Analysts see ‘good times’ return to telecom sector

Reliance Jio, Bharti Airtel and Vodafone Idea (Vi) are set to report strong average revenue per user (ARPU) as well as India mobile revenue sequential growth in the fiscal fourth quarter, helped by the full beneficial impact of sharp tariff hikes taken last November-December, analysts said.

Jefferies estimates Airtel and Jio to report 10% sequential jumps in their India mobile revenues in the March quarter, while BNP Paribas estimates Vi’s to rise by around 5.5% on-quarter.

Airtel, Vi and Jio had raised prepaid tariffs by 20-25% around end-November-early-December, 2021.

“We expect robust q-o-q growth of cellular revenues by Indian telcos in 4Q, helped by ARPU uplift, with the full benefits of tariff hikes taken in November’21 flowing through,” BofA Securities said in a note seen by ET.

Analysts also expect telcos’ March quarter margins to see sharp improvements due to higher ARPUs, but expect subscriber additions to stay muted, post-the price hikes and continued clean-up of low-paying users by Jio.

BNP expects Airtel to report the highest ARPU jump among the three private carriers, at 14% on-quarter to Rs 185, while Jefferies reckons Jio’s will rise 12.1% sequentially to Rs 170. Vi, in turn, is estimated to report a 7.4% sequential rise on this key performance metric to Rs 123 in the March quarter, says BNP in a note seen by ET.

Analysts expect only Airtel to report subscriber additions in the fiscal fourth quarter, and see both Jio and Vi suffering customer losses after the sharp rise in mobile tariffs.

Jefferies estimates Airtel to add around a million customers, taking its user base to 324 million in the January-March period. By contrast, it estimates Jio’s user base to dip 2% sequentially to 412 million due to the market leader’s focus on high-quality subscribers, reflected in the mass removal of inactive users.

BNP, though, estimates Vi to lose another three million customers in the fourth quarter – reducing its user base to 244 million – largely due to the impact of SIM consolidation, post-the-increase in tariffs, underlining the cash-strapped telco’s continuing inability to fight Airtel and Jio, particularly on the 4G front.

Brokerage UBS estimates Airtel’s March quarter net profit to grow sharply by around 78% on-quarter to Rs 1,477.3 crore. Analysts say Airtel’s expected profit rise will be helped by robust India mobile revenue growth as well as a strong growth trajectory of its domestic non-mobile businesses, particularly the home broadband and enterprise verticals. Consolidated revenue is estimated to grow around 9% sequentially.

Jefferies estimates Mukesh Ambani-led Jio to report around a 40% sequential jump in net profit in the March quarter to around Rs 5,000 crore — its 18th successive quarterly profit – due to higher Ebitda and lower interest costs.

BNP estimates Vi’s March quarter loss to narrow sequentially but still remain elevated at Rs 6,805.2 crore as benefits of tariff hike-fuelled revenue growth would get partially offset by down trading, post-price hikes and continued customer losses.

It, though, estimates overall telecom sector revenue growth to more than double at 9% sequentially in the fourth quarter of FY22, driven by the full impact of sharp telco price hikes last November-December.

The estimated telecom sector revenue rise, BNP said, is despite “multiple factors affecting growth, including, a lower number of days q-q, moderation in user additions due to higher tariffs and handset prices, SIM card consolidation and the impact of high inflation leading to weakness in purchasing power of consumers and reduced spending across mass consumption categories”.

Telecom sector revenues grew at 4.5% and 4.2% sequentially in the second and third quarters of FY22.

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