Bharti Airtel may report weak Q4 FY18 earnings on IUC cut, PAT likely to fall over 85% YoY

Brokerage expect Bharti Airtel to report a weak March quarter, owing to pressure on financials due to a cut in the interconnect usage charge and reduced average revenue per user (ARPUs), among others.

A Reuters poll of analysts estimates the company to report a net profit of Rs 127.89 crore for Q4 FY18, a huge dip from Rs 978.9 crore reported during the same quarter last year. It implies a massive 87 percent YoY drop. In the previous quarter too, the company had reported a profit after tax of Rs 545.3 crore.

Reuters estimates peg revenue to be Rs 19,659.96 crore against Rs 21,934.6 crore YoY. Last quarter, the same stood at Rs 20,318.6 crore.

Brokerage IDFC Securities said drag on the India wireless business may be due to cut in IUC charges as well as price erosion. It sees ARPU around Rs 115 and a stable quarter for its Africa business.

HDFC Securities said that while IUC cut will hit Bharti's financials, ARPU pressures on the back of bundled plans for subscribers ‘will exert pressure on revenues of incumbents’.

IDFC Securities believes guidance on capital expenditure holds key to Bharti's prospects. HDFC Securities is also looking at the company's capex outlook, its trajectory on ARPU remains to be seen. “ARPU should bottom out in Q1 FY19 and the management's commentary on ARPU trends would be the topmost on investor's minds,” it added.

As such, research firms are expecting a subdued quarter for the telecom space. In an April report, Jefferies said both Idea and Bharti were likely to face pressures along with a decline in ARPUs. But this fall could be partly offset by subscriber addition. The brokerage also expects margins to moderate 200 basis points QoQ, led by increased costs.

Deutsche Bank said the period of consolidation in the telecom space was over and investors need to prepare for inevitable revenue recovery. It expects industry revenue to decline 9 percent YoY in FY19.

In terms of revenue market share, Idea-Vodafone stands at 37 percent, followed by Bharti Airtel and Reliance Jio at 36 and 25 percent, respectively.

Its shares have lost close to 20 percent in the last six months, while in the past three-day it has gained over a percent.