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Slower revenue growth, higher cost to restrict EBITDA, ICICI Securities

Q1FY23E will see slower mobile revenue growth due to 1) subs decline for Bharti / VIL; 2) fewer 4G net add due to lower smartphone sales, thus, not much advantage of premiumisation; and 3) negligible benefit of Dec’21 tariff hike, except for RJio which will benefit on higher proportion of long validity recharge subs. However, one additional day is the key reason for revenue growth during the quarter for Bharti/ VIL. Mobile revenue growth for Bharti is estimated at 1.6% QoQ, while VIL’s will grow only 0.6% and RJio’s revenue will be up 3.3%. EBITDA growth will be further restricted from higher power cost (on rise in diesel prices), and EBITDA margin (adjusted for one-offs) will be flattish QoQ for all the three operators. Indus Towers will see steady growth in tenancy at 2,000; however, one-off gains in Q4FY22 will result in sequential EBITDA /PAT diminishing. Tata Communications would see a gradual recovery in data revenue and EBITDA partly benefiting from rupee depreciation.

  • Subs add muted, ARPUs benefit from one more day. Q1FY23E would be a muted quarter for telcos with subs declining for Bharti (down 3mn) and VIL (down 4mn), while RJio will have net add of 5mn after three quarters of decline. 4G net add for Bharti (+3mn) / VIL (+1mn) again will be muted due to lower smartphone sales. However, ARPU will show growth of 2-4% and will be aided by one additional day, some benefit of tariff hike taken in Dec’21 and some premiumisation (though it would be lower vs earlier quarters). RJio will have the highest growth in ARPU, up 4% QoQ to Rs174; Bharti’s ARPU will grow by 3.1% to Rs184, and VIL’s by 2% to Rs126
  • Bharti’s consolidated EBITDA to dip 1% QoQ (+22.4% YoY) to Rs159bn. Bharti’s India revenue to grow 1.6% QoQ (21.6% YoY) to Rs231bn led by mobile segment (up 1.6% QoQ / 25.1% YoY). India EBITDA will be up 1.6% QoQ (25.2% YoY) to Rs116bn, and incremental EBITDA margin will be restricted from higher diesel prices. Bharti’s Africa US$ revenue and EBITDA will rise 0.8% QoQ to US$1,231mn and 0.5% QoQ to US$579mn, respectively. Consolidated revenue to rise 2.6% QoQ to Rs323bn and EBITDA will dip 1% QoQ to Rs159bn. Net profit is seen at Rs19bn
  • VIL’s EBITDA to dip 3.4% QoQ to Rs45bn. VIL’s revenue to rise 0.6% QoQ to Rs103bn, negatively impacted by subs decline. EBITDA to drop 3.4% QoQ (up 21% YoY) due to one-off gains of Rs1.5bn in the base, and higher power cost. Net loss seen at Rs66bn for VIL (nil tax rebate).
  • JioPlatform’s EBITDA to rise 3.3% QoQ. Note: We have shifted our estimates to JioPlatform from earlier Reliance Jio Infocomm. JioPlatform’s revenue to grow 3.2% QoQ to Rs230bn and benefit from tariff hike taken in Dec’21; RJio has higher share of long validity recharges which means tariff hike benefit comes with lag vs peers. EBITDA to grow by 3.3% QoQ to Rs113bn with incremental EBITDA margin at 50%. However, net profit to rise 6.4% QoQ to Rs46bn on lower interest cost from refinancing of high cost spectrum debt.
  • Indus’ tenancies to rise by 2,000. Rental per tenant to dip 8.5% QoQ to Rs43,140 as last quarter had one-off gains and lower penalty revenue. Rental revenue to decline 8.1% QoQ (up 3.5% YoY) to Rs44bn. EBITDA to contract 9.3% QoQ (+4.8% YoY) to Rs37bn which continues to be impacted by negative spreads on energy. We expect net profit to drop 16% QoQ but rise 8.3% YoY to Rs15.3bn.
  • · TCom’s EBITDA to grow 1.2% QoQ to Rs10bn (excl. real estate). Voice revenue to be flattish QoQ and EBITDA margin may be at 7%. We estimate data revenue to rise 3% QoQ (9.1% YoY) where execution pick-up is gradual than expected with some benefit of currency depreciation. EBITDA margin is likely to contract slightly QoQ to 25.6% (dip 40bps QoQ). Data EBITDA to grow 1.3% QoQ (up 5.6% YoY) to Rs9.7bn. We estimate net profit at Rs3.4bn (down 6.9% QoQ) on higher tax rate.

For report –

CT Bureau

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