Re depreciation have led to a
downward adjustment on capex.
Bharti – strong EBITDA expansion likely driven by strong India and Africa wireless
We expect Bharti to report a strong 9.7% qoq growth in consolidated EBITDA to Rs63.8 bn on
revenues of Rs184.6 bn, +7% qoq. We expect strong qoq revenue and EBITDA growth for both
India as well as Africa wireless. For India wireless, we build in a 5/7% revenue/EBITDA growth qoq,
respectively, driven by volume growth of 4%, RPM uptick of 0.9% and OPM expansion of 60 bps
qoq. Our Africa wireless estimates call for a 5.5% qoq local currency (2.2% in USD terms, 13% in
INR) revenue growth and 80 bps qoq margin expansion. Our net income forecast of Rs13.9 bn
builds in a forex loss of Rs3 bn versus Rs2.5 bn in 2QFY12.
Idea – expect volume leadership, again
We estimate consolidated revenues to come in at Rs49.5 bn (+7% qoq) and EBITDA to come in at
Rs13.2 bn (+11% qoq), implying an OPM expansion of 100 bps qoq to 26.7%. Expect strong
6.5% wireless minutes growth and 0.7% RPM uptick qoq. Our PAT estimate of Rs1.55 bn (growth
of 47% qoq and decline of 36% yoy) builds in forex losses of Rs400 mn versus a loss of Rs313 mn
in the previous quarter.
Bharti is likely to report on Feb 8, Idea between Jan 23 and 25, and RCOM in Feb second week.
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