Challenging market conditions, regulatory uncertainty, hyper competition, increasing costs, a high debt burden and shrinking margins continued to impact telecom operators? financial health during the September-December 2012 quarter. Consequently, Bharti Airtel, Reliance Communications (RCOM) and Idea Cellular witnessed slow revenue growth during the period. While Bharti Airtel registered lower profits for 12 consecutive quarters, RCOM?s profit dropped by over 40 per cent year on year. However, Idea Cellular registered a 14 per cent increase in profits in the quarter ended December 2012 as compared to the corresponding quarter in 2011.

tele.net takes a look at the financial and operational performance of India?s leading telecom operators during the quarter ended December 31, 2012?

Bharti Airtel

Bharti Airtel?s net profits decreased by 72 per cent from Rs 10.11 billion in the quarter ended December 2011 to Rs 2.84 billion during the corresponding quarter in 2012. The decline has been largely attributed to the higher outgo on depreciation and amortisation costs, net interest charges, forex fluctuation losses and tax payments. Revenues grew from Rs 184.77 billion to Rs 202.39 billion during this period. The earnings before interest, taxes depreciation and amortisation (EBITDA) margin declined from 32.2 per cent to 30.6 per cent.

Indian and South Asian operations accounted for over 70.5 per cent of the company?s total revenues during the quarter ended December 2012. These revenues increased from Rs 131.68 billion during the quarter ended December 2011 to Rs 142.67 billion in the reported quarter. Bharti Airtel?s net income from this region, however, declined from Rs 12.7 billion to Rs 8.04 billion during this period. The operating margins for the Indian business declined from 34.4 per cent to 31.9 per cent while the capex almost doubled from Rs 7.81 billion to Rs 15.15 billion. Revenues from the company?s African operations grew by 15.14 per cent from Rs 53.58 billion to Rs 61.69 billion. The EBITDA margins remained largely stable during the period. The losses stood at Rs 5.2 billion during the quarter ended December 2012, almost double the Rs 2.6 billion a year ago.

The company?s performance was satisfactory on the operational front. The contribution of non-voice revenues to total revenues grew from 25.4 per cent during the quarter ended December 2011 to 28.5 per cent during the quarter ended December 2012. The total net minutes on the

network grew by 12 per cent from 252.97 billion to 284.04 billion during the period.

For the Indian operations, the share of active subscribers in total users grew from 90 per cent to 95 per cent while the monthly churn declined from 7.9 per cent to 5.9 per cent. The total minutes on the network stood at 240.81 billion, a 10 per cent growth over the corresponding quarter in the previous year. The ARPU declined from Rs 187 to Rs 185 and the average revenue per minute (ARPM) fell from Re 0.45 to Re 0.42. The contribution of non-voice revenues in total revenue increased to 17.3 per cent from 15.8 per cent. In the non-voice revenue segment, the contribution of data services grew from 3.5 per cent in the quarter ended December 2011 to 5.7 per cent in the quarter ended December 2012.

Going ahead, industry analysts are optimistic about the company?s performance in India. The operator is the leading player in the country with a subscriber base of around 182 million as of December 2012. However, growing losses in its African operations are a key area of concern and may impact the company?s overall performance in the coming quarters.

RCOM

RCOM registered a 43.5 per cent drop in net profits from Rs 1.86 billion during the quarter ended December 2011 to Rs 1.05 billion during the corresponding quarter in 2012. This has been attributed to higher interest costs incurred during the quarter ? these costs increased by more than 50 per cent over the corresponding quarter in 2011. Revenues grew by 3 per cent from Rs 50.52 billion during the quarter ended December 2011 to Rs 52.02 billion during the corresponding quarter in 2012. The EBITDA margin declined from 31.9 per cent to 31.5 per cent. During the quarter ended December 2012, investments made by RCOM in the wireless segment stood at Rs 1.57 billion, as compared to Rs 1.72 billion during the corresponding quarter in 2011. Investments in the global enterprise business, however, grew by 150 per cent from Rs 0.9 billion to Rs 2.25 billion during this period.

On the operational front, the wireless minutes of usage (MoUs) grew from 99.9 billion during the quarter ended December 2011 to 103 billion during the corresponding quarter in 2012. The ARPM declined from Re 0.45 to Re 0.44 while the ARPU increased from Rs 100 to Rs 119. The wireless churn, however, increased from 4.2 per cent to 10 per cent. Wireless MoUs per customer per month grew from 224 to 271.

Going forward, analysts believe that RCOM will lag behind its peers in terms of profitability. However, the company?s growing data subscriber base will ensure higher revenues and better margins in the future.

Idea Cellular

Idea Cellular continued to chart a growth path in terms of profits. The operator?s net profit grew by 14 per cent from Rs 2.01 billion in the quarter ended December 2011 to Rs 2.29 billion in the corresponding quarter in 2012. The operator?s revenues grew by 10.9 per cent from Rs 50.31 billion to Rs 55.78 billion during the same period. The EBITDA margins declined from 26.7 per cent to 26.4 per cent. During the quarter under consideration, Idea maintained free cash flow (after capex but excluding spectrum payout) and registered a cash profit of Rs 11.09 billion. The capex of

Rs 6.54 billion (excluding forex fluctuations and spectrum payout) for the reported quarter was entirely funded through cash profits. The company?s capex guidance for 2013-14 stands at Rs 30 billion, excluding payments towards spectrum.

On the operational front, the total MoUs grew by 16 per cent from 113.96 billion during the quarter ended December 2011 to 132.18 billion for the corresponding quarter in 2012. The ARPU was stable with a marginal decline from Rs 159 to Rs 158 while the average MoUs per user increased from 369 to 384. The ARPM, however, declined from Re 0.43 to Re 0.41. The contribution of Idea?s non-voice revenues to total service revenues increased from 13.7 per cent to 14.6 per cent. Of the operator?s 114 million subscribers (as of November 2012), 98.1 per cent were on the visitor location register, which was among the highest in the industry. In terms of mobile number portability, the company recorded a net gain of 5.5 million customers as of January 18, 2012.

Going forward, Idea aims to expand its wireless voice and broadband businesses. Its recent acquisition of telecom licences in eight circles (seven of which were cancelled by the Supreme Court) will help the company in consolidating its market position.

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