Telecom companies are expected to report sequential improvement in revenue aided by higher mobile recharges and conversion of 2G customers to 4G service. However some of these gains will be offset by increased spends on commissions and marketing, say analysts. Typically, the July-September period is seasonally weak for telecom companies but there have been a few positive growth triggers this time. According to Axis Capital, increase in mobile recharges in urban areas due to work from home in urban areas and reverse migration of labourers into cities will help telecom companies reverse the decline in subscriber additions seen in first quarter. The shift to 4G, longer tenure plans and a traction in digital recharges will also help telecom companies.
Bharti Airtel will report its result on Tuesday while Vodafone Idea and Reliance Jio results will be declared on Thursday and Friday respectively.
Telecom companies took a tariff hike last December but have shied from raising prices again. While the last tariff hike will reflect in improved performance on a year on year basis, sequential growth will be seen due to business recovery.
“The first quarter was adversely impacted by validity-period extensions made to low-income subscribers, disruption in offline top-ups and negligible smartphone shipments in April and May. The first two factors completely normalised in 2Q. Smartphone shipments have resumed since June, though weak consumer sentiment has kept these below pre-Covid levels,” IIFL Securities said in an investor note.
B&K Securities expects Airtel’s average revenue per user (ARPU) to rise 2 per cent Q-oQ and 25 per cent on a YoY basis to Rs 160. Jio’s ARPU is expected to rise 4.3 per cent sequentially and 21.9 per cent on YoY to Rs 146. Vodafone Idea’s (Vi)’s ARPU is expected to rise 10 per cent and 17.2 per cent on QoQ and YoY bases to Rs 125.
Data volume will be higher sequentially due to increased penetration of broadband and use of video applications during lockdown. B&K Securities estimates Reliance Jio’s subscriber base to increase by 12 million but Vi is expected to see a further 6 million loss in its subscribers over the first quarter.
According to B&K Securities, Airtel is expected to report 4.6 per cent QoQ revenue growth (compared to one per cent QoQ growth in Q1FY21) led by ARPU growth in India wireless business and uptick in the enterprise segment. Vi is
expected to report revenue growth of 6.2 percent QoQ (compared to de-growth of 9% QoQ in 1QFY21).
Other brokerages such as IIFL Securities and Emkay Global are estimating a flat revenue growth and 4-6 per cent decline in earning before interest tax depreciation and amortisation for Vi due to higher marketing spend on branding. Business Standard