While Bharti Airtel’s average revenue per user (ARPU) is expected to continue showing strong growth sequentially at Rs 204, its consolidated performance is expected to be slow due to stress on the Africa business due to the depreciation of the Nigerian naira, which the management had cited in its first-quarter earnings call.
“During 2QFY24, we expect steady growth of 3-4% QoQ for Bharti/Jio, with strong subscriber additions for Jio and stable additions for Bharti and a 2% QoQ ARPU growth for Bharti/Jio,” analysts at Jefferies have said.
According to JP Morgan, “We expect (Vodafone) Idea to report flat revenues as 2% ARPU (average revenue per user) growth will be offset by subscriber decline.”
Jio and Airtel are likely to report customer additions of 9 million and 4 million, respectively, in the second quarter, largely at the expense of Vi, which is expected to lose 4.5 million subscribers. That underlines Vi’s continuing inability to compete with the two bigger rivals, exacerbated further by its failure to launch 5G services, brokerage JM Financial said in its report. The companies are expected to report second-quarter earnings in the next few weeks.
Analysts forecast a stable quarter revenue-wise for the telcos.“With stable tariffs over the past year, we expect the Indian telecom industry revenue to grow by 8-9% y-o-y in 2QFY24, assuming an improving subscriber mix as more customers adopt 4G services,” BNP Paribas said in a recent report.The brokerage added that both Airtel and Jio should see healthy double-digit sales growth on the back of recent market share gains. The initiation of 5G monetisation will also help revenue growth.
“Airtel and Jio have expanded their 5G coverage and have taken the first step towards monetising 5G by launching AirFiber services,” the report said.
Average revenue per user, as a consequence, is expected to grow sequentially, benefitting from an additional day in the quarter.
“ARPU growth would be driven by improving subscriber mix and one extra day in 2Q,” the Jefferies analysts said.
Airtel however may face headwinds with regard to consolidated numbers due to the stress on its Africa business.
“Nigeria, which contributes 40% to Airtel Africa’s revenue, has seen 40%+ currency depreciation vs the USD, after the country let the naira float,” IIFL analysts observed. Airtel Africa had said in a filing that every 1% depreciation of the naira against the dollar results in a hit of $22 million and $12 million on annualised revenue and ebitda, respectively, they added.
The impact of this on earnings before interest, taxation, depreciation and amortisation (EBITDA) in the first quarter was to the tune of $24 million. In the second quarter, analysts expect an incremental sequential hit of $115 million.
