Flat tariffs, fewer new users hit Arpu growth
Telecom operators are expected to report a slowdown in average revenue per user or Arpu growth in the December quarter, primarily because of the absence of tariff increases and lower subscriber additions during the year
Telecom operators are expected to report a slowdown in average revenue per user or Arpu growth in the December quarter, primarily because of the absence of tariff increases and lower subscriber additions during the year.
The drop in user additions will also show in the tepid pace of conversion of 2G customers to 4G, which will in turn, shrink the benefits carriers could have earned from shifting customers to a higher cost plan, also termed as premiumisation.
“Our Q3FY23 estimates suggest a deceleration in mobile revenue growth across telcos due to SIM consolidation, lower benefit of premiumisation from slowdown in 4G net add, and absence of tariff hikes," said analysts at ICICI Securities.
Vodafone Idea is likely to lose the most with an expected decline of 6 million subscribers, analysts said, followed by Reliance Jio, which is expected to see a fall of 5 million subscribers in the three months ended December. Airtel is likely to see the least churn with a loss of 2 million subscribers.
Accordingly, Arpu growth is likely to range from flattish to 2.5% for all the carriers taken together on a sequential basis.
For Airtel, Arpu may grow 2% from the previous quarter ended September, from ₹190 to ₹194, while it may be flat for Reliance Jio at ₹177. Vodafone Idea may see Arpu rise the most, by 2.5%, to ₹134 from ₹131.
Consolidated revenues at Airtel, Vodafone Idea and Jio are likely to grow 1.8%, 0.1% and 1.5% on a sequential basis to ₹35,098 crore, ₹10,628 crore and ₹24,653 crore, respectively, the ICICI Securities analysts said. Airtel’s India revenues are likely to grow 0.6% sequentially and 17% from a year earlier to ₹24,700 crore led by the mobile segment.
“We expect Ebitda margin expansion for the operators due to negligible SUC (spectrum usage charges). SUC earlier was 3-3.5% of AGR, but is now negligible on the purchase of spectrum in Jul’22 auctions. Full benefit of low SUC is likely to be reflected in Q3FY23E," they added.
The government has lowered the weighted average of spectrum usage charges on spectrum bought in auctions from 2022 onwards. However, this could be offset by higher network operating costs on rollout of 5G network even though the impact of 5G spectrum purchase on amortization and interest cost will be negligible.
Airtel’s consolidated Ebitda or earnings before interest, taxes, depreciation and amortization is expected to grow 2.6% sequentially and 22.7% from a year earlier to ₹18,000 crore, while India Ebitda is likely to be up 2% sequentially and 23.6% from a year earlier to ₹12,800 crore. Its Africa operations revenue and Ebitda may rise 1% sequentially each to $1.31 billion and $642 million, respectively.
Vodafone Idea’s Ebitda may be flat at ₹4,100 crore due to the benefit of premiumisation and non-mobile revenue growth. However, it is expected to incur a net loss of ₹7,300 crore in the December quarter.
Net profit for Airtel, India’s No. 2 carrier, may be at ₹3,200 crore, benefiting from lower foreign currency losses partially offset by 5G spectrum cost.
Expectations of SIM consolidation following tariff changes by Airtel in two circles in November is likely to be the downside.
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