Telecom sector Q1 outlook: Brokerage houses expect muted quarter

Q1 revenues for telecom companies are likely to reflect the impact of curbs during the second wave of Covid-19 infections. Sluggish smartphone sales, free recharges which were doled out by companies for the bottom-of-the-pyramid subscribers and an overall moderation in subscriber additions are expected to lead to a muted quarter.

Emkay Global research in its report has mentioned, “On the subscriber addition front, Jio is expected to
outpace Bharti with 5mn adds, while Bharti’s subscriber base is assumed to be flat sequentially. Jio’s outperformance would be partially driven by the full impact of JioPhone tariffs launched in Feb’21. Vodafone Idea is expected to see a contraction of 4mn in its subscriber base along with a 2% decline in ARPU.”

Bharti Airtel 

Wireless revenues and ARPU are anticipated to stay stable sequentially. Mix improvement will get offset by free recharges and moderation in data subscriber adds. The African business should see a rebound in revenues and profitability.

ICICI Direct report says “The reported ARPU is likely to be flattish QoQ at Rs 145. Indian wireless revenues are expected to be flattish QoQ at Rs 14,085 crore. India non-wireless revenues traction is
expected to remain robust especially broadband and enterprise. Africa is likely to witness revenue growth of 2% QoQ to Rs 7753 crore. Consolidated reported revenues are expected to be up 1.5% QoQ at Rs 26,121 crore. We expect India EBITDA margins at 49%, flattish QoQ. Africa margins are expected to be stable QoQ at 47.5%.”

Jio

Sector analysts say that revenues are forecasted to rise 1.4% (QoQ), supported by subscriber additions of 5 million although they were lower than the average of 9.7 million in the last four quarters.

Vodafone Idea

ICICI Direct in its report mentions, “We expect churn for Vodafone Idea to remain controlled as network integration is complete. However, we do not expect any improvement in addition given the lockdown impact amid second wave. Reported margins are expected at 41.6%, down 430 bps QoQ. The company is
expected to post a net loss of Rs 6674 crore.”

Emkay Global on the other hand believes a fund-raising announcement and government support are crucial for the survival prospects of the company, especially considering cash and cash equivalents of just Rs 3.5 bn at FY21-end.

Indus Towers

Emkay global report suggests that revenues are projected to rise, boosted by a jump in energy reimbursements, driven by the rise in diesel prices. On the other hand, rental revenues should increase 2% sequentially. Energy margins are forecasted to break-even after a few quarters of negative margins.

Tata Communications

Sector analysts expect the high base in the previous year on account of increased adoption of data solutions fuelled by the work-from-home trend, along with continuing challenges in deal conversion, should result in a subdued quarter.

ICICI Direct reports says, “Consolidated EBITDA is expected to grow 10.6% QoQ at Rs 229 crore while EBITDA margins for the quarter are expected to decline 40 bps QOQ to 17%. Reported PAT at Rs 91.4 crore is expected to be down 27% QoQ driven by weak operating performance sequentially.”

Top Picks

ICICI Direct: Bharti Airtel, Tata Communications

Emkay Global:   Tata Communications, Bharti Airtel