By Jatin Grover
A weak data volume growth and muted additions of subscribers are expected to limit the revenue growth of telecom companies in the September quarter, analysts have said.
According to them, a fall in growth in data volumes and subscriber additions can be attributed to higher smartphone prices in the entry-level segment and downtrading by consumers, which is shifting to lower recharge plans owing to higher tariffs.
In the September quarter, the telecom operators are expected to report a 2.4% quarter-on-quarter (q-o-q) growth in revenue, brokerage house BNP Paribas said. “We expect the Indian telecom industry to post strong y-o-y revenue growth (19%) in 2QFY23. However, q-o-q growth (2.4%) is likely to be weaker compared with the previous two quarters as tariff hike benefits are largely behind and subscriber additions are likely to be muted,” it said in a note.
ICICI Securities expects the industry data volume to grow 3.9% at 45.6 trillion MB in the September quarter, which is less than 4.3% growth in the preceding quarter.
In the quarter ended June, the three telecom operators – Reliance Jio, Vodafone Idea and Bharti Airtel – reported a 3.2% sequential growth in revenue. The growth was largely led by residual impact of tariff hikes taken by the operators in November 2021.
Among the three telecom operators, Bharti Airtel and Reliance Jio are expected to continue to post a decent earnings performance in the September quarter, while Vodafone Idea would lag owing to its weak cash flow position and the absence of competitive spending to improve the network.
According to analysts, lower spectrum usage charges are expected to aid the operating margins of all the telecom companies. Operating margins are calculated on earnings before interest, taxes, depreciation, and amortisation or Ebitda.
“We expect Ebitda margin expansion for mobile operators due to negligible SUC (spectrum usage charges) for part quarter. SUC was 3-3.5% of AGR (adjusted gross revenue) which has reduced to negligible on the purchase of spectrum in July’22 auction,” brokerage house ICICI Securities said. The full benefit of low SUC will likely reflect in Q3FY23, it added.
According to average estimates of three brokerage houses, Reliance Jio is expected to add about 7 million subscribers in the September quarter, down from 9.7 million in the previous quarter. The company’s average revenue per user or Arpu, which shows average spends by a user on the network to increase 6.5% to Rs
179 from168 in the preceding quarter, the estimates showed. The company’s parent, Jio Platforms, is expected to report a 6.2% on-quarter growth in net profit at Rs 4,800 crore, according to ICICI Securities.
Jio Platforms is a subsidiary of Reliance Industries, which houses other digital and content-oriented operations of the parent apart from the telecom business.
In comparison, Bharti Airtel is expected to add about 4 million subscribers in the reported quarter. The company’s Arpu is expected to grow 4.5% on quarter to Rs 186. Emkay Global expects the company’s net profit to increase by 42% on quarter to Rs 2,275 crore, largely due to revenue growth and steady performance of the Africa business.
Analysts also expect a strong momentum in the company’s home and enterprise business to aid its performance during the quarter.
Beleaguered Vodafone Idea is expected to lose about 4 million subscribers during the quarter, the brokerage estimates showed. Owing to higher interest cost as expenses and a weak topline, the company’s net loss is expected to be about Rs 7,400 crore, higher than Rs 7,297 crore in the previous quarter, according to analysts. The company’s Arpu, on the other hand, is expected to increase by 5% to
130 from124 in the preceding quarter.
As of June end, Reliance Jio had the maximum subscriber base of 420 million, followed by Bharti Airtel at 362 million in India, and Vodafone Idea at 240 million.
When the companies will start reporting their earnings later this month, investors will keep a close eye on their guidance on capital expenditure, especially with the launch of 5G services, the next leg of tariff hikes, and their plans on tapping the home broadband space, among other things.