Bharti Airtel, Reliance Jio To See Boost In Q4 Revenue From Tariff Hikes
Here’s what brokerages expect from the telecom sector in Q4FY22.
Analysts expect Bharti Airtel Ltd. to post highest revenue growth among peers in the fourth quarter even as the carrier’s 4G user addition slowed.
The average revenue per user of the telecom operators are also likely to improve in the three months to March as the benefits of tariff hike kick in. That would support their margin.
Bharti Airtel, Reliance Jio Infocomm Ltd. and Vodafone Idea Ltd. had raised prices of prepaid plans by 20-21% in November and December.
But lower number of days in the reported quarter, shrinking subscriber base due to SIM consolidation, and increased handset prices due to rising inflation are likely to offset some benefits.
Here’s what brokerages expect from the telecom sector in Q4FY22:
BNP Paribas
Expects the industry’s revenue to rise by 20% year-on-year and 9% quarter-on-quarter, led by tariff hikes.
Expects a high-level of resilience in consumer spending on mobile services despite weakness in the purchasing power of consumers due to rising inflation.
The industry’s data volume growth trajectory is likely to moderate to 32% YoY in Q4 compared to 39% YoY in Q3 due to low 4G additions, opening up of the economy, and a small proportion of consumers downtrading after the tariff hike.
Forecasts Bharti Airtel, Reliance Jio, and Vi revenue to grow 12%, 9%, and 5% QoQ, respectively.
Bharti Airtel’s 4G subscriber addition is expected to be weak due to SIM consolidation. However, it is well-positioned as a play on both mobile and fixed digital infrastructure services for Indian households and enterprises.
Vi’s quarterly loss is likely to remain elevated but lower compared with Q3.
BofA Securities
Estimates a 10%, 7%, and 5% QoQ increase in Q4 revenue for Bharti, Jio, and VIL, respectively.
Along with results commentary, capital allocation and 5G investment cycle would be key stock price drivers.
ARPU for Bharti Airtel is expected to increase 9% QoQ and the momentum at other businesses will remain steady. Reliance Jio and VIL ARPU will increase 9% and 7.2%, respectively.
Reliance Jio subscribers to decline 77 lakh in 4Q on the back of subscribers’ clean-up and SIM consolidation. But for FY23, no major decline in subscribers is expected.
Better operating leverage due to marginally lower spending on network expenses will support Ebitda margin for VIL.
Jefferies
Bharti Airtel’s India mobile revenue is expected to grow 10% QoQ in Q4 FY22E, led by 10.5% QoQ growth in ARPU supported by tariff hikes.
Bharti Airtel’s 4G additions will remain strong but overall subscriber additions will be modest due to the impact of increased tariffs. Consumer adoption of recent tariff hikes, the timing of next tariff hikes, and capex outlook including outlay for 5G will be the key focus areas of the company’s Q4 results.
Reliance Jio’s revenue is expected to grow 10% QoQ, however, there will be around 90 lakh decline in subscribers due to the ongoing clean-up of inactive subscribers.
Reliance Jio’s profits are expected to rise sharply by 40% QoQ supported by lower interest costs.
UBS
The churn to remain elevated at all three telecom companies, with Bharti Airtel witnessing the least risk.
Bharti Airtel’s QoQ mobile revenue growth is likely to outperform both VIL and Reliance Jio on the back of lower churn and slightly higher ARPU increase.
Ebitda of Bharti Airtel and VIL is expected to jump 6.5% and 10.4% on a sequential basis.
Cuts FY22-23E mobile revenue estimates for Bharti Airtel by 1% and for VIL by 1.5% after factoring in the increased industry churn rate.
Maintains ‘buy’ on Bharti Airtel and ‘neutral’ on VIL.
ICICI Securities
ARPU for Bharti Airtel, VIL, and Jio is likely to rise 8.6%, 7%, and 8% on a QoQ basis. Bharti Airtel will outperform on revenue growth.
Ebitda/PAT growth will be strong for Bharti Airtel and Reliance Jio, which will be supported by lower finance costs from the refinancing of high-cost spectrum debt.
Bharti Airtel is the only operator to report net additions in subscriber base, but it will see much lower 4G net additions.
Reliance Jio has a higher share of long validity recharges, which indicates that the benefits of the tariff hike will come with a lag compared to peers.