Telecom operators, Bharti Airtel, Reliance Jio and Vodafone Idea, are expected to see another steady sequential revenue growth in the October-December quarter backed by continuous increase in data consumption, gradual 2G to 4G upgradation, and improved subscriber mix, analysts said.
The growth in average revenue per user (ARPU) for the telcos, however, is expected to be restricted in absence of tariff hikes and with the increase in 5G users, who are adopting unlimited 5G data at no additional tariffs.
The telecom operators are expected to report a near 2% QoQ increase in the revenue collectively, according to average estimates of three brokerage houses. While Airtel and Jio are expected to report a 3% increase in revenue each, Vodafone Idea’s revenue growth is seen at 0.5% QoQ owing to an increase in entry level feature-phone tariff hike, analysts said.
Besides data consumption, higher 4G subscriber additions, premiumisation trend, focus on rural market is expected to favour Airtel during the quarter. For Jio, the growth will be led by industry-leading subscriber addition, competitive pricing of its plans, as well as traction for JioBharat phones.
Vodafone Idea, however, will continue to lose subscribers on the back of weak network spends in the absence of fundraise, analysts said.
With regard to the bottomline, Vodafone Idea will likely see its losses narrowing to Rs 7,970 crore from 8,738 crore in the July-September quarter, according to analysts. Airtel is expected to see around a near 80% QoQ increase in net profit to Rs 2,413 crore at a consolidated level. Jio’s net profit is expected to increase 3% QoQ to Rs 5,209 crore, according to analysts.
“We expect telcos to report a steady set of numbers and estimate Jio/Bharti/VIL (Vodafone Idea) to show 3%/2.5%/0.1% qoq improvement in India cellular revenues,” said BofA Securities in a note.
According to BofA, Jio is expected to witness strongest net subscriber additions once again partly led by JioBharat phones also scaling up. “Our checks indicate that the capacity build-up of JioBharat phones since its launch is 10 million in the channels with 50-60% of these phones activated till now,” BofA said.
Further, the operating profit or Ebitda of Airtel and Jio is expected to be stable, despite higher costs for rolling out 5G, according to analysts
According to Jeferries, Ebitda margins are expected to be flat for Jio and Airtel owing to higher costs for 5G. For Vodafone Idea, the margins are expected to fall on weaker revenue growth as well as higher marketing expenses.
ICICI Securities expects an Ebitda margin of Bharti Airtel at 52.7% (largely flat QoQ), whereas margins for Jio are seen at 52.3% (a fall of 2 basis points QoQ). Vodafone Idea’s margins are also seen flat at 40%, according to analysts.
On the operating metrics of telecom operators, overall subscriber growth is expected to be higher. “We have assumed revenue growth to be led by incremental subscriber additions of 10.6 million with ARPU seeing a slight uptick to Rs 182.1 (vs Rs 181.7 in 2Q24),” Morgan Stanley said.
Jio is expected to add 10-11 million net subscribers, while Bharti’s subscriber additions are expected to remain steady QoQ at 3 million, analysts said. Vodafone Idea is expected to lose 3 million subscribers, compared to 1.6 million lost in July-September, Emkay Global said.
At the end of September, Bharti Airtel’s mobile subscriber base was at 342.3 million, while that of Jio and Vodafone Idea was at 459.7 million and 219.8 million, respectively.
Lately, growth in subscriber base has been weak, owing to inflation. Further, feature phone to smartphone upgrade has been slower due to higher prices of smartphones. Analysts, however, believe that growth in data usage will continue to drive marginal increase in ARPU for the telecom operators in the absence of tariff hikes.
Among the operators, Bharti Airtel’s ARPU is seen at Rs 205, an increase of 1% from Rs 203 in the preceding quarter, whereas Jio’s ARPU is expected to increase marginally to Rs 182, and that of Vodafone Idea will likely increase by 0.7% QoQ to Rs 143.
“Jio and Airtel continue to gain market share from Vodafone Idea, which is witnessing a sustained decline in subscribers and a delay in external funding,” said Emkay Global.
Analysts expect the next leg of tariff hikes in the second half of this year.
The investors will keep a close eye on the guidance by telcos on fixed wireless access (FWA) uptake, net subscriber addition trends in mobile services, and investments in 5G. Financial Express