RJio's offers and disruptive pricing could slash telcos FY18 profit by 60%

The telecom sector may not have enough money to pay off interest on their loans, if the worst-case scenario painted by brokerages is anything to go by. According to Rohit Chordia of Kotak Institutional Equities, disruptive pricing and offers could spark a 60 per cent year-on-year fall in India wireless operating profit (excluding Reliance Jio) in FY18 to under Rs 20,000 crore. Given the industry's debt of Rs 4 lakh crore, including deferred spectrum obligations, the operating profit will not be enough to service interest obligations, he adds. CLSA, too, in a recent report highlighted that given Jio's aggressive pricing, the sector's revenues in FY18 could come in at Rs 1.84 lakh crore, the lowest in last nine years. Commodity Trading Tips

Pointers to FY18 would pop up from March quarter performance of listed telecom companies. Bharti Airtel is expected to post a 25 per cent year-on-year fall in operating profit for its Indian wireless business to Rs 4,400 crore, while Idea Cellular's is expected to fall 45 per cent to Rs 1,800 crore. Unlike Airtel which has Africa operations, direct-to-home, and enterprise services, Idea has none; it is a pure-play telco estimated to end the March quarter with a net loss of Rs 1,000 crore as against a net profit of Rs 576 crore a year ago and a net loss of Rs 384 crore in the December 2016 quarter. And imagine that the Rs 1,000-crore net loss comes for a quarter analysts see as the strongest seasonally!  Nifty Trading Tips

Analysts say while Airtel and Vodafone remain better off, things could get difficult for Idea. If its March quarter estimates are annualised, Idea could end up with an operating profit of Rs 7,200 crore for FY18. On a debt of Rs 50,000 crore and assuming capital expenditure of Rs 7,000 crore (FY17 levels), it will have to borrow more to pay for interest expenses of Rs 4,500 crore. For smaller operators, that neither have the cash to expand their network nor protect their market share, the situation is getting worse.  Astrology and Numerology Trading Tips