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Telecom
�� Subscriber addition continues to fall
Subscriber addition has fallen further in the first two months of Q3FY12
at 11.4 million as compared to 14.3 million in Q2FY12. It remains well
below the number of Q1FY12 at 28.7 million, signalling declining
competitive intensity. We expect the industry to add 17.6 million
subscribers in Q3FY12 as compared to 21.4 million in Q2FY12 and 40.0
million in Q1FY12. The slowdown in net adds is on cessation of dual
SIM phenomena and free call minutes along with a recent price hike
taken by the incumbents. We expect 5.5% QoQ revenue growth for
telecom service providers on back of 2.7% subscriber growth.
�� Traffic growth to moderate; ARPM’s to improve
Total Traffic had de-grown in the Q2FY12 which is a seasonally weak
quarter and we expect a slight improvement in Q3FY12 aided by the
festive season. We expect 3.1% QoQ domestic volume growth for our
telecom universe coverage in Q3FY12 to 446 billion minutes as against
1.0% de growth in Q2FY12. ARPM across players is expected to
improve in Q3FY12 on the back of the recent price hike taken by
telecom operators and higher 3G uptake. We expect ARPM’s to slightly
improve and stay in the range of 43-45 paisa
�� EBITDA margin to remain subdued
EBITDA margins are expected to remain stable in Q3FY12. While low
traffic growth and increasing network operating expenses on back of 3G
rollout will put downward pressure on the margins, increasing ARPM’s
and lower selling and promotional expenses due to lower subscriber
addition will help it upwards. Tulip Telecom is expected to witness
stable margins, while OnMobile is expected to witness a contraction in
margins due to a dip in revenue and higher administrative expenses.
PAT margins are expected to show a mixed trend. PAT margins would
expand on account of lower forex loss for Bharti and high financial
leverage for Idea. RCom is expected to witness a contraction in margins
due to higher amortisation. Telecom operators may report foreign
currency translation loss due to 11.1% depreciation of INR against USD
in this quarter, which would hurt PAT margins.
�� Regulatory developments - positive sentiment for industry
The timeframe of implementation of the draft of NTP 2011 along with
issues such as spectrum refarming remains unclear. While operators
would witness a huge outgo due to one time spectrum fees, higher
license and spectrum usage charges, guidelines like liberal M&A norms
and spectrum sharing play positive for the incumbents.
Company specific view
Company Remarks
Bharti Airtel Higher network operating expense due to 3G rollout would be partly compensated
by lower SG&A expenses on account of lower subscriber addition in the domestic
market. The African business is expected to post an EBITDA margin expansion of
~195 bps to ~28%. We expect it to add 3.2 million subscribers in India and South
Asia and 2.4 million in Africa. India ARPU would grow 0.5% to | 184 while that of
Africa would improve by 0.2% to US$7.3. Telemedia, Enterprise, Passive
Infrastructure and Digital DV Business are expected to grow at 0.8%, 1.0%, 2.1%
and 4.3% respectively
Idea Cellular We expect Idea to add 5.5 million subscribers with a 1.4% QoQ improvement in
ARPU to | 157. MoU is expected to increase 1.0% to 368. ARPM is expected to
remain at 43 paisa
OnMobile OnMobile is expected to continue to see a drop in its domestic revenues. However,
international revenues are expected to grow. Also, declining discretionary spend by
subscribers owing to the economic slowdown and tighter sharing norms from
telcos would be a dampener
Reliance Comm. We expect RCom to add 2.9 million subscribers. We expect ARPU to fall 0.5% to |
101 while MoU would decline 0.5% to 226 and ARPM is expected to remain stable
at 45 paisa. The broadband and global revenues are expected to stay more or less
flat
TTML Subscriber base of TTML is expected to remain flat though active subscribers are
expected to fall. ARPU is expected to decline marginally by 0.4% to | 182 (for
active subscribers) while MoU is expected to decline by 0.5% to 415. 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
�� Subscriber addition continues to fall
Subscriber addition has fallen further in the first two months of Q3FY12
at 11.4 million as compared to 14.3 million in Q2FY12. It remains well
below the number of Q1FY12 at 28.7 million, signalling declining
competitive intensity. We expect the industry to add 17.6 million
subscribers in Q3FY12 as compared to 21.4 million in Q2FY12 and 40.0
million in Q1FY12. The slowdown in net adds is on cessation of dual
SIM phenomena and free call minutes along with a recent price hike
taken by the incumbents. We expect 5.5% QoQ revenue growth for
telecom service providers on back of 2.7% subscriber growth.
�� Traffic growth to moderate; ARPM’s to improve
Total Traffic had de-grown in the Q2FY12 which is a seasonally weak
quarter and we expect a slight improvement in Q3FY12 aided by the
festive season. We expect 3.1% QoQ domestic volume growth for our
telecom universe coverage in Q3FY12 to 446 billion minutes as against
1.0% de growth in Q2FY12. ARPM across players is expected to
improve in Q3FY12 on the back of the recent price hike taken by
telecom operators and higher 3G uptake. We expect ARPM’s to slightly
improve and stay in the range of 43-45 paisa
�� EBITDA margin to remain subdued
EBITDA margins are expected to remain stable in Q3FY12. While low
traffic growth and increasing network operating expenses on back of 3G
rollout will put downward pressure on the margins, increasing ARPM’s
and lower selling and promotional expenses due to lower subscriber
addition will help it upwards. Tulip Telecom is expected to witness
stable margins, while OnMobile is expected to witness a contraction in
margins due to a dip in revenue and higher administrative expenses.
PAT margins are expected to show a mixed trend. PAT margins would
expand on account of lower forex loss for Bharti and high financial
leverage for Idea. RCom is expected to witness a contraction in margins
due to higher amortisation. Telecom operators may report foreign
currency translation loss due to 11.1% depreciation of INR against USD
in this quarter, which would hurt PAT margins.
�� Regulatory developments - positive sentiment for industry
The timeframe of implementation of the draft of NTP 2011 along with
issues such as spectrum refarming remains unclear. While operators
would witness a huge outgo due to one time spectrum fees, higher
license and spectrum usage charges, guidelines like liberal M&A norms
and spectrum sharing play positive for the incumbents.
Company specific view
Company Remarks
Bharti Airtel Higher network operating expense due to 3G rollout would be partly compensated
by lower SG&A expenses on account of lower subscriber addition in the domestic
market. The African business is expected to post an EBITDA margin expansion of
~195 bps to ~28%. We expect it to add 3.2 million subscribers in India and South
Asia and 2.4 million in Africa. India ARPU would grow 0.5% to | 184 while that of
Africa would improve by 0.2% to US$7.3. Telemedia, Enterprise, Passive
Infrastructure and Digital DV Business are expected to grow at 0.8%, 1.0%, 2.1%
and 4.3% respectively
Idea Cellular We expect Idea to add 5.5 million subscribers with a 1.4% QoQ improvement in
ARPU to | 157. MoU is expected to increase 1.0% to 368. ARPM is expected to
remain at 43 paisa
OnMobile OnMobile is expected to continue to see a drop in its domestic revenues. However,
international revenues are expected to grow. Also, declining discretionary spend by
subscribers owing to the economic slowdown and tighter sharing norms from
telcos would be a dampener
Reliance Comm. We expect RCom to add 2.9 million subscribers. We expect ARPU to fall 0.5% to |
101 while MoU would decline 0.5% to 226 and ARPM is expected to remain stable
at 45 paisa. The broadband and global revenues are expected to stay more or less
flat
TTML Subscriber base of TTML is expected to remain flat though active subscribers are
expected to fall. ARPU is expected to decline marginally by 0.4% to | 182 (for
active subscribers) while MoU is expected to decline by 0.5% to 415. 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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