Revenue and EBITDA for wireless telecom service providers are expected to improve sequentially during March quarter 2019-20 fuelled by tariff hike in December, but the full impact is likely only in first quarter of the current fiscal when majority users come for recharge, according to Axis Capital.
Axis Capital, in its recent report outlining Q4FY20 preview, has also anticipated a soft quarter for infrastructure providers, impacted by the COVID-19 outbreak.
The report said Reliance Jio and Bharti Airtel are expected to benefit from the price hike as well as subscriber addition, while subscriber loss is expected to continue for Vodafone Idea.
"We expect revenue and Earnings before Interest, Tax Depreciation and Amortisation (EBITDA) for wireless service providers to improve led by tariff hike taken in December 2019, though the full impact is expected only in Q1FY21 when most users come for recharge," it said.
The report, dated April 3, added that EBITDA will "benefit from pass-through of the price hike with margin improvement in the range of 20 basis points(bps) quarter on quarter (QoQ) to 80 bps QoQ for Indian wireless business."
On infrastructure providers, it said Bharti Infratel, is expected to have a muted quarter with modest tenancy addition.
Tejas Networks, it said, will have another soft quarter after weak third quarter on reduction in revenue from government projects and COVID-19 impact, while Sterlite Tech's revenue/margin is expected to contract QoQ due to pressure on pricing and volume of products and also services impacted by COVID-19.
In case of Bharti Airtel, the numbers are seen improving, with Axis Capital expecting consolidated revenue and EBITDA to be up 3.8 per cent QoQ and 5.1 per cent QoQ with 55 bps improvement in margin.
"India wireless revenue to be up 6.1 per cent QoQ on the tariff hike taken in December 2019, though we expect full impact to come through only in H1FY21 when most of the customers come for recharge," it said about Airtel, adding management speak on floor pricing proposal, 5G auction and strategy to increase market share will be the key focus.
For Reliance Jio, Axis Capital report expected revenue to grow by 5 per cent QoQ (over 6.4 per cent QoQ in Q3) led by continued net subscriber addition and improvement in average revenue per user.
"Subscriber addition remained strong in January/February, though it moderated towards March-end due to COVID-19 impact," Axis Capital said on Jio adding that management commentary on GigaFiber ramp-up and steps for net debt reduction is likely to be key focus post Q4 results.
Meanwhile, BofA Securities in its Q4 preview report said that tariff hike benefits are seen offsetting lockdown impact in Q4.
"We expect stable set of 4Q numbers from Bharti/Vodafone Idea given the defensive revenues and benefits from December 2019 tariff hike. However some impact was felt due to the lockdown leading to a major decline in net adds/recharges post March 24...," the report by BofA Securities said.
It has estimated 7.7 per cent and 4.5 per cent QoQ increase in India cellular revenues for Bharti and Vodadone Idea.
It is pertinent to mention here that in mid March, while easing compliance requirements amid coronavirus outbreak, regulator Sebi gave a 45-day relaxation for companies to file their fourth quarter results as well as an additional one-month time to submit their annual results.
With respect to quarterly financial results, companies have been given 45 days till June 30, 2020 to file their March quarter results. In the case of submitting results for the year ending March 31, the watchdog has extended the time till June 30.
Prime Minister Narendra Modi, on March 24, had announced a complete lockdown of the entire country for 21 days in an unprecedented move to try halt the spread of coronavirus, shortly after which the Centre said road, rail and air services will remain suspended during this period.
The pandemic has so far claimed 109 lives in the country and number of COVID-19 cases has increased to 4,067.
While the lockdown has meant that telcos' new subscriber additions for March have taken a massive hit as stores remained shut for days and weeks, operators have put their might behind ensuring that essential connectivity services in the country continue uninterrupted to enable customers to connect with their loved ones and work from home.
To lend a helping hand to the poor, operators have also announced an extension of prepaid validity for low-income feature phone subscribers as also varying amounts of talktime credit to help users stay connected during the lockdown.
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