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Jio, Airtel may post higher Q4 revenue on tariff hikes; heavy user losses to drag Vodafone Idea

Axis Capital estimates Mukesh Ambani-led Jio to report over 31% sequential jump in profit.

, ET Bureau|
Last Updated: Apr 08, 2020, 12.12 PM IST
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Kolkata: Reliance Jio Infocomm and Bharti Airtel are likely to report higher revenue, operating income and margins in the fiscal fourth quarter, helped by the impact of tariff hikes initiated last December, analysts said.

Vodafone Idea though, they estimate, will report an on-year revenue fall, albeit sequential growth on this score, as it’s likely to continue suffering heavy customer losses.

Last December, Bharti Airtel, VIL and Reliance Jio had increased bundled prepaid tariffs by around 14-33% -- the first round of price hikes in over three years -- that is likely to boost their overall March quarter earnings numbers. But analysts expect the full impact to be palpable only after the first six months of FY21, by when most users are likely to recharge to the new higher value plans, given that the overall volume of mobile recharges too has plunged amid the nationwide Covid19-induced lockdown.

Analysts though don’t see the Covid19-led lockdown hitting telcos’ fourth quarter earnings much as it started late-March, but expect it to slow down the overall pace of customer adds during the January-March period.

“Jio and Bharti will benefit from the price hike as well as subscriber addition, while subscriber loss is expected to continue for VIL,” Axis Capital said in a note. The brokerage estimates Jio and Airtel to add 14 million and 2 million customers on-quarter respectively, and VIL to lose 6 million users.

Axis Capital estimates Mukesh Ambani-led Jio will report an over 31% sequential jump in net profit in the March quarter at Rs 1,772.3 crore – its tenth successive quarterly profit – helped by a combination of higher tariffs and customer adds.

It also estimates a jump in Jio’s March quarter profit as parent “Reliance Industries has recently taken over Rs 1-trillion debt of Jio after approval from the National Company Law Tribunal (NCLT),” a move aimed to reduce Jio’s interest cost”. Jio’s numbers, it added, would also benefit from the company having moved to a new tax regime.

The brokerage estimates the telecom market leader to report 1% sequential growth in its average revenue per user (ARPU) – a key performance metric – to Rs 130 led by last December’s tariff hike, though it expects Jio’s strong subscriber adds in January/February to be moderated towards March-end due to Covid-19 impact.

Axis estimates Bharti Airtel and VIL to narrow their fiscal fourth quarter losses to around Rs 867 crore and Rs 4,269 crore respectively, helped by the recent tariff hikes. Airtel and VIL, it estimates, will also report 5.2% and 3.7% ARPU gains on-quarter to Rs 142 and Rs 113 respectively.

Airtel and VIL Idea had posted losses of Rs 1,035 crore and Rs 6,453.2 crore respectively in the December quarter. Both telcos were hit hard by the Supreme Court verdict that backed the government’s wider definition of AGR and face statutory dues of Rs 43,980 crore and Rs 58,254 crore respectively. The apex court has scrapped the self-assessment of AGR dues but has agreed to consider the government’s plea on allow the two telcos to stagger their payments over 20 years or less. The matter will be taken up at the next apex court hearing.

BofA Securities estimates Airtel’s fourth capex to rise sequentially as the telco is “front loading capex,” to tackle the surge in data consumption as corporate staff works from home amid the lockdown. This, it said, is likely to also push up Airtel’s network opex on-quarter. But BofA estimates “Airtel’s overall Ebitda margin will improve 40bps to 42.6% as 60% of incremental tariff hike revenue flows down”.

ICICI Securities, in turn, sees VIL reporting a sharp decline in its subscriber base due to “SIM consolidation from (the recent) tariff hike, and the Covid19-induced lockdowns”. The brokerage also expects any “synergy benefits to get off-set by rise in VIL’s termination cost and higher regulatory payouts on adoption of the new AGR definition”.

Axis Capital estimates Jio’s quarterly revenue to grow 32.1% on-year and 5% on-quarter to Rs 14,668.4 crore. For Airtel, consolidated revenue is estimated to grow 10.5% on-year and 3.8% on-quarter to Rs 22,772 crore, helped by price hikes, growth in India wireless revenue and 2 million-odd customer adds. Airtel’s India wireless revenue, it estimates, will grow 6.1% sequentially to Rs 11,844 crore in the March quarter.

VIL’s quarterly revenue, Axis estimates, will rise 3.6% on-quarter, but fall 2.4% on-year to Rs 11,494 crore during the period as its expects more low-ARPU customer exits amid SIM consolidation.
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