We expect another quarter of weak earnings prints for the wireless names as well as Bharti Infratel as postpaid re-pricing, continued prepaid average revenue per user (ARPU) down-trading, seasonality and initial impact of Jio monsoon hungama result in a higher sequential revenue decline for the wireless names and loss of Vodafone-Idea tenancies hits financials. Tata Communications is likely to report a slightly better quarter. We remain cautious on Idea and Bharti Infratel, and constructive on Bharti and Tata Communications.

Four factors driving higher sequential revenue pressure for the incumbents are:

# Accelerated postpaid re-pricing as the incumbents look to protect their postpaid subs base from switching to R-Jio.

# We are perhaps getting close to the end of the downward ARPU shift in this segment (prepaid mobile broadband subs).

# We note that Jio’s bundled pricing approach protects them from this aspect.

# Our channel checks suggest that Jio has seen a higher degree of success with this (monsoon hungama) plan than it did with the initial JioPhone plan. Given that this plan involves exchange of customer’s old feature phone for JioPhone, it also means the spending on the new SIM goes down to zero. Impact on the incumbents will likely increase from the third quarter onwards as the impact in the second quarter was limited to less than half a quarter.

We expect all these factors to drive a sharper sequential pressure on incumbent revenues. For Bharti, we bake in 3 per cent QoQ decline in reported India wireless revenues (3.5 per cent organic). For Idea, we expect a 5.7 per cent like-on-like (Vodafone+Idea, full-quarter proforma) QoQ decline in wireless revenues. On a reported (Idea+1 month of Vodafone for Q2) basis, we expect Idea to report a 28 per cent QoQ growth in revenues to Rs 76 billion. We expect Bharti to report a 16 per cent QoQ and 45 per cent YoY decline in India wireless Ebitda and Idea to report a 6 per cent QoQ Ebitda growth on a reported basis; on a like-on-like basis, we estimate a 34 per cent QoQ and 71 per cent YoY Ebitda decline.

We note that this is after baking in some initial merger cost synergy gains.

Bharti Infratel’s financials are likely to look weak on account of the one-month impact of the Vodafone-Idea tenancy exits even as we believe the company has seen a slight pickup in gross tenancy additions primarily from R-Jio. We expect a 4.5 per cent QoQ and 10.1 per cent YoY decline in Ebitda and around an 8 per cent QoQ as well as YoY decline in recurring PAT for Bharti Infratel. We bake in a net EOP-to-EOP tenancy decline of 24,695 driven by Voda-Idea merger impact of 27,447 as announced by the company. We do note that Bharti Infratel’s reported rental/tenant could see a spike driven by the inconsistency between the numerator (revenues) and denominator (tenancies) of the equation.

For Tata Communications, we expect a modest 3 per cent sequential improvement in Ebitda led by a slight improvement in the revenue growth trajectory in the traditional data business and further reduction in Ebitda losses in the growth services segment.