Bharti, RCOM profits may take a hit

Lower Per-User Revenue, Increase In Competition To Dent Bottomline Ranjit Shinde ET INTELLIGENCE GROUP  THE country's top two telecom operators — Bharti Airtel and Reliance Communications — are expected to report a deceleration in growth for the September 2009 quarter. Both the telcos will declare their quarterly numbers on Friday. Bharti is likely to grow its revenue 14% to Rs 10,288.5 crore from the year-ago level, while net profit may rise 16% to Rs 2,427.5 crore. For RCOM, net sales may grow 12.6% to Rs 6,356.6 crore. Its net profit is likely to skid 27.3% to Rs 1,171.2 crore. The estimates are based on the average of forecasts of four brokerages and estimates of the ET Intelligence Group.      The third-largest listed mobile operator Idea, which declared results on Monday, disappointed investors with near-flat revenue and lowerthan-expected growth in profit. It witnessed lower per-user revenue and higher churn of subscribers — a fallout of intense competition.      Against this backdrop, the performance of Bharti and RCOM will hold answers to some critical questions regarding sectoral trends. Subscriber growth is expected to remain robust for both the operators given the steep rise in monthly additions from 12 million in June to 14 million in August. However, this is likely to drag average revenue per user per month (ARPU) and minutes of usage similar to that in case of Idea.      The domestic telecom sector is currently witnessing steeper fall in valuations after the operators reduced tariffs significantly to gain market share. The stocks of Bharti and RCOM have lost 27% and 36%, respectively, in one month. Analysts have downgraded future revenue expectations of the top players citing the sharp fall in ARPUs due to the recent tariff revision. Given this, it would be important to follow management comments on Friday pertaining to the near-term growth and profitability scenario. That would have a bearing on future valuations of the sector.