Airtel, Idea & RCom expected to post strong Q3 performance

Via The Economic Times | Jan 21, 2015

Bharti Airtel, Idea Cellular and Reliance Communications may report robust net p
rofit growth in the three months ended December as subscribers made more calls a
nd used more of their pricey data services, analysts say. Sequentially, all thre
e companies are expected to report flattish voice revenue per minute, but an inc
rease in call minutes is likely to drive revenue growth in the October-December
quarter, they say. Robust revenue growth from data amid reduced competition has
been a big plus for the sector, with pricing power returning after several quart
ers of tariff wars. Sector watchers expect margins to improve by about 20-30 bps
due to reduced diesel prices and operating leverage, but accelerated network ex
pansion and the associated increase in network operating expenditure will take a
way some of the benefits. "The three incumbents continue to gain share of hi-spe
ed wireless broadband subscribers as data consumers in India continue to vote in
favour of quality over price. This is a critical difference versus the voice ma
rket," Kotak Institutional Equities said in a report. Credit Suisse said after t
he results, the focus of telcos would quickly shift to spectrum auctions. "The i
ncumbents will likely bid for 2100 MHz spectrum as bulk of the future growth has
to come from data services. While any new spectrum release to industry is posit
ive long term, the immediate impact is likely to be negative on cash flows or re
turns," it said.
Bharti Airtel is expected to post a 90 percent-136 percent on-year jump in net p
rofit from Rs 610.2 crore a year earlier. Revenue is expected to grow more than
2 percent over the July-September period and by almost 7 percent from a year ear
lier, analysts say. However, Morgan Stanley expects Bharti Airtel's net profit t
o fall 4.8 percent sequentially, largely due to a decline in revenue and earning
s before interest, tax, depreciation and amortisation from African operations. I
dea Cellular s net profit for the third quarter is expected to rise by 63 percent82 percent from Rs 467.7 crore a year earlier on the back of a threefold growth
in voice volumes and a 95 percent increase in data revenue. The company, reporti
ng results on January 27, is expected to post a sequential gain of 4 percent-6 p
ercent in revenue compared to the July-September period and a 20-21 percent incr
ease over the same quarter last year, as per Morgan Stanley and Credit Suisse. W
hile Credit Suisse expects RCom's third-quarter net profit to rise 97 percent to
Rs 213 crore from Rs 108.4 crore a year earlier, analysts at Kotak predict a 38
percent increase in net income to Rs 153 crore.