Angel Broking has come out with its earnings estimates on telecom sector for the March quarter FY13. The research firm expects revenue growth to be modest on the back of increase in MOU and inch up in voice ARPM, although there could be a slight decline in subscriber base. We expect Bharti and Idea to post a revenue growth of 1.9% and 3.0% qoq, respectively.
Angel Broking report on Telecom sector:For 4QFY2013, we expect revenue growth to be modest on the back of increase in MOU and inch up in voice ARPM, although there could be a slight decline in subscriber base. We expect Bharti and Idea to post a revenue growth of 1.9% and 3.0% qoq, respectively. RCom is expected to post 0.7% qoq decline in revenues. On the EBITDA margin front, we expect the margin of Idea and RCom to grow by 34bp and 15bp qoq to 26.7% and 31.3%, respectively, led by some improvement in domestic KPIs. The EBITDA margin of Bharti is expected to decline by 83bp qoq to 29.7%.Industry dynamics are currently pointing towards a possible consolidation in the near term and we expect few operators, ie Bharti, Vodafone, RCom, Idea, BSNL, Aircel and Tata Teleservices to continue with their operations. During the past two quarters, policy uncertainty regarding one-time spectrum fee and 2G auction were partially addressed but exact payout towards spectrum renewals, spectrum re-farming and excess charge remains uncertain as pan India reserve price remains undiscovered.In our view, the telecom industry can improve structurally only after data revenues start picking up, which still looks far. Telecom stocks are currently trading at close-to-moderate valuations, which we believe, is justified given the low business returns and partially uncertain environment, which might pose huge risk to the overall profitability of these companies. We are currently neutral on the telecom sector and will refrain from taking any call till financial clarity on the stocks emerges. Bharti continues to be our preferred pick amongst telcos due to its low-cost integrated model (owned tower infrastructure), potential opportunity to scale up in Africa, established leadership in revenue and subscriber market share, relatively better KPIs and upside in stock price on account of listing of Bharti Infratel.| Company | Net Sales | Net Profit | ||
| 4QFY13E | % chg | 4QFY13E | % chg | |
| Bharti Airtel | 20,631 | 1.9 | 532 | 87.6 |
| Idea | 5,747 | 3 | 248 | 8.5 |
| Rel Comm | 5,265 | -0.7 | 95 | -10.1 |
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