INDIA TELECOM INDUSTRY
Telecom operators reported robust performance during the December 2007 quarter at the aggregate level. The sector could maintain growth in profits and profitability despite declining average revenue per user (Arpu). Drop in Arpus was more than compensated by increased operational efficiency and robust growth in number of subscribers during the quarter.
Sales at the aggregate level rose by 30% to Rs 16,312 crore compared to the corresponding quarter of the previous year. Profit before depreciation, interest and taxes (PBDIT) grew at a faster rate of 54% to Rs 6,204 crore. Net profit (PAT) rose by 33.5% to Rs 3,354 crore. The slower rate of growth in PAT can be attributed to five-fold jump in interest outgo and a moderate rise in depreciation. This reflects the aggressive capital expenditure undertaken by telecom companies to fund their expansion plans.
The top two telecom operators, Bharti Airtel and Reliance Communications (RCom), have gradually increased their share in total revenue of the sector. Both the companies together accounted for 73% of the total sales of the sector during the December 2007 quarter compared with 67% during the year-ago quarter. Their share in PAT is much higher at about 92%. This reflects higher profitability of these two players compared to the other operators.
Profitability of the sector improved during the third quarter. PBDIT margin rose by 600 basis points (bps) to 37.4% from the year-ago mark. Net margin inched up 64 bps to 20.2%.
Telecom operators continued to witness lower Arpus during the December quarter. Rcom’s average revenue per user (Arpu) dropped by 6.1% to Rs 339. The fall was sharper than that reported by Bharti. At Rs 358, Bharti’s Arpu took a knock of 2.2%.
During the December 2007 quarter, momentum in the subscriber base remained strong. The telecom sector added 24.3 million subscribers to take the total count to 233 million, 61% more than that a year ago. Bharti saw the biggest jump in net additions, amounting to 26% of total net additions during the quarter. Among the other listed companies, Rcom and Idea accounted for 18% and 9% of total net additions.
Operators are expected to see continued momentum in the user additions in the coming quarters. This coupled with increased operating efficiencies is likely to keep the cash book of operators ringing.
