Lower Termination Rates to hit Telco Revenues, strong EBITDA to continue: ICICI Securities

By July 11th, 2015 AT 7:24 PM

In a recently released Equity research report by ICICI Securities on the telecom sector, they predict leading telcos to continue reporting strong EBITDA. Some of the key assessments made are:

Lower termination to hurt revenue: Revenues of listed telecom operators will be hit by lower voice RPM, which are expected to decline by 3.3% to 11.8% YoY (down 3.0% to 3.4% QoQ) due to –

  1. reduction in termination rate to 14p/min (vs. 20p/min) w.e.f March 1, 2015, which implies impact of ~4.5% on voice RPM,
  2. higher service tax (w.e.f June 1, 2015), which will have limited impact on full recharge vouchers, and
  3. reduction in roaming tariff ceiling (w.e.f May 1, 2015). Minutes are estimated to grow by 5.2% to 17% YoY (1.5% to 4.5% QoQ). Data revenues likely to expand by 64% and 84% for Bharti and Idea, respectively.

Bharti’s consolidated EBITDA likely to grow by 4.5% YoY (down 0.6% QoQ) led by Bharti India’s EBITDA growth of 13.8% YoY (0.7% QoQ, lower due to Rs 1.6bn one-off gain in Q4FY15), while EBITDA of Africa business will be down by 30% YoY (down 4.6% QoQ). Africa operations continue to be hurt by the depreciation of African currencies. Consolidated net profit will be hit by forex loss in Q1FY16.

Idea likely to report robust EBITDA growth of 28% YoY (5.5% QoQ) led by strong revenue growth of 15% YoY (3.4% QoQ). Lower termination will optically improve EBITDA margin by 70bps QoQ, but like-to-like margins will remain stable. Net profit will remain flat QoQ due to higher depreciation and interest cost on account of the launch of 3G services in Delhi (using 900MHz spectrum bought in February 2014 auction).

Bharti Infratel’s EBITDA to decline 0.8% QoQ but to grow by 12.5% YoY. Bharti Infratel’s revenue is expected to grow by 6.8% YoY led by tenancy growth of 9.2% (+3,634 tenancy addition in 1Q). ICICI Securities estimates EBITDA to grow 12.5% YoY, however, it is likely to decline 0.8% QoQ due to –

  1. lower energy margins on account of annual renegotiation of energy reimbursements and
  2. Q4FY15 benefiting from the reversal of donation.

Telecom Stocks at a Glance11_17:23:40


  1. EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization
  2. Quarter On Quarter – QOQ‘ A measuring technique that calculates the change between one financial quarter and the previous financial quarter
  3. Year over Year – YoY A comparison of a company’s current earnings or other financial performance with the same data for the previous year.
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Rahul R PatilDuane Recent comment authors
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Rahul R Patil
Rahul R Patil

Won’t affect RCOM as it is new player as compared to other listed companies.And RCOM already has been offering services much much cheaper considering old termination charges.So RCOM had asked to remove termination charges fully in it’s comment to consultation paper.So instead of loss RCOM is most beneficial of lowering termination charge.AVOID will be affected badly.So it’s party time.


@Rahul R Patil
lets wait and watch

Rahul R Patil
Rahul R Patil

BSNL LL is offering unlimited free calling to any network from 9 pm to 7am on almost all plans.For which BSNL need not pay termination charges.Same time called network need to serve free.This will drain much profit/money of called networks.AVOID offers calls to LL much much costly so AVOID loses business from Mobile to LL. RCOM has been treating calls to LL same as mobile.So RCOM users like me give much business by calling to LL.& RCOM need not pay called LL operator termination charges.

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