The market reaction to the results of top telecom operators Bharti Airtel and Idea Cellular has been contrasting, even though there are many positive takeaways from both their numbers on the operational front.

While Idea has been on a roll over the past one year, with the stock price growing over 66 per cent, the share price of Bharti Airtel has remained largely unchanged.

The markets have also accorded a higher valuation multiple to Idea, betting on its potentially faster growth rate. The key reason for the market cheering Idea ahead of Bharti has been its steady improvement in profits and growth. In the March quarter, while Idea's profits grew 29 per cent over the same period last year, Bharti’s profits halved. Bharti, with its loss-making African operations, higher operating expenses and rise in interest costs, has witnessed a dent in overall profits, though the company is still progressing steadily on the revenue front.

Both companies have seen considerable similarity in important factors over the past few quarters, though.

Adding subscribers

In the March quarter, both companies have witnessed an increase in subscriber addition after two successive quarters of decline as they churned their bases. Idea managed a more impressive 7.7 million customer additions while Bharti increased its base by 6.3 million.

These companies added 1-1.2 million 3G subscribers, which is more lucrative.

It has had a desirable effect with both companies reporting increases in their average revenue per user (ARPU) and minutes of usage. Again, both Idea and Bharti have focused on maintaining a subscriber base that is remunerative where subscribers recharge periodically.

In this regard, Idea has stolen a march over Bharti as 98.4 per cent of its base is active compared to the latter’s 95.1 per cent. Of course, both companies have managed to increase this proportion steadily over the past several quarters.

Stable realisations

Realisations have remained relatively stable over the past few quarters, suggesting a return of pricing power, especially with the cancelling of licences of several new operators.

Given that there is such similarity in Idea’s ability to deliver profit growth, renewed thrust on quality subscriber additions and a tight rein on network expenses have helped the stock enjoy a premium, which may continue for the foreseeable future.

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