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Telecom operators expected to see stable Q2, say analysts

Indian telecom operators are expected to show sequential growth in the second quarter of financial year 2020-2021 on the back of higher gross additions and data subscriber additions. Though a seasonally weak quarter followed by the monsoon, Q2FY21 is expected to be an aberration, due to substantial low base witnessed in Covid-hit first quarter of FY21.

The average revenue per user (Arpu) is expected to see moderate rise for all operators on a sequential basis. While Bharti Airtel is expected to report Arpu in the range of Rs 157-Rs 159 seeing a flat to 1.2% increase, Vi (erstwhile Vodafone Idea) is expected to report a slightly higher 4-5% increase in Arpu from Rs 114 in Q1FY21 to Rs 119-Rs 120 in Q2FY21. Reliance Jio, according to analysts, will see a 2% quarter-on-quarter increase in Arpu to Rs 143 compared to Rs 140 in the preceding quarter.

Every year Q2 typically shows seasonal weakness led by monsoon, however, the magnitude is declining, analysts at BofA Securities observed. “While subscriber additions have picked up from Q1 as lockdown pressures have eased, it’s not yet at pre-Covid levels for the industry. Fixed broadband net adds have picked up for both Bharti and Jio in Q2,” they said.

With offline recharge activity picking up in second quarter, analysts at Kotak Institutional Equities said Bharti Airtel could see its revenues increase by 3.5% q-o-q, while the reported subscriber to be higher by 2.9 million sequentially.

For Vi, the brokerage expects the revenue to increase by 2% q-o-q. According to BofA while Vi is estimated to continue to lose subscribers, the pace of subscriber loss is reducing. “We factor 5 million q-o-q subs reduction versus 11 million in Q1. VIL has also benefited with activations picking up post lockdown,” the foreign brokerage noted.

Reliance Jio is expected to report 5% q-o-q revenue rise led by steady net additions sequentially. Subscriber base is expected to increase by 11 million, similar to that of the previous quarter but meaningfully lower than average of last four quarters of 17 million, analysts at Emkay Research said.

Bharti’s Ebitda (earnings before interest, tax, depreciation and amortisation) is expected to rise only 1% q-o-q to Rs 7,900 crore, while operating margin is likely to be down 40 basis points sequentially 43.5% due to higher SG&A expenses. The company’s net loss is estimated to be Rs 240 crore, cushioned by forex gain, according to analysts at ICICI Securities.

Vi is expected to see a dip of 7.3% in Ebitda on a q-o-q basis to Rs 3,800 crore due to a one-off benefit of Rs 300 crore in Q1FY21. “We estimate VIL to report net loss of Rs 59 billion (Rs 5,900 crore) with nil tax rebate,” the domestic brokerage observed.

Jio is estimated to see its Ebitda rise by 6% q-o-q but will be partially restricted due to a sustained increase in costs, leading to flattish Ebitda margins sequentially. Jio had reported Ebitda of Rs 7,281 crore for the April-June quarter. Ebitda margins are estimated to improve by 25 basis points sequentially to 43.5% led by continued revenue growth. The Financial Express

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