Revenue of telecom service providers through wireless services is likely to fall in the first quarter of FY20-21 due to the nationwide lockdown, according to a report by Emkay Global Financial Services.
The report noted that the lockdown delayed recharges by low ARPU (Average Revenue Per User) prepaid subscribers on account of the reverse labour migration and impact on income levels along with curbed subscriber additions, SIM consolidation and absence of international roaming revenues.
“We expect ARPU to decline sequentially in Q1FY21 after healthy growth in Q4FY20. Bharti (Airtel) and VIL (Vodafone Idea) are likely to see 5 per cent quarter-on-quarter (qoq) fall in ARPU. Home broadband to see a healthy increase in new connections, boosted by the lockdown,” it said.
Subscriber addition shall moderate due to the lack of smartphone sales in April and early May, the report said adding that the reverse migration could lead to subscriber loss for the industry due to delayed or no recharges.
Further, it noted that cost savings are expected from marketing, channel margins and other admin costs. Network opex shall continue to rise on increased utilisations.
In case of Reliance Jio, the report said that “partial flow-through of the Dec 2019 tariff hike in Q1FY21 would get offset by lockdown-led delayed recharges, resulting in wireless revenues growth of 1 per cent qoq”.
Lower contribution from international roaming would also restrict ARPU for Jio as compared to peers, it said.
“We project subscriber additions to be compressed at 6 million and ARPU to decline 2 per cent qoq, negatively impacted by the lockdown. Similar to Bharti and VIL, subscriber acquisition cost shall fall, leading to 114bps qoq expansion in EBITDA margin.”