Telecom Companies May See Earnings Pressure Ease In Q1

Reliance Jio Infocomm Ltd.’s decision to start charging customers has eased competition in the telecom industry. This is likely to slow down the pace at which its two listed rivals, Bharti Airtel Ltd. and Idea Cellular Ltd., are losing revenue.

Revenue of Bharti Airtel, India’s largest telecom operator, is expected to fall marginally to Rs 21,927 crore, while that of Idea Cellular may fall by 1 percent to Rs 8,063 crore in the first quarter of financial year 2017. It will be the fourth straight quarterly decline for the two companies.

Reliance Jio started charging for services from April 2017 after offering free services for the first six months. Rivals then came out with more unlimited bundled plans. Brokerages expect this to push data and voice usage, though at lower realisations.

Which means, Bharti Airtel and Idea Cellular will see their blended average revenue per user (ARPU) further decline for the fourth quarter in row.

Bharti Airtel’s African business will see muted revenue growth but margins will expand after the company took cost control measures. Idea Cellular is again expected to post a loss of more than Rs 700 crore, the third straight quarterly decline. The company will also see its earnings before interest, tax and depreciation and amortisation (EBITDA) fall by more than a third to Rs 1,909 crore.

Bharti Infratel Ltd., the tower infrastructure company, will see its revenue grow 10 percent and EBITDA rise 3 percent. Net profit is expected to decline 8 percent due to lower energy rentals.

Brokerages remain cautious as they expect competition to remain fierce. However, they are bullish on the tower arm amid faster network rollout by older telecom operators and fresh tenancy demand from Reliance Jio.

(These expectations have been compiled from reports of Credit Suisse, Morgan Stanley, PhillipCapital, Edelweiss, Motilal Oswal and IDFC.)

Also Read: What Bharti Airtel Can Add, Reliance Jio Can Better