The first quarter of financial year 2019-2020 is likely to be better for the incumbent telecom players, given that the continuous slide in revenues has been arrested. However, highly leveraged balance sheets would require more meaningful support at profit and loss (P&L) level, which is still missing. Both Bharti Airtel and Vodafone Idea Ltd's (VIL's) net losses are estimated to narrow on a sequential basis - a trend similar to the previous quarter - on the back of higher average revenue per user (Arpu).
According to analysts, the benefit from minimum recharge scheme for both Bharti and VIL is more or less complete and is unlikely to provide any sequential revenue uplift in the April-June quarter versus the quarter ended March 31 - a factor that has supported revenues in the last two quarters.
"Even as like-for-like pricing has been stable for the past few quarters, incumbents continue to see net negative impact of consumers trading up and trading down on the ARPU axis," analysts at Kotak Institutional Equities said in a recent note.
Arpu for both Bharti and Vodafone is expected to rise further during the quarter. While for Bharti it could see a 2% sequential jump to `127 per month, for VIL the increase is estimated to be much higher, by about 10% quarter on quarter to `114 per month, due to sharp decline in average subscriber base. At these levels, Bharti’s Arpu will cross Reliance Jio’s Arpu at `126 in Q4FY19.
Estimates for Jio’s Q1FY20 have not been shared by analysts as yet. In the quarter ended March 31, VIL had witnessed a sharp rise in company's Arpu to `104 compared to `89 in the previous quarter. Bharti had reported an Arpu of `123 versus `104 in the preceding quarter.
Overall, the quarter is likely to be steady for Bharti as it is expected to report a 1.6% q-o-q growth in wireless revenues. VIL’s revenues are expected to remain flat, largely on the back of higher number of days in the June quarter versus March.
"In summary, a calm quarter on the wireless revenue front-'better' as the declining trend of 2HCY16-2HCY18 seems to be behind but still 'bad' as the stretched balance sheets (in slightly better shape post the rights issues, to be sure) continue to need sharp improvement in P&Ls," KIE analysts said.
Subscriber additions to 4G and bundled plan adoption are unlikely to impress as well during the quarter, according to analysts.
For Bharti, consolidated revenues and Ebitda (earnings before interest tax depreciation and amortisation) are estimated to be Rs 21,000 crore and Rs 6,700 crore in Q1FY20, up 2% and 0.8% q-o-q. The Ebitda for the wireless segment is likely to be down 3% q-o-q on a reported basis to `2,490 crore. VIL, though expected to report weak revenue performance, steady progress is expected on cost synergies.
For VIL, revenues are estimated at `11,800 crore, flat on a q-o-q basis. Analysts expect a sharp jump in Ebitda to Rs 1,920 crore (from `1,590 crore in 4QFY19, adjusted for one-off cost reversals) on the back of further progress on delivery of cost synergies. Net finance costs should see a sharp sequential decline on account of lower debt balance post the `25,000 crore rights issue.
However, data traffic growth for VIL is expected to continue at sub-10% for another quarter versus 13-15% sequential growth expected for Bharti and Jio.
In Q4FY19, the data volumes for VIL had increased 8.9% q-o-q to 29,47,472 million megabytes. The growth was slower compared to a 11.5% increase witnessed in Q3FY19, and less than a third of Jio.