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Covid-19 expected to hurt telcos’ Q1 revenue growth, say analysts

The coronavirus pandemic and the ensuing restrictions are likely to hit revenue growth of Vodafone Idea Ltd and Bharti Airtel Ltd in the first quarter of fiscal 2021, with significant reduction seen in subscriber base due to massive migration of workers from urban to rural areas, job losses and disconnection by those holding multiple SIM cards, said analysts.

Airtel and Vodafone’s average revenue per user (Arpu) is expected to drop in the April-June quarter due to non-availability of offline recharges, muted 4G net additions, negligible international roaming revenue and some temporary recharge aberration, ICICI Securities said in a report.

Mukesh Ambani’s Reliance Jio Infocomm Ltd may report tepid revenue growth due to lockdown-led delayed recharges. However, the telco’s lower share of business from international roaming services, compared to peers, is going to prevent a steep Arpu fall.

“We project Jio’s subscriber additions to be compressed at 6 million and Arpu to decline 2% QoQ (quarter-on-quarter) to ₹128. Lower interest charge (post fund raise and debt restructuring in Q4) shall aid profit after taxes growth of 11% QoQ,” said Emkay Global Financial Services.

According to Telecom Regulatory Authority of India (Trai) data, India lost 8.2 million subscriber in April, the month that suffered the full blow of the nationwide lockdown, with urban mobile subscriber base dropping by 9 million. While Vodafone lost 4.5 million subscribers, Airtel’s subscriber base fell by 5.2 million. Even as Jio added 1.6 million subscribers, it was among the lowest monthly additions in two years.

“Fall in subscriber base in April would hit overall revenue growth. However, Arpu could go up given the lower denominator and assuming that the maximum fall has come from low-end customers… We need to see the numbers for May and June,” a telecom analyst said.

The fall in revenue may not bode well especially for Vodafone, which is yet to clear adjusted gross revenue (AGR)-related dues totalling ₹50,400 crore. According to analyst estimates, Vodafone will have to more than double its Arpu to pay between ₹5,900 and ₹6,200 crore annually if the Supreme Court allows a 15-year window for staggered payment. Vodafone’s Arpu in the quarter ended March was ₹121.

Airtel’s tower subsidiary Bharti Infratel, which is set to announce its Q1FY21 earnings on Monday, is expected to report steady numbers, with a likely sequential growth of 3% in revenue and rise in tenancies by over 2,000. However, rental revenue may fall 1.7% year-on-year due to removal of equipment by exiting tenants, ICICI Securities said.

The management’s commentary on the tower company’s long-pending merger with Indus Towers Ltd, will be key. In June, Bharti Infratel had extended the long-stop date for the closure of its merger with Indus Towers for the fifth time, to August 31.

“Commentary on large bad debt provision (from Q4 FY20) would be of interest as it being an indicator of the financial health of Vodafone Idea and BSNL (Bharat Sanchar Nigam Ltd) ,” said Kotak Institutional Equities.


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