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Telcos look at steady Q1 with Airtel expected to top average revenue per user

Telcos look at steady Q1 with Airtel expected to top average revenue per user
  • The first quarter of FY24 is expected to be a non-event for most telcos, say analysts with modest EBIDTA growth expected.
  • Airtel is expected to post the best growth in the industry in terms of ARPU.
  • Jio’s new discounted feature phone launch will delay tariff hikes and pave the way for a possible duopoly, say analysts.
Little has changed for the three listed players in the telecom sector in the first quarter of the current financial year (FY24), except for the launch of Jio’s heavily-discounted feature phone. But that will have no bearing on the earnings report card of Bharti Airtel, Vodafone Idea and Reliance Industries’ telecom business, say analysts.

“We see Q1FY24 results to be largely a non-event given tariff hikes and accelerated subscriber market share gains post complete 5G rollout are key triggers for the group,” said a report by Morgan Stanley.

Bharti to add more mobile add broadband users

Subscriber additions have been taking place on expected lines. Jio is expected to report a net addition of seven million subscribers in the first quarter, Bharti’s overall addition should be muted at two million though its mobile subscriber additions are expected at around six million.

Vodafone Idea is expected to continue its trajectory of losses – shaving off five million subscribers but J M Financial hopes that the troubled telecom major will add around a million mobile broadband subscribers.

No telecom company is expected to report any tariff hikes in FY24 and that hasn’t been factored in. Even Jio’s move to capture the lower end of the market with its new feature phone will not alter the dynamics, say analysts.

“While Jio’s move suggests continued competitive intensity, it does not incrementally worsen the tariff hike outlook since most of the Street (including us) was not factoring in a direct tariff hike in FY24,” says IIFL Securities.

Bharti to report the best ARPU growth

Airtel and Jio are expected to report a moderate quarter-on-quarter growth of 2-3% in Earnings before interest tax depreciation and amortization (EBIDTA), with Vodafone reporting moderate losses to the tune of 2.5%, as per J M Financial.

When it comes to average revenue per user (ARPU) Bharti is expected to report a 1.8% growth, the best in the sector to ₹196.

“Jio is repurposing of customer retention efforts for low-ARPU subscribers. ARPU is likely to rise by a modest 0.8% QoQ to ₹180 in 1QFY24 driven by one more day during the quarter and new subscriber upgradation to smartphones,” said J M Financial.

Vodafone Idea is also expected to post a strong ARPU growth of 1.7% but since it has a lot of catching up to do with its peer, its ARPU might be only at ₹137.

A duopoly in the offing

In the long-term however the sector will have to watch out for a transformational shift into a possible duopoly — pushed by Jio’s move to pull in subscribers from the bottom end of the pool. Most analysts say that since feature phone users only tend to replace their phone at the end of the cycle of the current device — it will cater to that market.

The effect of this highly discounted phone with an attractive plan, will count only in FY25. Bharti will however see the most effect, with subscriber and EBIDTA losses. The short-term impact of this move however will be felt on Vodafone.

“Jio's moves of coming out with attractive offerings on both postpaid and voice segments at a time when VIL's cashflow pressures are mounting, suggest that the market may consolidate into an effective duopoly sooner,” said a report by Jefferies.

This move ensures that there are no tariff hikes in the near term. But, if at all a tariff hike happens, Bharti is expected to gain the most from it.

“Bharti is the biggest beneficiary of higher tariffs given the sticky and premium quality of its subscribers, ensuring that tariff hikes flow through to ARPU,” said J M Financial.

As India's Telecom Sector grows, the duopoly of Airtel and Jio grows with it.$BHARTIARTL.NSE stock on the price chart exhibits signs of a leading stock from this sector.The stock price is making fresh All Time Highs and sustained buying is seen on the charts.Price action indicates that the market is expecting strong quarterly results for the April-June quarter.Exciting times ahead for the investors of Airtel!Disclaimer: This is not a recommendation to buy, sell or hold. Consult an investment advisor before making investment decisions.

— (@DrNikhilJain) July 11, 2023]]>


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