Sector preview Q3FY15 - Telecom :: HDFC Securities

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
In Q3FY15, telecom sector is expected to report strong numbers on the back of seasonal strength and strong data growth. We expect the voice traffic to expand both on a
YoY and QoQ basis (voice traffic declined 2.1% in Q2FY15). We expect RPM to improve in a range of 1-2% QoQ supported by stable voice realizations and continued strong
data growth; as a result ARPU could also improve. For Bharti Airtel, we expect its African business to post one more quarter of muted performance mainly led by significant
depreciation of Nigerian currency (Naira). On a consolidated basis, Bharti Airtel’s EBITDA margin could remain muted on account of decline in Africa business, partially
offset by improvement in India business EBITDA. Net profit could increase YoY due to lower interests cost and lower tax rate. We expect Idea Cellular to outperform Bharti
Airtel on all parameters. Even though the company has spent less amount compared to other players like Bharti Airtel and Vodafone on acquiring 3G spectrum during 2010
auction, it managed to focus on other key areas like closing network coverage gap versus Bharti and Vodafone, brand positioning etc. We expect Idea to report better
revenue growth and margins compared to Bharti Airtel. As far as Bharti Infratel is concerned, it could report strong revenue growth on the back of rising tenancy, margins
will expand due to strong operating leverage and cost rationalization efforts.
Spectrum auction, key thing to watch out for
The government is expected to conduct auction of spectrum encompassing 800MHz, 900MHz, 1,800MHz, and 2,100 MHz bands in February 2015. The upcoming auction
could become a game changer for many players, considering the fact that most of the service providers have their licences expiring in circles from which they get majority
of their revenues; so if they fail to procure spectrum in expiring circles or in case if they have to win spectrum in these circles, they might have to do it at steep prices on
account of spectrum shortage. While TRAI recommended reserve prices are broadly in-line and inclusion of 2,100 MHz spectrum in the upcoming is positive, we still believe
that the upcoming spectrum auction to be quite competitive given importance of retaining 900MHz spectrum for incumbents and increasing data spectrum requirement for
incumbents given continued strong data growth.
Wireless subscriber base continues to rise
Among the major players with pan India foot print, Idea continues to lead with the highest subscriber addition. Total wireless subscriber base increased from 935.35 million
at the end of October, 2014 to 937.06 million at the end of November, 2014, thereby registering a monthly growth rate of 0.18%. The wireless subscription in urban areas
declined from 548.78 million at the end of October, 2014 to 546.99 million at the end of November, 2014, whereas wireless subscription in rural areas increased from
386.57 million to 390.06 million during the same period. The monthly growth rates of urban and rural wireless subscription were -0.32% and 0.90% respectively. In the
month of November, 2014, a total of 3.64 million subscribers submitted their requests for MNP. With this, the cumulative MNP requests increased from 135.86 million at
the end of October, 2014 to 139.49 million at the end of November, 2014.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010718