Telcos to report subdued Q1 on pandemic woes

By: |
July 21, 2021 4:00 AM

“We expect 1QFY22 to be impacted by the second wave of Covid-19, which would moderate the pace of customer acquisition,” analysts at Credit Suisse said in a note.

In the case of Tata Teleservices, the total amount is Rs 16,798 crore and it had paid Rs 4,197 crore.In the case of Tata Teleservices, the total amount is Rs 16,798 crore and it had paid Rs 4,197 crore.

Subdued smartphone sales due to Covid-19-led lockdowns, moderation in new subscriber additions and free recharges rolled out by companies for low-end customers are expected to keep the performance of Indian telecom operators muted for the first quarter ended June 30, 2021.

“We expect 1QFY22 to be impacted by the second wave of Covid-19, which would moderate the pace of customer acquisition,” analysts at Credit Suisse said in a note.

The more severe impact of the second wave is expected to be seen on the data usage, which could see a possible sequential decline, according to analysts at JM Financial. “We remain cautious of a possible sequential decline in usage metrics, as the second Covid wave in India has impacted the professional/middle income category, who drive the bulk of the data usage,” they said.

Impacted by lower recharge frequency and free benefits to a segment of users, the average revenue per user (Arpu) growth is estimated to remain flattish to slightly below on a sequential basis for all the three listed operators — Bharti Airtel, Reliance Jio and Vodafone Idea (VIL).

Bharti Airtel is expected to report Arpu in the range of Rs 146-148 seeing a flat to 1.8% increase quarter-on-quarter. However, according to IIFL, Bharti’s Arpu could decline much more to about Rs 140 impacted adversely by slowdown in 2G to 4G upgrade cycle due to lower smartphone shipments. Vodafone Idea is expected to report Arpu in the range of Rs 104-106 in Q1FY22, a decline of 1-3% versus Q4FY21. Reliance Jio, according to analysts will see a q-o-q increase in Arpu to Rs 139-140 compared to Rs 137 in the preceding quarter. However, IIFL and Emkay Research estimate Jio’s Arpu to decline 1-2.3% sequentially.

With the impact of the harsh second wave of Covid-19 felt on smartphone shipments and new subscriber additions, and benefits doled out to lower-end consumers, revenues of wireless service providers will remain subdued in Q1FY22. “Telcos extended benefits to low-income subscribers…this would impact q-o-q revenue growth by about 1.5%/2%/3% for JIO/Bharti India mobile/Vi (VIL), though an extra day in 1Q would provide nearly 1.1% tailwind,” said analysts at IIFL Securities. Bharti and VIL quantified the benefits at Rs 270 crore and Rs 290 crore, respectively, while Jio is estimated to have taken a hit of Rs 250 crore during the quarter.

At Bharti, the pace of market share gains is expected to moderate, with net additions of 3 million in 1QFY22 after three successive quarters of about 14 million net additions, wrote analysts at Credit Suisse. On the contrary, subscriber loss for VIL is estimated to pick up to 3.5 million in the June ended quarter after showing signs of moderation in the last two quarters with a loss of about 2 million subscribers.

Jio, however, will sustain its subscriber momentum going into first quarter and is estimated to have 15 million net additions despite lockdowns slowing industry net adds. “We expect a larger proportion of these subs to be feature phone users,” said analysts at BofA Securities.

Bharti’s Ebitda (earnings before interest, tax, depreciation and amortisation) is expected to rise only 2% q-o-q to Rs 12,600 crore. Net profit is seen at Rs 260 crore, which will be impacted by amortisation and interest cost for spectrum bought in March 2021 auction worth Rs 18,700 crore, according to analysts at ICICI Securities.

VIL is expected to see a steep dip in Ebitda of about 10.2% q-o-q to Rs 4,000 crore as preceding quarter had one-off gain of Rs 450 crore in network cost. However, the stressed telco is expected to narrow its losses sequentially to Rs 6,500 crore versus Rs 7,023 crore in Q4FY21.

Jio’s Ebitda will rise 4.2% q-o-q to Rs 8,600 crore with incremental Ebitda margin at 53%. However, like Bharti, Jio too is expected to feel the impact of amortisation and interest cost on Rs 57,100 crore spectrum bought in March auction, which is estimated to result in 6% q-o-q decline in net profit to Rs 3,200 crore.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Delhi High Court gives Twitter one last chance to comply with IT Rules
2Gupshup raises fresh $240 million within four months of it entering unicorn club
3Bharti Airtel hikes entry-level pre-paid tariff by 61%; scraps base pre-paid plan of Rs 49, replaces it with Rs 79 plan