March quarter results suggests signal remains weak for telecom companies

The subdued trend in ARPUs is among key concerns

The March quarter or Q4 results suggest the telecom sector is closer to a duopoly. Reliance Jio and Bharti Airtel disappointed in ARPU (average revenue per user) but both continued to register high net subscriber additions, implying Vodafone Idea is losing market share.

Jio Platforms (JPL) posted a net profit of Rs 3,508 crore for Q4FY21, compared to Rs 2,379 crore a year ago, up 47.5 per cent YoY. On a QoQ basis, PAT was flat -- just 0.5 per cent more than Q3FY21. The Ebitda margin improved to 47 per cent, from around 43.5 per cent, QoQ. JPL posted an ARPU of Rs 138.2 per month in Q4, a drop from Q3 ARPU of Rs 151. The company claims a total subscriber base of 426 million, with Q4 gross additions at 31 million.

Bharti Airtel reported a net profit of Rs 759.2 crore for Q4FY21. It had a one-time loss of Rs 5,237 crore a year ago. In Q3, PAT stood at Rs 853.6 crore, meaning a QoQ decline of 11 per cent. The Q4 PAT includes an exceptional gain of Rs 440 crore. Revenue in Q4 was Rs 25,747 crore, up 17.6 per cent YoY but down 3 per cent QoQ. Ebitda at Rs 12,583 crore was up 28.9 per cent YoY and the Ebitda margin was at 48.9 per cent, a rise of 647 basis points.

Airtel’s ARPU was Rs 148, disappointing the Street which hoped for Rs 154. The termination of interconnection usage charges (IUC) in January 2021 has favoured Jio. The Q3 ARPU for Airtel was Rs 166 but about Rs  12 of that came from IUC pay-in.

Airtel gained 13.7 million 4G subscribers in Q4. The Airtel wired broadband service claims a base of 3.07 million and a total global subscriber base of 471 million. The India base is claimed at 350 million, a net addition of 14 million subscribers QoQ. The India mobile subscriber base is 321 million, a net addition of 13 million subscribers.

Airtel’s debt levels remain a source of concern. Core borrowings are 38 per cent of gross debt of Rs 1.62 trillion. The rest is deferred payment liability (Rs 68,200 crore) and lease obligation (Rs 33,000 crore). The net debt for FY21 stood at Rs 1.48 trillion, leading to a net debt-to-equity ratio of 2.5x, up from 1.6x in the previous year.

Both Airtel and JPL are better off than Vodafone Idea (VIL). VIL has struggled to raise Rs 25,000 crore since September 2020 and hopes to raise the last tranche of Rs 7,500 crore by June. VIL has Rs 50,400 crore of AGR dues payable over 10 annual instalments until March 31, 2031. Annual spectrum payment of about Rs 15,500 crore would start from FY23. The VIL subscriber base was 283 million in February, according to Trai.

Data usage spiked in April 2021 during the second wave. Telecom service providers and tower companies have installed 69,000 new mobile towers and invested Rs 9,000 crore in infrastructure since January 2020. However, 5G rollouts would be delayed.

In terms of share price, Airtel has lost ground since it declared results but it is up 12 per cent in the last six months. VIL is down 8 per cent in the same period. It’s impossible to isolate the effect of JPL on the share price of its parent, Reliance Industries.