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We expect the seasonal slowdown in volumes to affect overall revenue growth for Indian telcos. However, as our recent channel checks showed, tariff action remains firm with companies continuing to withdraw discounts even in the seasonal slowdown.
*We thus expect an RPM (revenue per minute) increase of about 1% quarter-on-quarter, which should help deliver a flat-to-small increase in margins. We thus expect like-for-like Ebitda (earnings before interest, taxes, depreciation and amortisation) margins growth to sustain at 20%/40% plus year-on-year for Bharti, Idea, respectively.
*Bharti's African numbers should show some improvement with disruptions of the last quarter behind us. Along with smaller forex loss (thanks to sharp recovery in rupee towards end of quarter), this should help consolidated net profits show a y-o-y increase for the first time in three years (having bottomed out last quarter).
*For Infratel, we would look out for dividend announcements. An increase in stated payout policy should help the stock in our view.
*With receding regulatory pressures and improving competitive scenario, we remain positive on the telecom sector.
Seasonally weak quarter, but RPM uptick should continue: The September quarter is usually a seasonally weak quarter for Indian telcos, and this time should be no different. We expect volume declines of 3-4% q-o-q. However, as our recent channel checks showed, the tariff trajectory remains upwards with further action on withdrawal of discounts. However, we would expect the pace of RPM uptick to be slower than the 4-6% seen in the June-13 quarter. Overall, we expect a stable to small increase in margins for operators.
Bharti Airtel--Smaller forex loss, improvement in Africa: Bharti's Africa business should benefit from resumption of operations in parts of Nigeria where operations had closed down last quarter (full quarter impact could be only felt in the Dec-13 quarter). In addition, the continued strength in African local currencies (flat vs USD) should help reported numbers in INR terms. Further, we expect the tax rate in Africa to come down q-o-q.
With rupee recovering sharply towards the end of the quarter (q-o-q fall of 5%), Bharti's forex losses should be contained to less than Rs3 bn, in our view. This along with strong momentum in India mobile business should help in strong consolidated net profit growth. We would look for comments on elasticity response to tariff changes
Idea—Pronounced seasonality: Idea usually sees a more pronounced seasonality in September, and could see a sharper volume slowdown (4% q-o-q in our numbers)