Bharti Airtel, India’s leading telecom operator’s average revenue per user or ARPU is anticipated to see a higher-than-expected decline in the next 9 to 12 months, according to industry analysis reports. They said that Reliance Jio is expected to continue with its disruptive pricing of services, which may lead to fall in Airtel’s ARPU in the country.
An ET report said that brokerage and analysts had cut Airtel’s consolidated revenue and EBITDA estimates for FY18 and FY19 on expectations of this likely decline in India ARPU.
The Sunil Mittal-led telecom operator’s ARPU has been lowered by brokerage CLSA by 4% to Rs. 146 (Rs 152) in FY18 and by 2% to Rs. 154 (Rs 158) in FY19 on the back of Airtel’s retaliatory tariffs in response to Jio’s offers. These retaliatory tariffs will continue and further hit Airtel’s operations, it added.
CLSA also estimates a 12% yearly decline in Airtel’s EBITDA in FY18 to Rs. 31,365 crore from Rs. 35,450 crore in the previous fiscal. Further, it has lowered Airtel’s estimated consolidated revenue in FY18 and FY19 by 5% and 3% to Rs. 90,219 crore (Rs. 95,000 crore) and Rs. 98,932 crore (Rs. 1,02,200 crore), respectively, according to the report.
Morgan Stanley said that Airtel’s price response would depend on Jio’s price strategy. It expects India’s leading telco’s wireless revenue and EBITDA to remain under pressure for the next few quarters.
Another brokerage HSBC also said Airtel’s earnings are expected to remain weak in the current fiscal. It added that the telecom operator’s wireless EBITDA is likely to decline by as 15% in FY18.
In a client note, HSBC analyst Rajiv Sharma said that market recovery may be 5 to 6 quarters away versus our earlier estimate of early FY19 due to Reliance Jio’s recent ‘Dhan Dhana Dhan’ offer.
He added that telcos like Bharti Airtel, Vodafone, and Idea Cellular might also be impacted if Jio pursues an aggressive 4G feature phone strategy.