Monday July 21, 05:04 PM
Top mobile firms' Q1 net seen up on user growth |
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By Devidutta Tripathy
NEW DELHI (Reuters) - India's top mobile operators, Bharti Airtel and Reliance Communications, are set to report quarterly profit jumped by a quarter as they ride a boom in the world's fastest growing mobile market.
The number of mobile subscribers in India, the world's second-largest wireless market, jumped more than 56 percent in the year to May 31 to about 280 million and consultancy Gartner expects this to grow to 737 million by 2012.
However, there are signs of saturation in India's big cities and bulk of the growth is seen coming from small towns and rural areas, where only one in 10 people have a phone, much lower than the country's average of about 25 percent.
The boom in the industry has also been fuelled by cheaper handsets starting from $15 and as operators expanded their network to small towns and villages.
"I don't see any slowdown in subscriber acquisition at least for the next 8-10 months, at least it is not evident from the capex plans of the top two operators," said Nishna Biyani, analyst at brokerage Prabhudas Lilladher.
"After that it depends on how many new operators start service, what happens in number portability. There might be a lot of churn happening," he said.
India has been adding more than 8 million mobile subscribers every month. China has about 575 million mobile subscribers.
Analysts say stiff competition in India will put more pressure on call tariffs, already among the world's lowest at as low as 1 U.S. cent a minute, and dent earnings growth.
Bharti and Reliance are expected to pursue global assets for growth, analysts said, after both companies failed to reach a deal with Sub-Saharan Africa's largest operator MTN Group to create a global top-10 telecom group.
"They will continue to look forward to the global markets to diversify the source of revenue and both have aspirations to be global players," said R.K. Gupta, managing director at Taurus Mutual Fund.
Competition is also intensifying as new licensees plan to start services by the end of the fiscal year in March. A stronger No. 5 operator Idea Cellular, which is acquiring smaller rival Spice, also threatens the top players.
The government's plan to increase the annual fee operators pay for the usage of spectrum, or airwaves, by 100-200 basis points across various slabs could also hit the firms' earnings, analysts said.
Later this year, the government plans to allow subscribers to retain their phone number when they switch operators in a phased manner, which could hit tariffs as it would make it easier for customers to switch.
BHARTI KICKS OFF RESULTS
Top mobile operator Bharti is expected to report a 27.9 percent rise in net profit to 19.34 billion rupees ($452 million) for the fiscal first quarter ended June 30, from 15.12 billion rupees reported a year earlier, a Reuters poll of 12 analysts showed. The firm unveils results on Thursday.
Bharti added 7.4 million mobile users in the June quarter to increase its total to 69.4 million, 63 percent higher than the year-ago quarter.
Reliance Communications, which had nearly 50 million mobile customers at end-May, is seen reporting a 24.2 percent rise in June quarter net profit to 15.16 billion rupees.
(See bottom of story for earnings poll details, valuations and recent share price movements)
Both Bharti and Reliance are looking to take their telecoms tower subsidiaries public, a move that could unlock value for their shareholders, analysts said.
Vodafone Essar, controlled by Britain's Vodafone Plc, and state-run Bharat Sanchar Nigam Ltd are India's third- and fourth-ranked operators, respectively. Neither is listed.
Following are forecasts from the Reuters poll.
NET PROFIT
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COMPANY Mean (% y/y) Range Date
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Bharti 19.34 27.9 18.37-20.75 July 24
Reliance * 15.16 24.2 14.08-15.99 July 31
Idea* 2.88 -6.8 2.60-3.35 July 24
REVENUE
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Bharti 84.06 42.3 82.30-86.64
Reliance 57.61 33.9 55.69-60.93
Idea 21.83 47.7 20.79-24.24
* Reliance and Idea Cellular forecasts are based on 11 estimates.
SHARE PRICE & P/E
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COMPANY Share performance P/E Market cap
(pct change in June quarter) (forecast) (July 18)
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Bharti -12.6 17.9 $35.6 bln
Reliance -13.0 14.4 $21.0 bln
Idea -9.4 16.8 $5.0 bln
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Estimates compiled from: Angel Broking, Motilal Oswal, Morgan Stanley, Merrill Lynch, Religare, Batlivala & Karani, Emkay, IDFC SSKI, Macquarie, Kotak Securities, K R Choksey and Prabhudas Lilladher.
Share price and P/E as per Thomson Reuters data.
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