Profitability may improve, as the drop in gross subscriber additions is likely to imply lower costs.
Pradeep Gaur/Mint
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Tariff rise of up to 25% in four telecom circles in September is a sign of waning competitive intensity. Profitability and earnings may also improve, going by the recent decline in subscribers. Expansion in the subscriber base during the first half of 2012 had lifted selling, general and administrative costs eroding profitability. These developments may halt the long erosion in profit forecasts and improve the outlook for the valuation of telecom stocks.
Reliance Communications Ltd may have raised tariffs by 25% in four circles. Idea Cellular Ltd may have also hiked tariffs in Madhya Pradesh by 15–20%. While the tariff rises may have been only in select circles, the pricing revival indicates an easing competitive intensity. A 10% increase in outgoing voice tariffs for prepaid and postpaid subscribers is likely to raise the consolidated average revenue per minute by up to 4.5%.
Profitability may improve, as the drop in gross subscriber additions is likely to imply lower costs. A decrease in subscribers in August may reflect lower gross additions, assuming churn rates may have remained constant. Read More:
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