Telcos are in for a tough quarter as analysts predict a 3 per cent fall in average revenue per user (ARPU) on a sequential basis during the second quarter. This is likely to result in a 3-5 per cent decline in India wireless revenues.
ARPUs are expected to bottom out gradually in the September quarter. However, for the quarter, telcos would have to bear the brunt of higher foreign exchange costs, diesel price uncertainties as well as strong competition from some of Jio’s recent offerings.
In the June quarter, ARPU declined by 8.8 per cent for Airtel (Rs 105), 4.8 per cent for Idea (Rs 100), 3.3 per cent for Vodafone (Rs 102) and 1.9 per cent for Reliance Jio (Rs 135), respectively, on a quarter-on-quarter (QoQ) basis.
“Given that this plan involves the exchange of the customer’s old feature-phone for JioPhone, it also means that spend on the incumbent SIM goes straight down to zero. Impact on the incumbents will likely increase from 3Q as the impact in 2Q was limited to less than half a quarter,” said Rohita Chordia, research analyst, Kotak Institutional Equities, in a report.
He expects Bharti Airtel to report 3 per cent QoQ decline in India wireless revenues and a 5.7 per cent decline for Vodafone Idea (based on their independent performances).
Some analysts are of the view that the industry’s revenue is likely to improve in the short term in the wake of slower 4G subscriber addition in July. This will also slow down the price war in the industry.
“We expect (for Bharti Airtel) full quarter impact of the merger with Telenor on ARPU, contributing to ARPU decline. But for India mobile business, we see stable trends in other segments,” said Sunil Tirumalai, research analyst, Credit Suisse, in a report. The report estimates a 3-4 per cent decline in the sectoral ARPU.
BNP Paribas estimated a revenue decline of 3.1 per cent for Airtel, 5 per cent for Idea and 4 per cent for Vodafone, respectively.
Incumbents will see the impact of JioPhone’s new offer (in addition to the seasonal weakness), increased segmented offerings resulting in lower pre-paid ARPU, higher pressure on post-paid ARPU and impact from higher diesel costs, noted IIFL Institutional Equities in a report.
“We estimate around 3 per cent and 5.8 per cent dip in QoQ India mobile revenue for Bharti and Vodafone-Idea, respectively. Jio should see a 10 per cent QoQ revenue growth aided by healthy uptake of JioPhone,” said GV Giri, research analyst IIFL. It is to be seen how the ruling on Aadhaar-based KYC will impact the players, especially Reliance Jio.
”Jio has been the price-setter for the sector; In 2Q, the company has only tweaked its plans with limited period offers and tie-ups with payment wallets, showing moderation in (Jio’s) pricing aggression,” said Ravi Menon, research analyst, Elara Capital.