Tariff hikes, 4G adds to aid telcos in Q3: Reports

Riding on the benefits of the recent tariff hikes, continuing subscriber additions and pick-up in 4G net additions, telecom companies are expected to post “good” third quarter results.

According to analysts' reports, for the incumbents, resumption of services in Jammu & Kashmir (J&K) would be in their favour, while Internet shutdown in various parts of the country would have its impact.

“We expect 3Q to be a good quarter for Indian telcos, led by some benefit of tariff hike (for December), good subs momentum and Q-o-Q margin improvement. We also expect commentary on exit ARPU to be good, which would help overall momentum for telcos,” BofA Securities said in a report.

“We expect the full impact of tariff hike to be seen in the numbers in the next two quarters. This is because most of the smartphone users are on 84 day packs and hence their next top-up would be phased over the next 80 days,” it said.

As Reliance Jio Infocomm (RJio) has the highest number of smartphone users, the company’s ARPU hikes would be more phased versus more front-end loaded for incumbents.

According to Axis Capital, the revenue and EBITDA for wireless service providers are likely to improve led by price hike in December 2019, even though the full impact is expected only in the fourth quarter of fiscal 2020.

RJio’s revenue and subscriber market share gains are expected to continue though at a moderate rate versus past few quarters. Bharti Infratel is likely to have a muted quarter with modest tenancy addition, while Tejas Networks to have another soft quarter post weak second quarter.

“Topline growth for incumbents to be muted at 2-4 per cent on price hike, while RJio’s revenue is expected to improve by 9 per cent Q-o-Q as it benefited both from price hike as well as strong subscriber addition, which increased its market share further in the quarter,” Axis Capital said.

The wireless revenue for Bharti Airtel is expected to increase on a quarter-on-quarter basis, largely due to pickup in 4G net additions. While RJio's strong net sub additions appear to have continued, Bharti Infratel may show some sequential uptick in net tenancy additions, according to a Morgan Stanley report.

According to ICICI Securities, mobile revenues of Bharti Airtel and Vodafone Idea are expected to grow by 4.2 per cent and 1.5 per cent, respectively on a quarter-on-quarter basis. This would be based on higher 4G subscriber addition, low base on seasonality, partially offset by lower interconnect usage revenue as the new entrant start charging for voice calls.

The incumbent telecom operators are expected to see a sequential improvement in wireless revenues, driven by healthy data subscriber additions, resumption of services in Jammu & Kashmir and some voice traffic shift from RJio due to the introduction of Interconnection Usage Charge top-up vouchers, Emkay said in a report.

“We have not assumed any impact of the tariff hike in Q3 as subscribers would have recharged ahead of the hikes, in our view. Further, data volumes should also get impacted due to the Internet shutdown in various parts of the country due to recent protests,” it added.

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