The Economic Times daily newspaper is available online now.

    Reliance Jio's heat may melt top telcos' revenues: Analysts

    Synopsis

    Airtel, Idea and RCom are likely to report sharply lower earnings in January-March, stung by the second full quarter of Jio's free services, analysts said.

    Untitled-27
    Credit Suisse expects Airtel’s monthly ARPU to dip 4.3% sequentially to Rs 165 and Idea’s to plunge 7.3% to Rs 146.
    MUMBAI: Telcos Bharti Airtel, Idea Cellular and Reliance Communications are likely to report sharply lower earnings in January-March, stung by the second full quarter of Reliance Jio Infocomm’s free services, analysts said.

    The trio may also post a steep fall in monthly average revenue per user (ARPU) as analysts reckon a sizeable chunk of their top-end customers opted for lower-value packs unveiled in response to Jio’s Rs 303 Prime offer.

    Empower Your Corporate Journey with Strategic Skill Courses

    Offering CollegeCourseWebsite
    IIM LucknowIIML Chief Operations Officer ProgrammeVisit
    Indian School of BusinessISB Leadership in AIVisit
    Indian School of BusinessISB Chief Technology OfficerVisit
    Bank of America-Merrill Lynch expects “the full impact of Jio’s free offering and existing consumers of Bharti and Idea down-trending to lower packs will be witnessed” in the quarter ended March. This implies a 6-6.5% decline in cellular revenue for Airtel/Idea from the previous quarter and a 398/540 basis points drop in India cellular Ebitda (earnings before interest, tax, depreciation and amortisation) margins from October-December, the brokerage said.

    Analysts, while predicting a sharp fall in profit, are split on the extent of the drop. Credit Suisse expects Airtel, the No. 1 carrier, to post an almost 45% on-year drop in net profit to Rs 720 crore (from Rs 1,290 crore last year), while BankAm-Merrill Lynch predicts a steeper drop to about Rs 76 crore.

    Idea Cellular may report its second successive quarterly loss. Credit Suisse and Motilal Oswal estimate Idea’s net loss in fourth quarter at Rs 602.5 crore and Rs 992 crore, respectively. BankAm-Merrill Lynch predictsIdea’s loss will be significantly higher at Rs 1,634 crore.

    RCom, the fourth-largest carrier, is expected to report an on-year net loss in the range of Rs 723 crore to Rs 810 crore. Airtel’s consolidated revenue is likely to fall by 7.7-11% on-year from Rs 24,960 crore last year. In Idea’s case, they peg the on-year fall in consolidated revenue in 13-15% range from Rs 9,484 crore last year.

    Credit Suisse said that since January-March saw telcos trying to match Jio’s Prime Rs 303/month plan, this would be “ARPU-dilutive for high-end subscribers” of listed carriers. The Swiss brokerage expects Airtel’s monthly ARPU to dip 4.3% sequentially to Rs 165 and Idea’s to plunge 7.3% to Rs 146.

    Last month, Airtel countered Jio’s Rs 303/month Prime offer with a Rs 345/month plan for prepaid users that dished out an identical 28 GB of 4G data over a month (with a 1GB daily usage cap) and unlimited voice calls to all networks. Idea unveiled a Rs 348 plan offering 14 GB of data over 28 days with unlimited voice calls.

    Analysts at BankAm-Merrill Lynch expect “ARPUs to bottom out for Bharti and Idea in March ’17 quarter as Jio’s free services will end,” but they are quick to say “any material improvement from these levels” will hinge on Jio’s competitive response.


    (You can now subscribe to our Economic Times WhatsApp channel)
    (Catch all the Business News, Breaking News, Budget 2024 News, Budget 2024 Live Coverage, Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the ET ePaper online.

    ...more

    (You can now subscribe to our Economic Times WhatsApp channel)
    (Catch all the Business News, Breaking News, Budget 2024 News, Budget 2024 Live Coverage, Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the ET ePaper online.

    ...more
    The Economic Times

    Stories you might be interested in