Mobile companies in India showed impressive 4th quarter results

The results for the fourth quarter of the 2006-07 fiscal - The three big telecom companies in India Bharti Airtel, Reliance Communications (RCOM) and Idea Cellularthat have reported impressive growth. The market was expecting a double digit growth, though there was concern over a falling average revenue per user (ARPU), following the expansion of companies into smaller cities with lower usage. Also, the mandatory requirement to verify and authenticate the identity of subscribers was expected to impact the reported subscriber base.

However, Idea reported a 48% rise in topline for the full year and a more than two-fold jump in bottomline. The operating margins for the eight established circles remained stable, compared with the previous year.

The Delhi-based Bharti Airtel has also posted growth in sales and profits on Friday. Its topline grew 59%, while bottomline surged 89%. Further, the company reported improved operating efficiencies, compared with the previous year, as operating margins expanded by over 300 basis points (bps).

The Anil Ambani group company RCOM’s operating margin shot up from 24% in the prior year to 40%. The pace of growth reported by the companies can be attributed to the scorching pace at which they are expanding the subscriber base. This has been combined with their ability to keep costs under control. Mobile companies in India are adding about seven million users every month — the fastest anywhere in the world — on the back of lower tariffs. Moreover, the minutes of usage (MOU) per subscriber are also on a rise given the gradual transition of users from fixed telephones to mobile. This has particularly taken care of the falling ARPU. For instance, in the case of Bharti, the ARPU fell 8% from the previous year, while the MOU increased 10%. The telecommunication companies are also keen on expanding into other forms of services, including direct to home (DTH), long distance telephony and broadband offerings. All the three companies have announced capex plans to fund their expansions. The valuations of Bharti, in terms of enterprise value per subscriber, is gradually softening. For instance, post FY07 results, Bharti’s valuation stands at Rs 35,538 per user, compared with Rs 41,500 per subscriber in March. In the case of Idea, it has increased from Rs 20,800 per subscriber to Rs 24,200 per subscriber.

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