‘Telcos expected to see growth for 2nd quarter in a row’

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January 21, 2021 4:20 AM

Wireless service providers’ revenue is set to improve in Q3FY21 on continued subscriber addition, analysts at Axis Capital observed. “Arpu to improve driven by upscaling (migration to 4G from 2G). Margin to improve from revenue increase on operating leverage benefit. Subscriber addition for RJio to be muted, while Vodafone Idea to continue losing subscribers,” they said.

A total 2,251 MHz of spectrum worth Rs 3.92 lakh crore at reserve price in the 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands is being put up for sale.As per Bharti Airtel CEO Gopal Vittal, though the 5G ecosystem is still nascent in the country, the devices coming into India now (as on December), about 4% to 5% of device shipments are already 5G compatible.

All Indian telecom operators are expected to show sequential growth for the second quarter in a row, as the December quarter of the current fiscal is expected to be marked by higher gross additions and new data subscribers.
The growth in average revenue per user (Arpu) is expected to sustain during the quarter for all operators on a sequential basis. While Bharti Airtel is expected to report Arpu in the range of Rs 165-Rs 167, seeing an increase of 1.5-2%, Vodafone Idea is expected to report a slightly higher 3-5% increase in Arpu from Rs 119 in Q2FY21 to Rs 123-Rs 125 in Q3FY21. Reliance Jio, according to analysts, will see a 1.5-2% quarter-on-quarter increase in Arpu to Rs 147-148 compared to Rs 145 in the preceding quarter.

Wireless service providers’ revenue is set to improve in Q3FY21 on continued subscriber addition, analysts at Axis Capital observed. “Arpu to improve driven by upscaling (migration to 4G from 2G). Margin to improve from revenue increase on operating leverage benefit. Subscriber addition for RJio to be muted, while Vodafone Idea to continue losing subscribers,” they said.

Analysts expect that Bharti Airtel will sport the fastest sequential revenue growth this quarter. India wireless revenue to be up 5.9% q-o-q as subscriber additions in September flowed through to Q3, said Axis Capital. Arpu to improve led by continued conversion to 4G and subscriber addition.

For VIL, the brokerages expect revenue growth to be moderate. Revenues for the telco to rise only 1.1% q-o-q. This is due to continued loss of subscribers, which is estimated to be down 3 million this quarter, according to analysts at ICICI Securities.

Weak subscriber additions and Arpu increase of 2% q-o-q could restrict revenue growth to 4% for Reliance Jio. Subscriber additions remained muted at 8 millon as compared to average 16 million additions over the last six quarters, analysts at Emkay Research said.

Bharti’s Ebitda (earnings before interest, tax, depreciation and amortisation) is expected to rise only 2% q-o-q to Rs 11,300 crore. India Ebitda is expected to rise a marginal 1.2% q-o-q to Rs 8,100 crore, impacted by de-consolidation of Bharti Infratel. The company’s net loss is estimated to be Rs 470 crore, according to analysts at ICICI Securities.

VIL is expected to see an increase of 3.1% in Ebitda on a q-o-q basis aided by revenue growth and continued cost optimisation, said another domestic brokerage. However, IIFL predicts a sharp decline in Ebitda for VIL in Q3FY21. According to the brokerage, third quarter is likely to see additional costs pertaining to extra month’s salary paid out to employees in November and rebranding expenses. “Hence, we expect reported Ebitda to decline 14% q-o-q. After removing one-off benefits in second quarter, Ebitda decline would be 7%.”

Jio is estimated to see its Ebitda rise by 3.5-4% q-o-q but should be restricted by weak revenue growth and cost inflation. Operating margins are expected to remain flattish sequentially. Jio had reported Ebitda of Rs 7,701 crore for the July-September quarter. Margins are estimated to improve by 36 basis points sequentially to 43.3%.

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