Expects wireless traffic to grow 3% QoQ in Telecom: MOST

Motilal Oswal has come out with its earnings estimates on telecom for March quarter FY12. The research firm expects wireless traffic to grow 3% QoQ; RPM increase likely to be arrested.

Motilal Oswal's estimates on telecom Q4 earnings:

During 4QFY12,  we expect average wireless traffic for the top-4 operators to grow ~3% QoQ (similar  to 3QFY12), broadly in line with the industry subscriber growth. After two consecutive  quarters of increase in wireless RPM since the tariff hikes undertaken in July/August  2011, we expect RPM to remain flat QoQ due to relatively higher competitive activity  from market leader Bharti (to protect declining volume/revenue market share) and  new entrants like Uninor (to prevent subscriber migration post license cancellation  order by the Supreme Court). Within operators, we expect Idea to continue reporting  the highest traffic growth (6% QoQ), followed by Bharti (3% QoQ). 

EBITDA margin expansion of 60/20bp QoQ for Bharti/Idea:

We expect consolidated  EBITDA margin for Bharti to expand by 60bp QoQ to 32.8%; margin expansion for India  and South Asia business is likely to be higher at 75bp QoQ, driven by lower branding  related expenditure in the “others” segment. We do not assume any improvement in  the underlying business segment margin for Bharti. Idea is likely to report QoQ EBITDA  margin increase of ~25bp to 27%. RCom’s EBITDA margin would be flat on QoQ basis. 

QoQ PAT growth for Bharti/Idea driven by better operating performance:

Domestic  business PAT growth of 13/28% QoQ for Bharti/Idea would be largely driven by 4/7%  QoQ EBITDA growth. For Bharti, we expect loss in Africa business to remain at ~INR2.5b  and also factor in INR1b forex loss. We expect Rcom to report net loss of INR402m in  4QFY12 v/s net profit of INR1.86b in 3QFY12 due to higher finance costs and  depreciation. 

Relatively challenging quarter for Bharti’s Africa business:

We expect 4QFY12 to be a  relatively challenging quarter for the Africa business, given (1) seasonal weakness,  (2) disruptions in Nigeria during the early part of the quarter, and (3) 1-1.5%  depreciation in African currency basket v/s the USD. We expect flat QoQ USD revenue  and EBITDA margin in the Africa business for Bharti v/s 5/8% revenue/EBITDA CQGR  over the preceding three quarters. 

(Rs in million)

Company	Sales			Net Profit
	Mar. 12	%YoY	%QoQ	Mar. 12	%YoY	%QoQ
Bharti Airtel	188,601	16	2.1	12,027	-14.1	18.9
Idea Cellular	53,401	27.1	6.1	2,566	26.8	27.7
Reliance Comm	51,191	-4	1.3	-102	PL	PL
Tulip Telecom	7,033	10.2	2.4	754	-8.8	-2.4

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