Q3 results of telecom companies to see impact of MTC cut: Reports

Business | Written by : IANS| Updated:

Q3 results of telecom companies to see impact of MTC cut: Reports

New Delhi : 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 per cent 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 per cent (on 2QFY18 base), respectively."

"Our math suggests that mobile termination contributed to as much as 14-15 per cent to Bharti's India wireless revenues and a similar proportion to the segment's EBITDA in 2QFY18. A 57 per cent cut in MTR (mobile termination rate), ceteris paribus, should result in around 8 per cent sequential dip in India wireless revenues for Bharti.

"For Idea, the contribution to revenues and EBITDA in 2QFY18 was 14-15 per cent and 20-21 per cent, 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."

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