Growth in revenue of telecom companies Bharti Airtel Ltd and Idea Cellular Ltd in the December quarter were starkly different, posing a conundrum for analysts. While the former’s revenue fell by 1%, the latter’s grew almost 6%, thanks to a 15% growth in total traffic carried on its network. In Bharti’s case, traffic grew at a lower rate of 6.7%.
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A number of theories were proposed by analysts to make sense of the difference. Now that Vodafone Essar Ltd’s results are also out, there are some further clues. Vodafone’s revenue grew by 4.5% sequentially, again much higher compared with Bharti.
According to a Citigroup Inc. report, “The primary reason behind the wide difference between Bharti’s and Idea’s (and now Vodafone’s) traffic growth was DoCoMo’s launch pattern. Revenue contribution from circles of DoCoMo’s initial launch in June 2009 (Andhra Pradesh, Karnataka, Kerala, Orissa and Tamil Nadu) for Bharti was 36% in the second quarter of 2009-10 against 25% for Vodafone and 27% for Idea.” Bharti’s traffic, therefore, was hit more because of the DoCoMo launch.
Graphic: Yogesh Kumar / Mint
DoCoMo has since spread to other circles and is expected to roll out its services across the country. This would eliminate such variations in the future.
Based on this reasoning, Idea’s growth rates won’t be substantially higher in future quarters. Of course, given its lower base and the fact that it is expanding into more circles, its growth rates are likely to be higher. But the extent of the difference will be far lower compared with the December quarter.
Telecom companies also benefited from the seasonality factor in traffic. Traffic slows marginally during the monsoon, causing growth rates in the December quarter to look good. With this factor missing, plus the increased competition after the entry of Uninor, results are likely to be weak across the board in the March quarter.
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