India’s telecom companies are likely to report a strong performance in the three months ended March, the first full quarter after tariffs were increased in November-December.
Bharti Airtel, Vodafone Idea, and Jio Platforms, a subsidiary of Reliance Industries, are expected to report 7-9 percent growth in their average revenue per user (ARPU) on a sequential basis, according to analysts polled by Moneycontrol.
Bharti Airtel reported an ARPU of Rs 163 per month in the quarter ended December, while Jio’s ARPU was Rs 151.6 and Vodafone’s was Rs 115.
With the full benefits of the tariff hike, JP Morgan India expects the three telecom companies to report 5-7 percent sequential growth in revenue.
“We expect 4QFY22 to be a strong quarter for telecom companies with likely revenue and EBITDA growth of 6-11% QoQ due to the impact of around 20% tariff hike undertaken by the industry in November 2021,” JM Financial Services said in a preview note.
However, the increase in telecom tariffs is starting to affect the lower rung of telecom subscribers.
User churn
“The industry is witnessing outsized churn in the lower ARPU segments given the entry-level prepaid tariff hike in July 2021, followed by another sharp hike in November 2021. Hence, it is likely to continue to witness muted subscriber addition and limited upgrades to high APRU plans,” JM Financial said.
JP Morgan said most of the subscriber churn may have taken place in the quarter ended March.
Brokerages said Bharti Airtel, which had a customer base of 356 million in India at the end of the third quarter, will likely retain its dominance in both ARPU and subscriber additions.
“We expect Airtel to continue to gain market share with sector-leading ARPU and subscriber growth in 4QFY22,” Credit Suisse Securities India said in a preview note.
Credit Suisse expects Bharti Airtel to report over 1 million new subscribers in the quarter as against a little-changed subscriber base for Reliance Jio and a loss of 4 million users for Vodafone Idea.
JP Morgan said Bharti Airtel may report a 7 percent sequential growth in revenue on the back of a 9 percent jump in ARPU in the quarter.
Reliance Jio is expected to report a 6 percent quarter-on-quarter growth in revenue, helped by a 9 percent rise in ARPU, said JP Morgan. However, the brokerage expects Jio to report a loss of 2 million subscribers as part of the ongoing consolidation of low-income users. Jio had 421 million customers in the third quarter.
Vodafone Idea may report stellar operating profit growth, led by gains from tariff hikes. IIFL Securities expects the company to report a 17 percent on-quarter growth in operating profit even losing subscribers.
Besides the earnings, investors will focus on the management commentary on their subscriber bases, potential tariff hikes this year, capital expenditure plans, the 5G spectrum auction, and margins given the higher fuel costs for running telecom towers in the June quarter.
Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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