Bharti Airtel Ltd. and Idea Cellular Ltd. are likely to see dismal earnings in the July-September quarter, which besides being seasonally weak, will also see the impact of Goods and Service Tax-related disruptions and continued competition from Reliance Jio Infocomm Ltd.
A higher tax incidence under GST may subdue the average revenue per user and earnings before interest, tax, depreciation and amortisation as operators were unable to pass on the hike to consumers due to competitive intensity. The GST on telecom services was fixed at 18 percent versus a 15 percent service tax earlier.
India’s largest telecom operator Bharti Airtel’s revenue may see a marginal decline to Rs 21,754 crore on a year-on-year basis, while that of Idea Cellular could report a 7 percent decline in the topline to Rs 7,619 crore.
Blended average revenue per user for both companies may decline for the fifth quarter in row. In its maiden earnings filing this quarter, Reliance Jio had reported an average revenue per user of Rs 156. The recent revision in its tariff plans could push its ARPUs even higher.
Bharti Airtel’s Africa business will see gradual recovery with topline growth and margin expansion led by cost cuts.
Idea Cellular may report a loss for the fourth straight quarter, to the tune of more than Rs 1,000 crore. EBITDA is likely to decline by more than one-fifth to Rs 1,484 crore.
Tower infrastructure company Bharti Infratel Ltd. will see a 10 percent topline growth and a 12 percent rise in EBITDA. However, net profit is expected to decline 5 percent due to lower other income and higher tax expense.
Tenancy addition in the second quarter is expected to moderate after a record increase in the last quarter. However, slowdown in deployment by Vodafone India Ltd. and Idea Cellular is expected to be offset by Bharti Airtel and Reliance Jio.
Brokerages remain cautious on telecom service operators on heightened competitive intensity, capital expenditure and more than 50 percent cut in the interconnect usage charge but are neutral on the tower business on the back of moderate rollouts by incumbents and some business loss from smaller players who are in financial stress.
Bloomberg Quint
