Tariff hikes could bring good & bad news for telcos

Kolkata: Bharti Airtel is likely to post stronger sequential revenue growth in the fiscal second quarter ended September compared with rivals Reliance Jio and Vodafone Idea, on the back of recent rate hikes and strong mobile broadband user additions, analysts said.

The tariff hikes taken in July are expected to give a solid push to the average revenue per user (ARPU) of all the three private telcos-Airtel likely the most-but they will also see a loss of users due the higher prices, with state-run Bharat Sanchar Nigam (BSNL) gaining, they said.

Airtel is expected to see the least overall subscriber losses due to a lower base of price-sensitive customers, experts added.

Jio's revenue growth from tariff hikes is likely to be staggered as it has more customers on longer-validity plans, they said.

"Estimated revenue growth in Q2FY25 has divergence, largely from subs (subscribers) mix and impact of SIM consolidation. Subs decline is likely steeper for Jio with net loss of 12 million, followed by six million for Vi (including one million 4G subs). Airtel's subs dip will be lower at 3.5 million," ICICI Securities said in a research note seen by ET.

Analysts, though, expect the full impact of the July tariff hikes to be visible only by the December quarter. All three private carriers raised rates by around 11-25% in early July, in the first wide-ranging headline price hikes in the telecom sector since November 2021.

Airtel's ARPU is estimated to jump 9.2% sequentially to ₹230 in the second quarter while both Jio and Vi are likely to report 6% on-quarter uptick on this key performance metric to 193 and ₹155, respectively, ICICI Securities said. That is because Airtel will be helped by good 2G-to-4G/5G conversions-resulting in five million 4G/5G user net adds-and rising postpaid adoption.

JM Financial sees a higher ARPU requirement for Jio to justify its significant 5G capex and also given Jio's potential IPO, going forward.

ICICI Securities estimates Airtel's September quarter India revenues to increase 7.2% sequentially, while Jio and Vi's are slated to grow by 5.6% and 3.8% on-quarter, respectively.

"Unlike Bharti and Vi, where we expect large benefit of tariff hikes to be front-loaded, for Jio we expect the benefit to be reflected over the next three-four quarters as a larger proportion of the latter's users are on one-year packs and/or they recently topped up recharges," BofA Securities said.

Analysts, though, expect Jio to report the highest growth in data usage levels among private carriers in the September quarter as rising appetite for its 5G-based fixed wireless access (FWA) service, Jio AirFiber, continues to drive wired broadband growth. JM Financial estimates Jio's average monthly data usage (AMDU) per subscriber to grow 3.4% sequentially to 31.3 GB in Q2FY25.

By contrast, Airtel and Vi's AMDUs per subscriber are slated to rise 0.5% and 1.4% sequentially to 23.8 GB and 15.8 GB, respectively, the brokerage said.

ICICI Securities estimates Airtel's Q2 consolidated net profit to rise by 3.6% on-quarter to ₹4,311.4 crore, further helped by sequential revenue and operating income growth of its Africa operation. "Bharti Africa's dollar revenue is estimated to grow 4% QoQ to $1.1 billion and Ebitda to grow 4.4% QoQ to $542 million," it said.

Jio's net profit in the fiscal second quarter, in turn, is estimated to increase by 7.6% sequentially to ₹5,858.2 crore.

Analysts estimate Vi's September quarter net loss to widen to around ₹6,616 crore amid continuing customer losses.