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Q3FY23 preview: Revenue growth to decelerate; costs to rise on 5G rollout, ICICI Securities

Our Q3FY23 estimates suggest a deceleration in mobile revenue growth across telcos due to SIM consolidation, lower benefit of premiumisation from slowdown in 4G net add, and absence of tariff hikes. Subscriber (sub) base for Bharti and VIL is likely to shrink while RJio’s net sub add (+5mn) may moderate. Revenue growth QoQ for Bharti (mobile), VIL and RJio is likely at 1.8%, 0.1% and 1.5% respectively. We expect EBITDA margin expansion for the operators due to negligible SUC (spectrum usage charges). SUC earlier was 3-3.5% of AGR, but is now negligible on the purchase of spectrum in Jul’22 auctions. Full benefit of low SUC is likely to be reflected in Q3FY23E. This could be offset by higher network operating costs on rollout of 5G network. However, impact of 5G spectrum purchase on amortisation and interest cost will be negligible. We expect Indus Towers’ performance to be aided by rise in tenancy net adds and higher 5G loading; QoQ dip in rental revenue would be due to one-off gain in base. Tata Communications is likely to report steady revenue growth in its data business on easing supply-chain issues and stable segmental margins.

  • Industry-wide subs to dip; ARPU growth to decelerate. Q3FY23E will likely bear the impact of SIM consolidation and churn induced by select rise in tariffs for Bharti. Bharti may report sub loss of 2mn (-0.6% QoQ) and VIL can lose 6mn subs (down 2.6%). RJio’s net sub add may moderate to 5mn (+1.2%). ARPU growth is likely to range from flattish to 2.5% QoQ (hurt from deceleration in premiumisation). Bharti’s ARPU may grow 2% QoQ to Rs194 while that for RJio may remain flattish at Rs177 and VIL’s may be up 2.5% at Rs134.
  • Bharti’s consolidated EBITDA to grow 2.6% QoQ (+22.7% YoY) to Rs180bn. We expect Bharti’s India revenues to grow 0.6% QoQ (17% YoY) to Rs247bn led by mobile segment (up 1.8% QoQ / 20% YoY). India EBITDA is likely to be up 2% QoQ (23.6% YoY) to Rs128bn; it will benefit from lower SUC partially offset by higher network cost due to 5G rollout. Bharti Africa’s USD revenue and EBITDA may rise 1% QoQ each to US$1,321mn and US$642mn respectively. Consolidated revenue could rise 1.7% QoQ to Rs351bn and EBITDA 2.6% to Rs180bn. Net profit is seen at Rs32bn benefiting from lower forex losses partially offset by 5G spectrum cost.
  • VIL’s EBITDA may be flattish QoQ at Rs41bn. VIL’s revenue is likely to be flattish QoQ at Rs106bn (+9.4% YoY) despite sub losses, due to the benefit of premiumisation and non-mobile revenue growth. We also expect EBITDA to be flattish QoQ (up 7.3% YoY). Net loss is seen at Rs73bn for VIL (nil tax rebate).
  • JioPlatform’s EBITDA to rise 2% QoQ. (Note: We have shifted our estimates to JioPlatform from earlier Reliance Jio Infocomm). JioPlatform’s Q3FY23E revenue is estimated to rise 1.6% QoQ to Rs247bn benefiting from sub adds. EBITDA may grow 2% QoQ to Rs123bn and benefit from lower SUC. Net profit is likely to rise 0.5% QoQ to Rs48bn as the company recognises a portion of 4G spectrum cost.
  • Indus’ tenancies to rise by 2,000. Rental per tenant is likely to dip 10.2% QoQ to Rs42,298 as the base had one-off gains in revenue, partly offset by higher loading revenue from 5G rollout. Rental revenue may dip 10.1% QoQ (down 2.1% YoY) to Rs43bn. We expect EBITDA to rise 28.6% QoQ on a low base, which was hurt by provisioning, but is likely to be down 2.3% YoY to Rs36bn. We expect net profit to drop 6% YoY to Rs14.8bn.
  • TCom’s data business EBITDA to grow 2.1% QoQ to Rs10.3bn. Voice revenue is expected to dip 5% QoQ and EBITDA margin may be at 10%. We estimate data revenue to rise 2.3% QoQ (10.5% YoY) on benefit from rise in execution on easing supply-chain issues. EBITDA margin is likely to be stable at 28.8%. Data segment EBITDA may grow 2.1% QoQ (fall 1.3% YoY on very high base) to Rs10.3bn. Consolidated EBITDA may dip 4.7% QoQ due to decline in voice EBITDA, which was unusually high in Q2FY23. We estimate net profit at Rs3.7bn.

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