Telecom Q1 preview | Revenue growth expected to be muted as inflation bites

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The Indian telecom sector is expected to report a muted revenue growth in the quarter ended June due to higher costs for consumers.

Brokerages expect revenues of the three major telecom operators— Reliance Jio Infocomm, Bharti Airtel and Vodafone Idea—to grow 3-4 percent from the previous quarter.

Brokerage firm Emkay Global Financial Services said it expects telecom operators to see muted addition of new subscribers in the reporting quarter due to inflationary scenario and the sustained impact of consolidation of users.

“With smartphone shipments declining in April-May and channel inventory remaining high, data subscriber additions should also see a moderation,” Emkay Global analysts said in a note.

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That said, BNP Paribas is of the opinion that industry can afford one more hike in tariffs after the previous increase in November 2021. The higher likelihood of Reliance Jio coming onboard for a tariff hike after completion of the consolidation of its user base will result in a tariff hike later this year.

“We see multiple headwinds to 4G upgrades in the near term including increased cost of smartphones, higher cost of service and high inflation impacting the consumer’s wallet. Accordingly, we are building in relatively soft 4G subscriber additions,” BNP Paribas said in a preview note.

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Net subscriber additions in the quarter are not expected to exceed 4-5 million users, with both Bharti Airtel and Reliance Jio likely to see net additions, while Vodafone Idea will continue to lose users, analysts said.

“Further, upgrades to high APRU MBB (3G/4G) plans are likely to be limited at 8-10mn for the industry due to limited availability and increased prices of smartphone due to semiconductor chip shortages,” brokerage firm JM Financial sid in a preview note.

Given the impact of the recent tariff hikes, ICICI Securities expects average revenue per user (ARPU) in the quarter ended June to rise 2-4 percent on-quarter for the three telecom operators. Bharti Airtel is expected to once again lead the pack with an ARPU of Rs 184 per user a month.

Bharti Airtel is expected to report 4.5 percent sequential growth in India mobile revenues alongwith a 4 percent rise in ARPU in the reported quarter. Jio is likely to see a 3.3 percent on-quarter growth in sales in the reported quarter and 4 percent rise in ARPU.

Unsurprisingly, cash-strapped Vodafone Idea is expected to report yet another quarter of net losses, which might exceed Rs 6,500 crore in the June quarter. However, its ARPU is likely to see a growth of 3-4 percent on-quarter, said analysts.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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