Telcos to get minimum lift from minimum recharge

KOLKATA: Bharti Airtel’s mobile services revenue in India is likely to see modest sequential growth in the quarter to June while Vodafone Idea’s is slated to stay flattish as the impact of the minimum recharge plans is believed to have subsided substantially, said analysts.

Kotak Institutional Equities said “the minimum recharge construct (MRC) offers no further material on-quarter revenue uplift,” anymore for Bharti Airtel and Vodafone Idea, which is likely to be reflected in “a steady and unexciting quarter for the two wireless players” in the April-June period.

Over the past two quarters, Vodafone Idea and Bharti Airtel had taken recourse to minimum recharge plans to weed out non revenue generating customers and boost average revenue per user (Arpu) which is a key performance metric.


Both Airtel and Voda Idea have been forced into losses for their India businesses, due to the intense price competition since Reliance Jio Infocomm’s entry in September 2016, which had pushed Arpu’s to record lows.

Kotak and Bank of America Merrill Lynch estimate that Bharti Airtel’s India mobile revenue will rise 1.6-2% in the June quarter over the previous three months while Voda Idea’s is likely to see a 0.2% sequential rise.

These brokerages expect Bharti Airtel to report a net consolidated loss in the range of Rs 1,154-1,283 crore, its first in almost 16 years. Vodafone Idea is estimated to narrow losses to around Rs 3,369 crore from Rs 4,878.3 crore recorded in the quarter to March, said analysts at Kotak. They didn’t offer estimates on Jio.

“Better but still bad would be a good way to describe the state of affairs for Bharti Airtel as well as Vodafone Idea as bundled plan adoption and 4G net adds in the prepaid segment have failed to provide the much-anticipated mix – uplift to Arpu and revenues — and we have no reason to believe this would happen in the June quarter of fiscal year 2019-2020,” Kotak Institutional Equities said in a note seen by ET.

Bharti Airtel shares closed flat at Rs 353.40 while Vodafone Idea shares were up nearly about 2% at Rs 11.92 on BSE.

Analysts, however, expect Bharti Airtel and Vodafone Idea to report modest Arpu growth at around 2% and nearly 10% to Rs 127 and Rs 114 respectively in the April-June period. Kotak also estimates Voda Idea to notch up a near 21% sequential jump in quarterly operating income (Ebitda) to Rs 1,920 crore, driven by further progress on delivery of cost synergies.

It also expects the telecom market leader to report sharp quarter-on-quarter fall in net finance costs on account of lower debt balance, following the fundraising via its Rs 25,000 crore rights issue.

Analysts estimate Bharti Airtel’s consolidated revenue to grow 3% year-on-year and 1% sequentially to Rs 20,711.6 crore, helped by a steady show in Africa and strong performance of the DTH business in India.

The Sunil Mittal-led telco’s home broadband business is also estimated to report sequential growth.