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Telecom Q4FY22 preview: Tariff hike flow-through, but lower days, SIM consolidation to hurt, ICICI Securities

Q4FY22 will see strong ARPU growth for mobile services as it benefits from 20% tariff hike in prepaid. However, two lower days in the quarter, and SIM consolidation offset some benefits; high cost handset prices had slowed 4G subs adds, limiting premiumisation. We estimate ARPU growth of 7-9% QoQ for three private players, but revenue growth will be 5-7% QoQ with Bharti outperforming, again. Note RJio has higher share of long validity recharges which delays flow-through of revenue. EBITDA / PAT growth will be strong which will be further supported by lower finance cost for Bharti / JioPlatform from refinancing of high-cost spectrum debt. Indus Towers will see steady growth in tenancy at 2,500. Tata Communications would see gradual recovery in data revenue. Key to watch is 5G spectrum auction reserve price recommendation by the TRAI.

  • ARPU growth strong; lower days and SIM consolidation drag. Q4FY22E is expected to be strong from full quarter impact of tariff hike of 20-21% on prepaid category wef Dec’21 which had good flow-through into revenue. We expect some more benefit on revenue in Q1FY23E. However, this quarter has two lower days which is a drag of 2% on revenue (and ARPU), and SIM consolidation has hurt subs base. Further, higher handset prices would mean lower 4G subs addition which will limit premiumisation. Bharti is the only operator to report net adds in subs base, while it will see much lower 4G net add. ARPU for Bharti / VIL / RJio is likely to rise by 8.6% / 7% / 8% QoQ to Rs176 / 123 / 164, respectively, in Q4FY22E.
  • Bharti’s consolidated EBITDA to grow 4.1% QoQ (24% YoY) to Rs153bn. Bharti’s India revenue to grow 5.4% QoQ (20% YoY) to Rs221bn led by mobile segment (up 6.7% QoQ / 22% YoY). Mobile revenue growth has limited the benefit of premiumisation and entire growth is driven by tariff hike. India EBITDA will be up 7% QoQ to Rs111bn. Bharti’s Africa US$ revenue and EBITDA will dip 2% QoQ to US$1,195mn and 3% QoQ to US$584mn, respectively on seasonality. Consolidated revenue to rise 3.3% QoQ to Rs309bn and EBITDA by 4.1% QoQ to Rs153bn. Net profit is seen at Rs14bn.
  • VIL’s EBITDA to rise 7.1% QoQ to Rs41bn. VIL’s revenue to rise 4.7% QoQ to Rs102bn, negatively impacted by SIM consolidation and downgrades. EBITDA to grow 7.1% QoQ / and down 7.3% YoY due to one-off gain of Rs4.5bn in the base. Net loss seen at Rs69bn for VIL (nil tax rebate).
  • JioPlatform’s EBITDA to rise 6.6% QoQ. Note: We have shifted our estimates to JioPlatform from earlier Reliance Jio Infocomm. JioPlatform’s revenue to grow 5.4% QoQ to Rs217bn and negatively impacted by SIM consolidation; RJio has higher share of long validity recharges which means tariff hike benefit comes with lag vs peers. EBITDA to grow by 6.6% QoQ to Rs107bn with incremental EBITDA margin at 59%. However, net profit to rise 11.4% QoQ to Rs42bn on lower interest cost from refinancing of high cost spectrum debt.
  • Indus’ tenancies to rise by 2,500. Rental per tenant to dip 1% QoQ to Rs43,465 as last quarter had one-off gains. Rental revenue to decline 0.3% QoQ (up 5.9% YoY) to Rs44bn. EBITDA to contract 0.6% QoQ (+7.8% YoY) to Rs37bn which continues to be impacted from negative spreads on energy. We expect net profit to drop 2.4% QoQ but rise 12.4% YoY to Rs15.3bn.
  • TCom’s EBITDA to grow 3.8% QoQ to Rs10.8bn (excl. real estate). Voice revenue may drop 2.0% QoQ and EBITDA margin may be 6.5%. We estimate data revenue to rise 2% QoQ (5.4% YoY) where execution pick-up is gradual than expected. EBITDA margin is likely to improve slightly QoQ to 28.5% (+30bps). We estimate net profit at Rs4.1bn.

Quarterly summary

CT Bureau

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