Telcos and thereby Indus set for flat Q4FY24, and better HIFY25

The Indian telcos, Reliance Jio, Bharti Airtel, and Vodafone Idea are expected to report largely steady revenues for the quarter that ended March 31, and the first half of the current fiscal year, buoyed by likely tariff hikes will see them put up a better show,

Indus Towers will also benefit and is expected to report relatively better numbers, as it will likely receive the part-payment of its dues from Vodafone Idea.

Analysts and brokerages tracking the sector expect the upcoming two quarters to see upsides for the sector, as they expect tariff hikes by up to 20% after the general elections end in June, spectrum auctions in the same month, and Vodafone Idea’s massive fundraising, including the ₹18,000 crore-follow on offer this week.

“We expect a stable set of numbers from India telcos, with 0-3% QoQ improvement in cellular revenues and largely flattish EBITDA margins,” said analysts at BofA Securities in a note.

Reliance Jio is expected to keep its subscriber-addition momentum going and to be better than in the quarter ended December 2023, with 11.5 million net additions. However, average revenue per user, or ARPU, for the March quarter is expected to be flat on a sequential basis.

Airtel’s consolidated revenue is expected to rise 3.8% sequentially to ₹39,300 crore, with the addition of 3.9 million subscribers and a 1.6% improvement in ARPU, owing to premiumization and addition in broadband subscribers. Ebitda (earnings before interest, taxes, depreciation, and amortization) margin may improve 71 basis points sequentially to 53%.

For Vodafone Idea that will launch its FPO on 18 April to raise ₹18,000 crore from retail as well as institutional investors, analysts expect a 1.6% drop in revenue sequentially, a 2-million subscriber loss and flat ARPUs as well as Ebitda margin. The funds that will be channelled towards launching 5G service and enhancing 4G coverage will help Indus Towers, as it will get payments and pending dues from the carrier. Analysts at BofA suggested that Vodafone Idea may also clear some backlog payments. Indus’ revenue growth in January-March is expected to be around 6% sequentially, even as tenancy additions get marginally slower and tenancy ratio – the average number of tenants or operators using a tower – stays at 1.71x.

“Tariff hikes are likely to happen in the next few months post elections, we see possibility of 15-20%,” BofA Securities said. Carriers raised headline tariffs by 20%– 40% back in December 2019, the first after Jio launched its services in 2016 and made voice a free service. This was followed by another hike, this time of 20%, in December 2021.

“We expect the industry to take 15%–17% tariff hike post the elections. The previous hikes have provided an ARPU uplift of ₹30 and ₹36 over four quarters,” analysts at Antique Stock Broking said in a note initiating coverage on Airtel, giving tariff hike as one of the factors of upside to the stock in the near and long term. Livemint