Telcos to show steady ARPU improvement in Q3

NEW DELHI:  Reliance Jio is set to kick off the third quarter earnings season for India’s telecom sector on Friday and analysts expect that all three telcos private sector telcos—the other two being Bharti Airtel and Vodafone Idea—will disclose improvements in key metrics for the period.

All three are expected to record increases in their average revenue per user (ARPU). But TRAI’s subscriber data indicates that stressed Vodafone Idea’s subscriber base has continued eroding during the period even as rivals Bharti Airtel and Reliance Jio expanded their subscriber network. 

According to analysts at Motilal Oswal Financial Services, ARPU improvement in Q3 compared to the previous quarter is estimated at 3 per cent for Jio and 1.5 per cent for Airtel.

“We expect VIL’s ARPU to improve 2.5 per cent (during the period) led by the churn of low-ARPU feature phone customers during the lockdown and the benefit of an increase in customer traction and select postpaid price plans,” said a research report from the brokerage firm.

Bank of America Securities (BofA Securities) noted that in terms of revenue, all telcos are likely to show stable revenue and improvement in ARPU.

Motilal Oswal also noted that apart from the benefits derived from the improving subscriber mix, shifting toward 4G, ARPU improvements are also likely to be driven by the return of feature phone recharges that had been earlier impacted by stricter lockdowns.

As for revenues, BofA Securities estimates “Bharti to show 4.8 per cent q-o-q (quarter on quarter) growth in India cellular revenues versus 3.6 per cent/2 per cent for Jio/VIL”.

Bharti Airtel, which has begun beating Jio in terms of subscriber additions over the past few months, is likely to have emerged the beneficiary of SIM consolidation at the lower end of the market. According to Axis Capital, Jio’s net subscriber additions “will be muted” and the churn rate would remain elevated. “We expect net additions for Jio to remain relatively modest at 7 million (versus 7.3 million in Q2). Farmers’ protests in states like Punjab and Haryana had an impact, in our view,” BofA Securities said.

Analysts’ take: What to expect

Average revenue per user (ARPU) improvement in  Q3 compared to the previous quarter is estimated at 3 per cent for Reliance Jio VIL’s ARPU to improve 2.5 per cent and 1.5 per cent for Airtel.

All three telcos are likely to show stable revenue growth.