New Delhi, Jan 2 - Indian telecom companies are still not out of the woods in terms of revenue recovery led by the onslaught from Jios free and aggressive tariffs; also, the cut in mobile termination charges (MTC) would have impacted third quarter balance sheets, Bank of America Merrill Lynch said in a report.
"We expect the 3Q (third quarter) numbers for Bharti/Idea to be impacted by interconnect (IUC) rate cut and continued down-trending by consumers to low priced plans. Unlike last quarters, we do not expect any major surprises in cost-control initiatives as the IUC rate cut largely masks it," the report said.
Similar concern was also echoed by a report of Kotak Institutional Equities. It said: "3QFY18 is likely to be another weak quarter for the Indian wireless names. 57% cut in mobile termination rate, effective October 1, 2017, is likely to impact Bharti's and Idea's India wireless EBITDA (earnings before interest, taxes, depreciation, and amortization) by around 8 per cent and 11% (on 2QFY18 base), respectively."
"Our math suggests that mobile termination contributed to as much as 14-15% to Bharti's India wireless revenues and a similar proportion to the segment's EBITDA in 2QFY18. A 57% cut in MTR (mobile termination rate), ceteris paribus, should result in around 8% sequential dip in India wireless revenues for Bharti.
"For Idea, the contribution to revenues and EBITDA in 2QFY18 was 14-15% and 20-21%, respectively, per our math," it added.
Bank of America Merrill Lynch report further added: "We expect continued tariff hikes by Jio to help Indian telco stocks as the negative operational leverage would turn into positive operational leverage."