EARNINGS PREVIEW - No Quarter Given Telcos Put Pressure on Each Other

SOME CHEER IN THIRD QUARTER A bounce back in minutes of use and

robust data growth during festival season could provide a silver lining, say
analysts
Bharti Airtel, Idea Cellular and Reliance Communications (RCom) are likely to
report sustained pressure on voice and data realisations for the OctoberDecember period, stung by continuing competitive intensity , although a bounce
back in minutes of use and robust data growth on account of the festive season
could provide a silver lining, say analysts.
A likely sharp increase in the number of minutes used could help drive 4-5%
sequential growth in the mobile business of the listed telcos, said brokerage
Credit Suisse.
Morgan Stanley expects minutes additions to be strong during the quarter, with
Idea and Bharti adding 7 billion minutes each and Anil Ambani-led RCom
reporting a flattish trend on this count, with any gains being offset by loss of
minutes in the 900 MHz circles where the company lost spectrum.
The third quarter of the financial year is considered strong for voice as it is
typically festival time when people make more calls and consume more data with
the growing popularity of 3G.
Brokerage firm Kotak expects pressure on voice and data realisations to reflect in
further deceleration in one year revenue growth for Bharti Airtel and Idea
Cellular and believes accelerated network investments are likely to reflect in flat
EBITDA (earnings before interest, tax, depreciation and amortisation) margins,
quarter-on-quarter.
Citi Research added that a 6% sequential decline in diesel prices could cushion
some of the impact.
Kotak said spectrum renewal costs, in the form of higher amortisation and
interest costs, will hit telcos for a part of the quarter, pressuring both PBT (profit
before tax) and PAT.

BHARTI AIRTEL
The company is slated to report an on year 6.1-18% fall in consolidated net profit
from `1,436 crore, hit by pressure on realisations and spectrum renewal payouts,
although data revenue growth and improved Africa margins are the proverbial
silver lining.
Goldman Sachs expects Bharti's India wireless growth to remain robust,
increasing 8.1% YoY, with a 57% on-year increase in data revenues driven by a
71% rise in volumes.
Kotak expects telco's monthly average revenue per user (ARPU) to dip to `193
from `202 on-year. It expects Bharti's wireless EBITDA mar gin to see a
sequential expansion to 37.6% from 37.3%.
Credit Suisse expects Bharti's Africa revenue in constant currency terms to grow
2% sequentially . Goldman Sachs sees Airtel Africa's EBITDA margins dip ping 40
basis points (bps) sequentially o 19.8%, with the close of eight tower deals in the
past 12 months.
IDEA CELLULAR
Analysts are divided on Idea's profit with some predicting a 9-13% on-year growth
and others expecting a 5-6.1% on-year decline from `767.1 crore. Its data growth
could be tempered by pricing pressure, accelerated network investments, airwave
renewal payouts and rising competition among the top three carriers to grab
rural customers.
Motilal Oswal expects Idea to report a 14.7% on-year growth in consolidated
revenue to `9,195 crore. Kotak said Idea's monthly ARPU may drop to `176 from
`179 in the previous year.
We expect Idea's traffic to rise 7 billion minutes during the quarter and report a
1.5% sequential decline in voice ARPM to 32.5 paise, said Morgan Stanley . It
anticipates the company's data MBs to grow 15% sequentially although average
realisation per MB could contract 4% QoQ to 22.5 paise.
RELIANCE COMMUNICATIONS
Reliance Communications is slated to report an on-year 14.3-16.3% fall in net
profit from `201 crore, hit by reduced minutes growth, market share challenges
and subscriber losses.

CIMB expects RCom to report a meagre 0.3% on-year EBITDA growth as the
company continues to lose market share due to limited network rollout and loss
of subscribers as it was unable to renew spectrum in several circles.
Morgan Stanley expects RCom's domestic traffic to grow by 1 billion minutes,
below the 7 billion projected for both Bharti Airtel and Idea, largely due to loss of
spectrum in the last auction.

No Quarter Given Telcos Put Pressure on Each Other

Analysis:
What: bounce back in minutes of use and robust data growth during festival
season, drive 4-5% sequential growth in the mobile business, with Idea and
Bharti adding 7 billion minutes, R-Com reporting a flattish trend on this count,
average revenue per user (ARPU) to dip
Who: Bharti Airtel, Idea Cellular and Reliance Communications,
When: third quarter of the financial year - for the October-December
Where: Telecom Voice and Data
Why: stung by continuing competitive intensity, any gains being offset by loss of
minutes in the 900 MHz circles where the company lost spectrum, accelerated
network investments are likely to reflect in flat EBITDA, spectrum renewal costs,
in the form of higher amortisation and interest costs, will hit telcos for a part of
the quarter, pressure on realisations and spectrum renewal payouts
How: pressure on voice and data realisations to reflect in further deceleration in
one year revenue growth, due to limited network rollout and loss of subscribers
as it was unable to renew spectrum in several circles, pricing pressure,
accelerated network investments, airwave renewal payouts

Drug Exports May Almost Halve Over Next 4 Years'

Prabha Raghavan
New Delhi:

FDA probes, weak currencies in key markets to hit exports: study

Tighter scrutiny of Indian manufacturing sites by US drug regulators, increased
competition and weaker currencies in key markets such as Africa and Russia are
likely to slow down the growth of Indian pharmaceutical exports over the next
four years, says a new study. The annual growth rate in pharmaceutical exports
may almost halve to 7.98% by 2020 from 14.77% CAGR during 2010-2014,
according to a joint report on Intellectual Property Rights (IPR) by TechSci
Research and industry chamber Assocham.
The US Food and Drug Administration's (FDA) increased scrutiny of the quality
of products from India's drug manufacturing plants is causing a decline in
growth rate of pharmaceutical exports to the US, the study noted.
Wockhardt and IPCA are among a host of drug makers that have come under the
US agency's glare on charges of lapses in manufacturing procedures at their
Indian facilities. During November-December 2015 alone, FDA issued warning
letters for deficiencies in manufacturing standards to top Indian firms Dr
Reddy's, Sun Pharma and Zydus Cadila.The Assocham-TechSci Research study
also pointed to delays in approvals in other key markets. Lower growth during
2015-2020 is anticipated on account of the regulatory scenario in top export
markets of the US, Russia and Africa, where regulatory approvals are being
delayed, it said.
A steep decline in currency in markets such as Africa, Russia, Ukraine and
Venezuela is also expected to add woes to drug manufacturing companies
supplying to those regions because weaker currencies will impact their ability to
generate high revenues, stated the report.
Another reason for slowing pharmaceuticals exports, according to industry
experts, is rising competition from emerging and developed markets.

Drug Exports May Almost Halve Over Next 4 Years'

Analysis:
What: slow down the growth of Indian pharmaceutical exports. May Almost Halve
Over Next 4 Years
Who: US Food and Drug Administration's (FDA), India's drug manufacturing
plants, Wockhardt and IPCA, Dr Reddy's, Sun Pharma and Zydus Cadila
When: Over Next 4 Years
Where: Exports - Africa, Russia, Ukraine and Venezuela
Why: weak currencies in key markets to hit exports, tighter scrutiny of Indian
manufacturing sites by US drug regulators, increased competition, delays in
approvals in other key markets, rising competition from emerging and developed
markets
How: charges of lapses in manufacturing procedures at their Indian facilities,
issued warning letters for deficiencies in manufacturing standards to top Indian
firms, weaker currencies will impact their ability to generate high revenues,

Government mulling to bring large hydropower units under renewable

energy ambit
NEW DELHI: The government is mulling to bring big hydropower plants under
the ambit of renewable energy, giving the capital-intensive projects access to
international funds and benefits available to green power, besides raising carbonfree generation of electricity as committed by India in UN climate talks. Ambit
Power industry experts see this as a shot in the arm for hydropower projects,
which will not only get more capital but also find it easier to sell power as state
power distribution ..
The move, however, may face resistance from environmentalists who argue that
though hydropower plants do not pollute the air, they impact fisheries by altering
the natural course of rivers, cause flooding and emit green house gases due to
submersion of plants. The Supreme Court had stalled work on 24 hydropower
projects in Uttarakhand on allegations that they led to catastrophic floods in
June 2013. The case is scheduled to be heard on Wednesday.
"There is no reason why hydropower should not be a part of clean energy while
many developed western countries count on hydro. At least run-of-river plants
that do not require dams should be part of renewable," said a senior power
ministry official. Another official said the proposal will have to be approved by the
Union Cabinet as an entire wing of the power ministry will shift to the new and
renewable energy ministry.
If the plan is approved, about 42 gigawatts of installed hydro power plants will get
added to the country's existing green energy portfolio of 37 GW, more than
doubling the green portfolio of power generation to 28% from around 13% now.
There is a good case to broaden renewables to include carbon free generation,
PwC leader (energy) Kameswara Rao said. "Large hydro in several European
nations is already categorised as renewable. It will also place capital-intensive
hydro favourably to ..
Association of Power Producers had last year written to the government seeking
renewable energy status for hydropower projects. "For optimal load management,
hydro needs to be around 40% of the energy mix. During the last three decades,

hydro generation has deteriorated considerably. The introduction of hydro

purchase obligation will help restore the balance," said Ashok Khurana, directorgeneral at Association of Power Producers.
The government had on October 1 last year submitted the Intended Nationally
Determined Contribution to the UNFCCC, where it vowed to reduce carbon
emissions intensity by 33-35% by 2030 from the 2005 level and achieve about
40% power installed capacity from non-fossil fuel-based energy resources.
India's existing generation capacity is dominated 70% by conventional thermal
power plants whereas non-fossil fuel generation constitute the rest, including
13% by renewables, 15% by large hydro and 2% by nuclear. Small hydro plants of
less than 25 MW capacity are already counted as renewable energy.
The Narendra Modi-led government's push to a five-fold increase in renewable
energy target to 175 GW by 2022 has attracted huge investment commitments
from local and international firms while companies have stopped expanding coalbased electricity generation. This is expected to help the government in balancing
the energy portfolio between green and conventional resources in the near future.
Share of hydropower generation has shrunk to just 15% though the country
ranks fifth in the world in hydroelectric potential with an estimated potential of
148 GW. Issues like long construction period, lack of transport infrastructure,
geological risks, land acquisition and environmental and religious concerns have
slowed hydropower projects including 50,000 MW being allocated to private
companies in north and northeast India.

Government mulling to bring large hydropower units under renewable

energy ambit
Analysis
What: mulling to bring big hydropower plants, may face resistance from
environmentalists, The Supreme Court had stalled work on 24 hydropower
projects
Who: The government, power generation companies - Private, Association of
Power Producers
When: by 2020
Where: power sector in India
Why: access to international funds and benefits available to green power, raising
carbon-free generation of electricity, easier to sell power, impact fisheries by
altering the natural course of rivers, For optimal load management
How: under the ambit of renewable energy, achieve about 40% power installed
capacity from non-fossil fuel-based energy resources, has attracted huge
investment commitments from local and international firms