Even as the minimum recharge plans initiated by telecom companies are expected to boost average revenue per user (ARPU), analysts say the move would impact only three of the 22 circle area in the country for the December quarter. The real benefits would show only from the March quarter.
At Bharti Airtel, revenue growth in the December quarter (third or Q3 of 2018-19 is expected to be flat from the earlier one. However, a rise in Ebitda (earnings before interest, taxes, depreciation and amortisation) in the African business is likely to make up for the decline in the Indian wireless business.
ARPU is not expected to rise yet, due to high churn in low-Arpu subscribers. Analysts at Kotak Institutional Equities expect Bharti to report revenue and Ebitda at Rs 20,450 crore (flat over the earlier quarter and Rs 6,200 crore (down 0.8 per cent from Q2), respectively. Also, a loss of Rs 990 crore on profit after tax (PAT).
“On the India wireless front, we expect a modest one per cent quarter-on-quarter (QoQ) increase and a 5.6 per cent year-on-year (Yoy) decline in revenue to Rs 10,150 crore. The expected QoQ dip in revenue is largely on account of lower intra-circle roaming revenues, as we expect stable consumer-level revenues,” wrote Rohit Chordia, analyst at Kotak.
Revenue decline in the post-paid segment is likely to be compensated by some uptick on the low-end prepaid user front, thanks to the recently launched minimum spending construct. However, the full-quarter benefit of the minimum Rs 35 recharge is likely to show up only from the March quarter (Q4) onwards, says the report.
The Telecom Regulatory Authority of India (Trai) has issued the wireless and wireline subscription numbers for October. This showed that Vodafone Idea Ltd (VIL) as a merged entity lost 7.36 million wireless subscribers in the month; Airtel lost 1.86 million. By Q4, analysts expect some double-digit growth in Arpu but Q3 growth is doubtful.
Around September, both VIL and Airtel started weeding very low Arpu subscribers, with a push to a minimum monthly Rs 35 recharge. The huge subscriber losses are likely to be part of thee exodus. Reliance Jio, despite aggressive subscriber gain, also added fewer subscribers in October than in earlier months.
As earlier incumbents Airtel and VIL seek to shed their low revenue customer base, to improve profitability, they are likely to witness a gradual Arpu increase. Even as around 50 mn customers are likely to move out, with telcos seeking SIM consolidation, say analysts.
For Airtel, analysts expect a one to two per cent sequential improvement in revenue and Ebitda for the Africa wireless business, a sharp sequential dip in Ebitda for the home business and decent quarters for the India enterprise and direct-to-home businesses.
Merrill Lynch analysts expect a 1.5 per cent decline in India wireless revenue, due to the impact of roaming and interconnect charges. “Despite increase in network opex (led by continued expansion and impact of tenancy cancellation of Idea/Vodafone), we estimate India cellular margins to be around 21 per cent and overall margins at 30.3 per cent,” says Sachin Salgaonkar, analyst at Merrill Lynch.
The report says a positive Arpu impact is likely to be visible only across three circles; overall positive growth will be seen in Q4.
Last month, Airtel formed a committee of directors to explore options for fund raising, to strengthen its capital structure and balance sheet. The market was abuzz about these plans (estimated at Rs 15,000 crore or more) as the telco sought to reduce debt, boost cash flow and meet capital expenditure. Commentary will be expected on the specifics and on the nature of the user base that the company is losing.
Airtel in October reported a 65 per cent drop in the July-September net profit to Rs 118 crore, while consolidated net debt rose by Rs 10,500 crore to Rs 1.18 trillion.
Capital expenditure was Rs 5,900 crore for wireless services and Rs 7,680 crore at a consolidated level. – Business Standard