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Telecom
ƒ Subscriber growth rate remains steady…
Subscriber growth is expected to remain robust in the festive season,
with the overall base for telecom companies under our coverage
growing to 479.2 million, up 2.7% QoQ. Idea is expected to lead the
subscriber addition, adding about 6.1 million subscribers followed by
Airtel and RCom, which are expected to add about 5.7 and 0.7 million
subscribers, respectively, in the quarter.
ƒ Minutes to expand sequentially after seasonally weak quarter…
Overall minutes for telcos are expected to expand 3.3% to 546 billion led
by robust subscriber additions in the festive quarter and a rebound in
usage after a seasonally weak second quarter. However, minutes of
usage per subscriber (MOU) growth may be limited to ~1% as
incremental subscribers contribute lower minutes. Airtel, Idea, RCom are
expected to post 3.0%, 0.7%, 5.2% QoQ growth in total minutes to
271.8, 170.9, 102.8 billion minutes, respectively.
ƒ Data growth to continue at robust pace…
Overall data growth is expected to continue at a robust pace, growing
14.9% QoQ to 198.7 million GB for all three telcos. Continuing the trend,
realisation per MB (ARMB) may continue to decline as a tariff war in data
segment intensifies. We expect ARMB to range at 24-26 paisa per MB
recording 2-4% sequential decline. Contribution of data to revenues has
been consistently increasing in the past few quarters. We expect total
data revenues to increase as a percent of total revenue from 15.8% in
Q2FY14 to 16.9% in Q3FY15E with 12.6% QoQ growth to | 4394.1 crore.
Airtel, Idea, RCom has 15.6%, 14.9%, 23.9% contribution from data in
their total revenues, respectively.
ƒ Marginal ARPM increase, EBITDA margin remains stable
Telcos have been gradually reducing discounts and hiking tariffs hence
leading to an ARPM expansion. Voice ARPM for all three telcos under
our coverage would expand marginally by 0.3-0.9% on the back of
curbing of discounts and hiking of select tariffs. Blended ARPM
expansion would also be aided by robust data growth. We expect
blended ARPMs to range between 46 and 48 paisa. Idea is expected to
post an EBITDA margin expansion of ~70 bps to 33.6%. Airtel and
RCom may post about 10 and 20 bps QoQ contraction in blended
EBITDA margins, respectively.
ƒ Impending spectrum auctions - Potential game changer
The telecom sector is anxiously waiting for the February 2015 auctions
to take shape. The auctions could change the fate of the players if they
are unable to procure spectrum in expiring circles or in case they have to
procure it at skyrocketing prices on account of spectrum shortage. The
government plans to auction spectrum in the 800/900/1800 MHz bands
and also in the 2100 MHz band since the Defence Ministry has already
given an in-principle nod to the swapping of 15 MHz of spectrum in the
band. Trai has also recommended a pan-India reserve price of | 2720
crore, which is 22% lower than previous 3G auctions. The auction of
2100 MHz with other bands could come in as a solace. However, the
auction could leave the players heavy with debt and hurt margins, going
ahead. Nonetheless, to gauge the length and breadth of the same, we
will await further clarity on the final reserve prices of the spectrum to be
auctioned.
Company specific view (Telecom)
Company Remarks
Bharti Airtel Bharti Airtel's India mobile subscribers have increased by about 3.9 million in the
first two months of the quarter. We expect the momentum in the subscriber
addition to continue with Airtel expected to end the quarter with subscriber growth
to 217.5 million subscribers, up 2.7% QoQ. The hikes taken in the quarter will
increase the blended ARPM to 47.9 paisa from 47.3 paisa in the previous quarter.
The robust subscriber addition is expected to lead to an MOU expansion by 1.0%
QoQ to 422 minutes, thus leading to an increase in total traffic by 3.0% QoQ to
271.8 billion minutes. The growing demand for data will lead to a growth in data
subscribers to 43.5 million and, hence, a 13.0% QoQ increase in data revenues. The
African business operations may continue to remain subdued posting 0.7% degrowth
in revenues due to the weakening of African currencies against the dollar.
Margins are also expected to remain muted at 23.6% for African operations. Due to
the weakening of the Indian rupee and other currencies, we believe Airtel may incur
forex losses of about | 200 crore in the quarter, which would dent its profits
Idea Cellular Idea Cellular has displayed robustness in subscriber additions with an addition of
about 4.4 million subscribers within the first two months of the quarter. The growth
in new circles continues to be voluminous. We expect subscribers herein to grow
7.3% QoQ to 12.1 million and overall subscribers to grow 4.3% QoQ to 149.6 million
subscribers. The robustness in subscriber addition signals towards lower than
industry rate hikes undertaken by the company. Hence, overall realisations are
expected to increase only marginally by 0.9% QoQ to about 46.3 paisa. The high
subscriber additions may lead to total voice traffic expansion by 5.0% to 170.9
billion minutes. ARPMs will be aided by higher data usage per subscriber, which is
likely to grow 6% QoQ to 472 MB from 446 MB a quarter ago. Data revenues are
expected to form about 14.9% of total revenues, helping Idea post margins at 33.6%
(up ~70 bps QoQ)
Reliance
Communication
The subscriber growth for RCoM has been lagging behind its peers. Hence, we
expect total subscribers to grow marginally by 0.6% QoQ to 112.0 million
subscribers with a net addition of about 0.7 million subscribers. Total minutes may
grow marginally by 0.7% QoQ to 102.8 billion with MOUs expected to remain
mostly constant at 307 minutes. We expect a 0.3% expansion in voice ARPM to
33.4 paisa. Total data traffic is expected to grow 13.3% QoQ to 74.5 million GB,
with a 2% decline in blended data realisation. Overall wireless revenues may grow
4.3% to | 4881.6 crore while blended realisation may grow 2.6% QoQ to 45.5 paisa
mostly buoyed by robust growth in the data segment
Tata
Communication
Voice would remain under pressure given the high competitive intensity in the
overseas wholesale voice industry. Continuing the weak trend seen in H1FY15, we
build in 10% YoY de-growth in ILD minutes, resulting in 6.9% YoY revenue decline to
| 2235 crore. Nonetheless, data segment would post robust revenue growth of 14%
to | 2319 crore, partly aided by new product launches. Neotel would remain stable
at | 582 crore though margins may take a hit owing to currency depreciation. The
PAT may decline significantly to | 9.5 crore from | 92 crore in Q2FY15, owing to
interest on income tax refund in Q2FY15
Source: Company, ICICIdirect.com Research
LINK
http://content.icicidirect.com/mailimages/IDirect_ConsolidatedPreview_Q3FY15.pdf
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
Telecom
ƒ Subscriber growth rate remains steady…
Subscriber growth is expected to remain robust in the festive season,
with the overall base for telecom companies under our coverage
growing to 479.2 million, up 2.7% QoQ. Idea is expected to lead the
subscriber addition, adding about 6.1 million subscribers followed by
Airtel and RCom, which are expected to add about 5.7 and 0.7 million
subscribers, respectively, in the quarter.
ƒ Minutes to expand sequentially after seasonally weak quarter…
Overall minutes for telcos are expected to expand 3.3% to 546 billion led
by robust subscriber additions in the festive quarter and a rebound in
usage after a seasonally weak second quarter. However, minutes of
usage per subscriber (MOU) growth may be limited to ~1% as
incremental subscribers contribute lower minutes. Airtel, Idea, RCom are
expected to post 3.0%, 0.7%, 5.2% QoQ growth in total minutes to
271.8, 170.9, 102.8 billion minutes, respectively.
ƒ Data growth to continue at robust pace…
Overall data growth is expected to continue at a robust pace, growing
14.9% QoQ to 198.7 million GB for all three telcos. Continuing the trend,
realisation per MB (ARMB) may continue to decline as a tariff war in data
segment intensifies. We expect ARMB to range at 24-26 paisa per MB
recording 2-4% sequential decline. Contribution of data to revenues has
been consistently increasing in the past few quarters. We expect total
data revenues to increase as a percent of total revenue from 15.8% in
Q2FY14 to 16.9% in Q3FY15E with 12.6% QoQ growth to | 4394.1 crore.
Airtel, Idea, RCom has 15.6%, 14.9%, 23.9% contribution from data in
their total revenues, respectively.
ƒ Marginal ARPM increase, EBITDA margin remains stable
Telcos have been gradually reducing discounts and hiking tariffs hence
leading to an ARPM expansion. Voice ARPM for all three telcos under
our coverage would expand marginally by 0.3-0.9% on the back of
curbing of discounts and hiking of select tariffs. Blended ARPM
expansion would also be aided by robust data growth. We expect
blended ARPMs to range between 46 and 48 paisa. Idea is expected to
post an EBITDA margin expansion of ~70 bps to 33.6%. Airtel and
RCom may post about 10 and 20 bps QoQ contraction in blended
EBITDA margins, respectively.
ƒ Impending spectrum auctions - Potential game changer
The telecom sector is anxiously waiting for the February 2015 auctions
to take shape. The auctions could change the fate of the players if they
are unable to procure spectrum in expiring circles or in case they have to
procure it at skyrocketing prices on account of spectrum shortage. The
government plans to auction spectrum in the 800/900/1800 MHz bands
and also in the 2100 MHz band since the Defence Ministry has already
given an in-principle nod to the swapping of 15 MHz of spectrum in the
band. Trai has also recommended a pan-India reserve price of | 2720
crore, which is 22% lower than previous 3G auctions. The auction of
2100 MHz with other bands could come in as a solace. However, the
auction could leave the players heavy with debt and hurt margins, going
ahead. Nonetheless, to gauge the length and breadth of the same, we
will await further clarity on the final reserve prices of the spectrum to be
auctioned.
Company specific view (Telecom)
Company Remarks
Bharti Airtel Bharti Airtel's India mobile subscribers have increased by about 3.9 million in the
first two months of the quarter. We expect the momentum in the subscriber
addition to continue with Airtel expected to end the quarter with subscriber growth
to 217.5 million subscribers, up 2.7% QoQ. The hikes taken in the quarter will
increase the blended ARPM to 47.9 paisa from 47.3 paisa in the previous quarter.
The robust subscriber addition is expected to lead to an MOU expansion by 1.0%
QoQ to 422 minutes, thus leading to an increase in total traffic by 3.0% QoQ to
271.8 billion minutes. The growing demand for data will lead to a growth in data
subscribers to 43.5 million and, hence, a 13.0% QoQ increase in data revenues. The
African business operations may continue to remain subdued posting 0.7% degrowth
in revenues due to the weakening of African currencies against the dollar.
Margins are also expected to remain muted at 23.6% for African operations. Due to
the weakening of the Indian rupee and other currencies, we believe Airtel may incur
forex losses of about | 200 crore in the quarter, which would dent its profits
Idea Cellular Idea Cellular has displayed robustness in subscriber additions with an addition of
about 4.4 million subscribers within the first two months of the quarter. The growth
in new circles continues to be voluminous. We expect subscribers herein to grow
7.3% QoQ to 12.1 million and overall subscribers to grow 4.3% QoQ to 149.6 million
subscribers. The robustness in subscriber addition signals towards lower than
industry rate hikes undertaken by the company. Hence, overall realisations are
expected to increase only marginally by 0.9% QoQ to about 46.3 paisa. The high
subscriber additions may lead to total voice traffic expansion by 5.0% to 170.9
billion minutes. ARPMs will be aided by higher data usage per subscriber, which is
likely to grow 6% QoQ to 472 MB from 446 MB a quarter ago. Data revenues are
expected to form about 14.9% of total revenues, helping Idea post margins at 33.6%
(up ~70 bps QoQ)
Reliance
Communication
The subscriber growth for RCoM has been lagging behind its peers. Hence, we
expect total subscribers to grow marginally by 0.6% QoQ to 112.0 million
subscribers with a net addition of about 0.7 million subscribers. Total minutes may
grow marginally by 0.7% QoQ to 102.8 billion with MOUs expected to remain
mostly constant at 307 minutes. We expect a 0.3% expansion in voice ARPM to
33.4 paisa. Total data traffic is expected to grow 13.3% QoQ to 74.5 million GB,
with a 2% decline in blended data realisation. Overall wireless revenues may grow
4.3% to | 4881.6 crore while blended realisation may grow 2.6% QoQ to 45.5 paisa
mostly buoyed by robust growth in the data segment
Tata
Communication
Voice would remain under pressure given the high competitive intensity in the
overseas wholesale voice industry. Continuing the weak trend seen in H1FY15, we
build in 10% YoY de-growth in ILD minutes, resulting in 6.9% YoY revenue decline to
| 2235 crore. Nonetheless, data segment would post robust revenue growth of 14%
to | 2319 crore, partly aided by new product launches. Neotel would remain stable
at | 582 crore though margins may take a hit owing to currency depreciation. The
PAT may decline significantly to | 9.5 crore from | 92 crore in Q2FY15, owing to
interest on income tax refund in Q2FY15
Source: Company, ICICIdirect.com Research
LINK
http://content.icicidirect.com/mailimages/IDirect_ConsolidatedPreview_Q3FY15.pdf
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