Facing increased pressure from Mukesh Ambani-led RILs telecom upstart Reliance Jio, telecom companies including Airtel and Idea are expected to report subdued numbers in the fourth quarter. CRISIL observes in a report, “The competitive intensity in telecom industry further intensified since January 2018 after the new entrant started passing on the benefits of cut in interconnect usage charges to customers through lower tariffs.”
According to a recent report from HDFC Securities, Bharti Airtel’s revenue may decline 5.5% in the current quarter. “We expect wireless business revenue to decline 5.5% qoq, and EBITDA 13.5% owing to IUC rate cuts, tariff cuts and ARPU downgrades owing to increased adoption of bundled plans.
In a report, Motilal Oswal said that there is a “lack of earnings visibility” in the telecom sector and estimated that the Airtel will report a 80 per cent decline in profits. Further, the firm said that Idea’s losses will continue to remain elevated. HDFC Securities said that Sharp Idea will experience a sharp 4.4% QoQ decline in revenue owing to IUC rate cut and bundled plan offering to result in and a steep 23% QoQ decline in EBITDA.
“Bharti Infratel too is likely to report subdued performance lead by tenancy exit of Aircel. Jio is the primary source of growth for the tower industry,” HDFC Securities said in the report.
Noting the increase in Reliance Jio subscriber base, HDFC Securities said that the growth has been enticing. “With 180 million subscribers at the end 4QFY18E, Jio already has ~60% share in data subscribers (3G+4G Smartphone users). It further adds around 5-6 million subscribers per month out of the incremental 10-12 million Smartphone users,” the firm said in the report.
Kotak Securities noted that it has been another challenging quarter from the telecom players. “Jio’s pricing moves in the month of January 2018, impact of international termination rate (ITR) cut effective February 1, 2018, and continued ARPU downtrading are likely to reflect in another quarter of sharp sequential revenue decline for the incumbents,” the firm said in the report.