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Beating the Trend - Telcos register revenue growth despite financial slowdown

February 15, 2009
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Financial results for the OctoberDecember 2008 quarter show that ndian telecom operators are posting higher revenues despite the gloomy financial climate. What has helped the companies is growth in Category B and C circles, where penetration continues to rise at a fast clip. The sector added over 31 million subscribers during the quarter.

However, the average revenue per user (ARPU) for voice services, which com-prises 80 per cent of the earnings for wireless telecom operators, declined by 2-6 per cent quarter on quarter. This put pressure on the margins. On a year-onyear basis, while Bharti Airtel and Reliance Communications (RCOM) posted an increase in net profit, Idea Cellular reported a decline.

tele.net takes a look at the financial performance of telecom operators that announced financial results for the October-December 2008 quarter...

Bharti Airtel

Bharti Airtel continues to drive the telecom growth story, with an increasing customer base and higher revenue despite intense competition. The company's strategy of extensive rollout ahead of competition, especially in rural areas, has yielded rich dividends.

On the back of record subscriber additions of 8.3 million (the highest by a telecom operator in any quarter), Airtel posted 25 per cent year-on-year growth in net profit, which increased from Rs 17.22 billion to Rs 21.59 billion in the quarter ended December 2008. This is despite the company suffering a forex loss of Rs 2.45 billion during the quarter.Total income rose by 39 per cent from Rs 69.64 billion in October-December 2007 to Rs 96.33 billion in the reporting quarter. Earning before interest, tax, depreciation and amortisation (EBITDA) climbed 33 per cent to Rs 39.45 billion.

On a sequential basis, revenues from the wireless business grew by 9 per cent, much higher than the 5.3 per cent growth recorded in the quarter ended September 2008. Growth in net profit for the company as a whole, driven primarily by the wireless segment, was higher than that in the previous quarter, despite drops in segments such as fixed line, data and long distance telephony. Wireless ARPU, which dropped by 5.4 per cent in the quarter ended September 2008, fell by just 1.9 per cent, despite the operator expanding into smaller towns and villages. However, the expected price elasticity did not come into play and there was a fairly sharp fall of 4 per cent in minutes of usage (MoU), which dropped to 505 per user per month.

Capex plans
 Bharti Airtel has earmarked around $5 billion as capital expenditure (capex) for the infrastructure business and mobile services in 2009-10. Around $2.5 billion is to be used for mobile services and $2.5-$3 billion for the company's tower business, which is run by the wholly owned subsidiary, Bharti Infratel, and Indus Towers, an independent tower company formed by Airtel, Vodafone and Idea Cellular.However, the capex does not include the money that the company will spend during 3G auctions. Airtel plans to raise money for the auctions internally.

Reliance Communications

Due to a sharp fall in taxes and near doubling of income from financial activities, RCOM posted a 2.7 per cent rise in net profit to Rs 14.1 billion from Rs 13.72 billion registered in the same quarter of the previous year. The tax payout in the reporting quarter was a mere Rs 152.6 million, much less than the Rs 1.38 billion paid in the corresponding period of 200708. Revenues went up by 20 per cent from Rs 48.74 billion to Rs 58.5 billion.

The company gained 5.31 million subscribers during the quarter. On December 30, 2008, RCOM launched GSM services with an aggressive pricing strategy, setting the ground for a potential tariff war with rivals in the future. The company also launched direct-to-home (DTH) services under Big TV, and acquired over 1 million DTH subscribers over the quarter.

On the back of declining ARPU and MoU, the Anil Ambani-promoted company reported a significant decline in revenue from the wireless and broadband business segments. The ARPU dipped from Rs 271 in July-September to Rs 251 in October-December 2008. Despite attractive tariff schemes and free minutes, RCOM reported a decline in MoU to 410 from 423 per user per month. Wireless revenue per minute dipped to Re 0.61 from Re 0.64 quarter on quarter, as aresult of which profits declined by 8 per cent. The EBITDA margins for RCOM's mobile business reduced by 1.2 per cent sequentially to 37.7 per cent.

Capex plans
The company has cut its planned capex for 2008-09 by 20 per cent to Rs 250 billion from Rs 300 billion. For 2009-10 too, the capex has been reduced to Rs 150 billion.This includes the expenditure planned for its tower subsidiary, Reliance Infratel.

Idea Cellular

Idea Cellular, India's fifth largest operator, has reported a 7.2 per cent year-on-year fall in net profit from Rs 2.36 billion to Rs 2.19 billion (on a consolidated basis) for October-December 2008. The GSM service provider's total income rose by nearly 60 per cent from Rs 17.1 billion to Rs 27.31 billion. The company signed up over 4 million users during the quarter and launched operations in new circles.

On a sequential basis, the company posted over 50 per cent growth in net profit and 19 per cent growth in revenues.

At a time when ARPU is declining for most operators, Idea's increased by 1.4 per cent on a quarter-on-quarter basis from Rs 261 to Rs 266. According to the company's management, the sharp rise in roaming revenues (including international roaming) in the Mumbai circle partly contributed to the increase in ARPU.The operator's realised rate per minute also moved up from Re 0.62 in JulySeptember 2008 to Re 0.64 in the reporting period.

The EBITDA margin, however, declined marginally from 26.4 per cent to 26 per cent, reflecting the new launches in Bihar and Mumbai.

Capex plans
The company has fixed a capex of around Rs 60 billion for 2009-10, marking a decrease from around Rs 65 billion for the current financial year.

Vodafone Essar

Vodafone Essar posted a 37.3 per cent increase in revenues on a sequential basis to $674 million for the quarter ended December 2008. This is the highest percentage growth for the Vodafone Group in the over 30 countries it operates in.

India contributed 65 per cent of the 9.7 million customers that Vodafone added globally during October-December 2008. The country also accounted for about 45 per cent of Vodafone's global traffic of 141.3 billion minutes during the quarter compared to about 37 per cent during the same period in 2007. In fact, about 70 per cent of the group's increase in minutes of mobile use came from India.

Vodafone Essar's ARPU, however, decreased by about 2.6 per cent, from Rs 305 in the quarter ended September 2008 to Rs 297 in the quarter ended December 2008.

TTML

Tata Teleservices (Maharashtra) Limited (TTML) registered a revenue growth of 12 per cent from Rs 4.59 billion to Rs 5.15 billion on a year-on-year basis, while EBITDA increased by 15 per cent to Rs 1.47 billion.

During the quarter, TTML expanded its network to 127 new towns in Maharashtra, taking its coverage to 65 per cent of the population in the circle.

MTNL

Mahanagar Telephone Nigam Limited (MTNL) reported a year-on-year drop in net profit from Rs 976 million to Rs 583 million for the quarter ended December 2008. The fall is attributed to staff costs increasing from Rs 4.33 billion to Rs 5.89 billion due to the merger of 50 per cent dearness allowance with basic pay.

The operator's total income increased by 5.8 per cent from Rs 13.27 billion to Rs 14.04 billion on a year-on-year basis.MTNL's wireless subscriber base increased by 222,079 during the quarter to 3.89 million, while the broadband user base expanded by 42,379 to 645,784.

Tulip Telecom

Tulip Telecom, an enterprise data connectivity service provider, ended the third quarter of 2008-09 with net sales of Rs 4.41 billion against Rs 3.41 billion in the corresponding quarter of the previous year, up by 29 per cent.

Due to a notional loss of Rs 390 million on account of foreign exchange fluctuations, the company posted a net profit of Rs 496.4 million, down 9.26 per cent from October-December 2007.

The company's strong position and growth in the multi-protocol label switching/internet protocol virtual private network business resulted in an EBITDA margin of 21 per cent.



 
 
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