Telecom operators may see muted growth in April-June quarter

Owing to weak subscriber addition and delay in headline tariff hikes, telecom operators such as Reliance Jio, Bharti Airtel and Vodafone Idea are expected to see a muted growth in the April-June quarter as well, analysts said. Despite higher number of days in April-June compared to January-March, the overall industry growth is largely expected to be similar to last quarter, factoring in SIM card consolidation at lower end of subscriber base and weak performance by Vodafone Idea.

In the April-June quarter, the telecom operators are expected to report a near 2% q-o-q growth in revenues, according to average estimates of four brokerage houses, which is marginally higher than 1.6% growth in the January-March quarter. The reason for weak revenue growth is also because Vodafone Idea’s revenue is expected to grow only 0.5% during the quarter, according to analysts. Besides, Airtel and Jio are expected to see a 2-3% growth in revenues, according to average estimates.

The reason for a slight growth in revenue for Airtel can be attributed to hike in base-level tariffs, increase in data consumption, growth in enterprise business and additions of 4G subscribers. For Jio, data consumption and better user addition, compared to rivals, are expected to have contributed to revenue growth.

With regard to the bottomline, Vodafone Idea will likely see an expansion in losses to Rs 7,411 crore from Rs 6,419 crore in the January-March quarter, according to analysts. Airtel is expected to see around 23% q-o-q fall in net profit to Rs 2,314 crore at a consolidated level. Jio Platform’s net profit is expected to increase 2.2% to Rs 4,800 crore, according to estimates from ICICI Securities.

Jio Platforms is a subsidiary of Reliance Industries, which houses other digital and content-oriented operations of the parent apart from the telecom business.

According to ICICI Securities, Bharti Airtel’s consolidated profit is seen down due to impact of higher forex losses and higher taxes.

Further, the operating profit or Ebitda of Airtel and Jio is expected to be stable despite higher costs, according to analysts. Operating margins are calculated on earnings before interest, taxes, depreciation, and amortisation or Ebitda. According to brokerage house Jeferries, Ebitda margins are expected to remain steady as operating leverage advantages will be balanced out by increased network costs.

BNP Paribas said, “We see Bharti and Jio as well positioned in the medium term with growth levers such as subscriber upgrades, market share gains and tariff hikes. Also, we expect a moderation in churn and capex to help improve the profitability and cash generation over FY23-25.”

On the operating metrics of telecom operators, overall subscriber growth is expected to be muted. “In Q1, we expect Bharti Airtel and Vodafone Idea to benefit from the conversion of 2G subscribers (to 4G) and the higher number of days in Q1 vs Q4, though benefit for Vi is likely to be mitigated by loss of subscribers. Jio would lead in user addition of 6.5 million q-o-q, aided by competitive pricing of its plans,” said brokerage house Emkay Global in a report.

“RJio to see acceleration in subscriber additions, up 9 million (+2% q-o-q) while Bharti subscriber additions to be muted at 2 million (impacted by pan-India rollout of higher minimum recharge) and Vodafone Idea subscriber loss to be 1.7 million,” ICICI Securities said in a note.

In the January-March quarter, Bharti Airtel’s mobile subscriber base was at 335 million, while that of Jio and Vodafone Idea was at 439 million and 226 million, respectively.

Lately, growth in subscriber base has been muted 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 with increase in 5G penetration will continue to drive Arpus for the telecom operators in the absence of tariff hikes.

Among the operators, Bharti Airtel’s Arpu is seen at Rs 199, an increase of 3% from Rs 193 in the preceding quarter, whereas Jio’s Arpu is expected to increase marginally to Rs 180 and Vodafone Idea’s will likely increase 1.5% q-o-q to Rs 137.

In the April-June quarter, the industry’s data volume is expected to grow 3-3.5% q-o-q to nearly 52 trillion MB, which is similar to the growth in the preceding quarter.

On the other hand, growth in voice consumption on the telcos’ network is expected to be about 1% at 2.9 trillion minutes.

Among the telcos, Reliance Jio will be the first to report its earnings on Friday. The investors will keep a close eye on their guidance on the next leg of tariff hikes, capital expenditure, plans on Jio 5G phone, among others. Financial Express