New subscribers to help Jio's Q2; tariff hikes to aid Airtel, VIL: Analysts

The second quarter of the fiscal is likely to be a "healthy quarter" for telecom companies, where Jio's performance will be driven by subscriber additions, and Bharti and Vodafone Idea will benefit from tariff hikes and some recovery post-severe wave of COVID-19, according to some analysts.

The urgency around tariff hikes has come down with Vodafone Idea Ltd's (VIL) near-term cash outflow significantly reduced, IIFL Securities said.

"Second quarter is likely to be a healthy quarter for telcos, though the drivers would be different for Jio and other players," IIFL Securities said in a recent note.

It expects Bharti to "marginally outperform" Jio on sequential India mobile revenue growth.

"Jio's revenue growth is likely to be entirely driven by subscriber adds, while Bharti and Vi would benefit from partial impact from tariff hikes (both pre-paid and post-paid) taken in July and some bounce-back post the pandemic related headwinds in 1Q (first quarter)," it said.

The report forecast five per cent and four per cent quarter-on-quarter Ebitda (earnings before interest, taxes, depreciation and amortisation) growth for Jio and Bharti consolidated and anticipated that VIL and Indus could see flat Ebitda.

"With the relief package reducing the urgency around tariff hikes, we now build-in significant price increases only in 2H 2022 versus early 2022 previously," it said.

As per Jefferies' report, telcos Reliance Jio and Bharti may post a 5-7 per cent sequential rise in revenue alongside a steady margin for the second quarter of FY22.

Bharti's growth will be led by segmented tariff hikes taken in the second quarter ended September, while Jio's growth will be driven by continued subscriber growth, it further said.

Credit Suisse, in its earnings preview note, said that 2Q FY22 is expected to mark higher subscriber churn and 4.5-6 per cent sequential average revenue per user (ARPU) growth for Airtel and VIL over actions on the minimum recharge plans and some recovery after the impact from the second wave of COVID-19 in the first quarter of FY22.

"For Airtel, we expect revenue market share gains to continue, with India mobile revenue growth of 4.2 per cent quarter on quarter, on the back of 4.5 per cent QoQ (quarter-on-quarter) ARPU growth offset by 0.6 per cent QoQ decline in subscriber base...," it said.

It expects Vodafone Idea Ltd to report a second consecutive quarter of 10 million-plus subscriber loss on higher churn and SIM consolidation.

"Thus, despite a 6 per cent QoQ ARPU growth, we estimate revenue growth to be muted at 1.6 per cent QoQ (-13.8 per cent year on year)," Credit Suisse note said.

In the case of Vodafone Idea, the key aspects to watch out for will be quantum and visibility of fundraising and the company's strategy to ringfence lower ARPU subscribers from affordable smartphone launch by Jio and cashbacks by Airtel.

India, the world's second-largest telecom market and the biggest consumer of data, has three private players -- Reliance Jio, Bharti Airtel, Vodafone Idea -- besides the state-owned operators BSNL/MTNL.

Amid an existential crisis faced by VIL, the government recently approved a blockbuster relief package for the sector that includes a four-year break for companies from paying statutory dues, permission to share scarce airwaves, change in the definition of revenue on which levies are paid and 100 per cent foreign investment through the automatic route.

The measures, aimed at providing relief to companies such as Vodafone Idea that have to pay thousands of crores in unprovisioned past statutory dues, also include the scrapping of spectrum usage charge for airwaves acquired in future spectrum auctions.