The Price War Started By Mukesh Ambani Is Finally Winding Down
Vodafone Idea and Bharti Airtel’s mobile service revenue in India likely grew sequentially for the first time in 11 quarters in the three months ended March, driven by minimum recharge plans and as more users opted for higher-priced voice and data packs, analysts Vodafone Idea, Bharti Airtel, Reliance Jio Infocomm, price war, minimum recharge plan said.
Reliance Jio Infocomm, which disrupted the sector when it started in September 2016, though, is likely to continue to outclass both its rivals, posting strong net profit and revenue growth, propelled by heavy customer addition. The price war triggered by Jio’s entry appears to be winding down, possibly signaling the return of stability in the sector.
“Growth is set to return for Airtel and VIL as tariffs have largely stabilized,” brokerage BNP Paribas said in a note seen by ET. It said the introduction of minimum recharge plans — to keep services active — will likely be revenue accretive and result in improved monetization.
Bank of America-Merrill Lynch estimates Airtel’s India mobile revenue in the fiscal fourth quarter will increase 4% over the previous three months, while BNP predicts VIL’s mobile revenue will grow 1%.
Airtel may post first loss in almost 16 years
Jio’s entry with free voice calls and dirt-cheap data had forced operators to match tariffs to protect their user base, which hurt their revenue and earnings. Consequently, smaller telcos shut down and Vodafone India merged with Idea Cellular, reducing the field to three private operators — Jio, Airtel and VIL
Bank of America-Merrill Lynch expects Airtel’s average revenue per user (ARPU) — a key performance metric — to jump over 21% to Rs 126. BNP estimates VIL’s ARPU will increase 19% to Rs 106. Both telcos introduced their minimum recharge plans in October, aiming to weed out non-revenue generating customers and boost ARPU.
BNP expects Airtel and VIL to have each added 9-10 million mobile broadband users in the quarter. It said VIL’s data volume growth is poised to accelerate, driven by the speedy integration of networks following the merger.
The brokerages said Mukesh Ambani-led Jio will likely report its sixth successive quarterly profit as Airtel and VIL continue to make losses for their India mobile businesses. BofAML said Jio’s net profit would jump 64% on-year to Rs 840 crore, boosted by the net addition of an estimated 29.5 million users.
The US brokerage estimates Jio’s revenue would grow 57% on-year and 8% sequentially to Rs 11,210 crore, although monthly ARPU could dip 2% on-quarter to Rs 127, marginally ahead of Airtel’s.
Airtel is expected to report a net consolidated loss in the range of Rs 599 crore to Rs 1,300 crore — its first in almost 16 years — with still-low pricing, higher costs and its non-mobile businesses shrinking.
CLSA estimates Airtel’s home broadband and DTH business will “see 3% on-quarter revenue declines” due to competition and a new regulatory order that allows consumers to select and pay only for channels they want to watch.
The wide variation in Airtel’s loss estimates is due to the possibility of the telco being stung by higher depreciation and finance charges, said analysts.
The nation’s second-largest telco had eked out a Rs 86-crore net profit in the fiscal third quarter, helped by one-time gains. During that quarter, its India mobile service revenue had slipped below Jio’s for the first time and also posted a loss.
For January-March, Airtel’s India mobile service revenue — estimated at Rs 10,289-10,342 crore — will yet again be below Jio’s. Consolidated revenue is expected to be in the range of Rs 20,506-20,930 crore. Airtel also offers mobile services in 15 African countries.
Analysts at BNP predict a 1% sequential rise in VIL’s revenue to Rs 11,882.4 crore.
They expect VIL and Airtel’s upcoming rights issues of Rs 25,000 crore each to be fully subscribed “in view of promoter commitment and discount being offered”, which would alleviate debt concerns.―Gadgets Now
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