After a rather muted Q2FY09, we expect telcos to report an uptick in q-o-q revenue growth rate in Q3FY09 led by stable wireless MOU/sub vs. a decline in Q2 and lower decline in ARPM, thanks to absence of significant tariff activity during the quarter.
Further, EBITDA margins should be stable in our view, in the context of muted tariff/promotional activity and higher roaming / VAS revenues.
Bharti Airtel: We estimate 3Q revenue/EBITDA growth of 6.8% / 5.8% q-o-q versus 6.3% / 5% in 2Q. Start-up losses in DTH (est. at Rs400 million) account for the entire 40bps dip in the EBITDA margin.
For the wireless segment, we model a 3.0% q-o-q drop in ARPU (vs 5.4% in 2Q) led by a 3% drop in ARPM and flat MOU.
In our view, Bharti would comfortably meet the consensus FY09e EPS of Rs44.3, if it meets our 3Q estimates.
We assume effective tax rate of 11.33% (MAT) in 3Q versus ‘negative’ 6.3% in 2Q. Key data point to look out for is Bharti’s FY10 capex guidance.
Reliance Communication: We estimate rev/EBITDA growth of 3.5%/4.2% q-o-q vs 6.1% / 2.3% in 2Q.
Revenue growth in 2Q was boosted by Rs910 million one-off receipt from TCOM. Despite DTH losses, we model a small increase in the consol.
EBITDA margin due to our expected recovery in the global segment margin (higher non-captive NLD traffic, ADC phase out, reduction in Vanco losses). We model 3Q PAT to decline given 4% tax rate assumption vs. -3.5% in 2Q.
Idea Cellular: 3Q revenue/EBITDA growth rates are likely to be in double digit without consolidating Spice, which would dilute the 3Q net income by an estimated Rs200-250m.
We model a 200 bps increase in the EBITDA margin of established circles but that is offset by start-up losses in Mumbai/Bihar circles.