Despite a moderate quarter, Airtel expected to end fiscal with 25% growth in EBITDA again

Telecom companies are likely to report moderate revenue growth in the January-March quarter due to a clutch of factors, including muted subscriber growth and lack of significant tariff hikes.

EBITDA (Earnings before interest, taxes, depreciation and amortization) margin expansion is also likely to be limited, or decline, due to rise in network operating expenditure owing to 5G deployment, analysts said.

Pointing out that revenue growth for telecom companies will be moderate with a 0-4 percent rise quarter-on-quarter in 4QFY23, JM Financial expect said growth will mostly come from an increase in data usage and mobile broadband upgrades led growth in average revenue per user metrics.

Prabhudas Lilladhar expects revenue of Reliance Jio and Bharti Airtel to increase by 3.1 percent quarter-on-quarter given a gradual increase in ARPU growth pegged at a 1-1.8 percent rise.

Meanwhile, Morgan Stanley predicts that even with a slower EBITDA growth of 3.2 percent, Bharti Airtel will end FY23 with a EBITDA growth of 25 percent year-on-year, making it the third consecutive year of 25 percent growth.

Most analysts pointed to the lower number of days in Q4 vs. Q3, higher network costs in the form of intensifying spending on 5G by Jio and Airtel, and the lack of major tariff hike benefits as the main reasons behind the slower growth in revenues.
User addition

“The quarter will likely bear the impact of SIM consolidation and churn induced by Bharti’s select rise in tariffs. Bharti may report subscriber rise of 2 million (0.6 percent quarter-on- quarter rise) while Vodafone Idea Limited’s subscriber base may fall by 4 million (1.7 percent fall). Reliance Jio’s net subscriber add will likely be 6 million (1.4 percent rise),” a report by ICICI Securities said.
JM Financial pointed out the industry continues to see outsized churn in the lower Average Revenue Per User (ARPU) segments given the sharp hike in entry level prepaid tariff in last 18-24 months.

“Hence, subscriber addition is likely to remain muted. However, upgrades to high ARPU (3G/4G) plans are expected to remain healthy for the industry aided by customers upgrading to smartphones,” it pointed out.
Jio had the highest user base in the country, at 426.1 million as of January 31, followed by Airtel at 368.8 million, and Vodafone at 239.9 million.

Reliance Jio cemented its lead in the Indian telecom market, gaining 1.65 million subscribers in January, after the 1.7 million rise in subscribers in December. Before this, the company had made 1.4 million additions in the previous two months.
Bharti Airtel’s subscriber count also continued to swell.

The company’s additions stood at 1.28 million in January, albeit lower than the 1.5 million subscriber addition in December. Subscribers continued to leave Vodafone Idea, which saw its user base shrink by 1.35 million, after losing 2.4 million in December. Business Standard