Telecom: TRAI Q2 data update

TRAI’s Q2 FY13 financial data report suggests momentum stalled for the sector as gross revenues declined marginally by 0.5% qoq to Rs371bn

January 01, 1970 5:30 IST | India Infoline News Service

TRAI’s Q2 FY13 financial data report suggests momentum stalled for the sector as gross revenues declined marginally by 0.5% qoq to Rs371bn. Bharti improved its revenue market share (RMS) by 83bps qoq as its gross revenues rose 2.3% qoq; its RMS gain was supported by aggressive SG&A spend in Q1 though these have come down in Q2. We note that Bharti had Rs5.9bn in one off income, adjusted for which Bharti RMS would have been lower by 28bps. Rcom posted ~30bps qoq increase in RMS after multi quarter decline as wireless revenues fell at a slower pace compared to say, Idea. Both, Idea and Vodafone saw RMS decline accelerate in Q2, in contrast to recent years trend of rising RMS. Interestingly, Q2 saw Uninor focus on the circles in which it eventually bid in the 2G auctions in November and these accounted for ~73% of its pan India gross revenues.  

In a separate development, lackluster 2G auctions augurs well for incumbent telcos as benchmark spectrum prices would probably be lower; therefore excess spectrum charge and renewal fees too would trend lower. In anticipation of lower regulatory payouts, telecom stocks have run up post the auctions and hence we lower our rating on Bharti and Idea to Market Performers with revised 9-mth target of Rs330 (earlier Rs310) for Bharti. Retain our 9-mth target of Rs100 on Idea. 

Bharti gains RMS as Idea and Vodafone revenue share drops

Bharti regained ~83bps qoq in RMS in Q2 on the back of aggressive SG&A spending in Q1 though marketing expenses have returned to normal levels in Q2 suggesting revenue gains may not be sustained. Bharti Q2 revenues also include Rs5.9bn in one-off wireless revenues but we have not adjusted our RMS figures; Idea and Vodafone continue to lose RMS in Q2 though Rcom surprised with rise in RMS after multi-quarter decline.

Financial summary
  Bharti Idea
Y/e 31 Mar (Rs m) FY13E FY14E FY13E FY14E
Revenues 799,577 874,559 236,208 275,676
yoy growth (%) 11.8 9.4 21.2 16.7
Operating profit 256,664 287,730 62,595 75,259
OPM (%) 32.1 32.9 26.5 27.3
Reported PAT 34,390 41,772 10,543 18,285
yoy growth (%) (19.3) 21.5 45.8 73.4
EPS (Rs) 9.1 11.0 3.2 5.5
P/E (x) 36.8 30.3   30.1   17.4
Price/Book (x) 2.4   2.2   2.3   2.0
EV/EBITDA (x)   7.5   6.4   7.6   6.0
Debt/Equity (x) 1.3 1.2 1.1 0.9
ROE (%) 6.6 7.5 7.8 12.2
RoCE (%) 7.1 7.8 9.3 12.0
Source: Companies, India Infoline Research

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