For Telecom Operators Q2 Likely to Be a Healthy Quarter: Brokerage Firms

The second quarter of this financial year (July-September) is likely to be a healthy quarter for the telecom companies, though the drivers would not be the same for all the operators.

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Reliance Jio Infocomm’s performance would be driven by subscriber additions, while Bharti Airtel and Vodafone Idea Ltd (VIL) would benefit from normalisation post the lockdown and tariff hikes, according to a report by IIFL Securities.

“We expect 5% and 4% quarter-on-quarter EBITDA growth for RJio and Bharti Airtel on a consolidated basis, while VIL and Indus are likely to see flat EBITDA. With the relief package reducing the urgency around tariff hikes, we now build-in significant price increases only in the second half of 2022 versus the early-2022 previously,” IIFL Securities said in its October 12 note.

The urgency around the tariffs has come down with VIL’s near-term cash outflow significantly reduced. Though Bharti Airtel’s chairman recently talked about ARPU trending towards Rs 200 in FY22, he also added that it would not happen at the expense of competitiveness.

Higher User Churn, ARPU Recovery

According to Credit Suisse, a higher subscriber churn and Average Revenue Per User (ARPU) recovery for telecom firms, while tenancy renewals negotiations for Indus Towers will be a key focus.

“We expect the second quarter of FY22 to witness higher subscriber churn and 4.5-6% sequential ARPU growth for Airtel and VIL on actions on the minimum recharge plans and some recovery after the impact from the second wave of COVID-19 in Q1 FY22,” it said in a research note.

The brokerage firm expects Airtel’s revenue market share gains to continue in 2Q FY22; subscriber churn will likely increase in the quarter due to the negative impact from the raising of the minimum recharge plan in the second half of July 2021.