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Large telcos’ profit growth to double in 2 years : Crisil

Operating profits of Airtel,Vodafone,Idea,RCom will increase 20% over the next two years.

Written by Fe Bureau | Mumbai | Published: December 27, 2013 3:54:56 am

The operating profits of large telecom companies will increase 20% over the next two years on the back of high tariffs and increased data usage,according to Crisil Ratings. The increase will be twice the operating-profit compound annual growth rate (CAGR) of 10% that the sector saw over the last five years.

Bharti Airtel,Vodafone India,Idea Cellular and Reliance Communications (RCom) reported higher realisation in the last quarter.

India,which is the second-largest mobile phone market,is now seeing signs of stability after the exit of smaller players in the market,thereby,bringing to an end the price war that the sector saw for over two years.

As companies began increasing call tariffs and cutting discounted minutes,the average realised rate per minute (ARPM) stabilised in 2012-13. ARPM improved by around 5% in the first half of the current fiscal as tariffs were hiked in select circles,according to Crisil.

During the July-September quarter,Airtel’s ARPM rose to 36.7 paise from 36.3 paise in the April-June quarter. Vodafone,too,saw an uptick in ARPM to 46.7 paise for the April-September period,from 44 paise in the prior year period. Idea’s ARPM rose to 44.7 paise from 43.7 paise in the previous quarter. RCom’s ARPM stood at 43.4 paise from 42.1 paise.

“Our estimates show there is still a 50% gap between headline tariffs and ARPM due to discounted call rates offered to many subscribers. With competitive intensity easing,telcos are in a better position to reduce the discounts and crunch the gap,” Crisil Ratings senior director Sudip Sural said.

Apart from pricing power,signs of policy clarity are emerging. “The crucial issues of spectrum availability and pricing have been partially addressed with the finalisation of the reserve price for the next round of auction in January 2014,” Crisil said in a report on Thursday.

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