The telecom sector is expected to report a loss for the eighth straight quarter. For Q1FY20, the sector is expected to post a loss of Rs 4,200 crore, according to a report by Motilal Oswal.
The telecom sector is expected to report a loss for the eighth straight quarter. For Q1FY20, the sector is expected to post a loss of Rs 4,200 crore, according to a report by Motilal Oswal. The brokerage expects the sector to be in loss for all the four quarters of FY20.
As per its report, the sector, on an overall basis, has reported a PAT of Rs 0 in the September quarter of FY18. Since then, there has been no recovery in the sector. In December quarter of FY18, the sector had a loss of Rs 300 crore, which rose to Rs 4,700 crore in the March quarter of FY19.
The sector reported a loss of Rs 200 crore in March quarter of FY18, Rs 1,200 crore in Q1FY19, Rs 4,800 crore in Q2FY19, and Rs 6,600 crore in Q3FY19, the report noted.
The sector has been under pressure since the launch of Reliance Jio, which grabbed the market share of top telecom providers. In 2019 alone, Reliance Communications tanked 89 percent, Vodafone-Idea lost 56 percent and Tata Communications declined 10 percent. However, the Bharti twins — Bharti Airtel and Bharti Infratel — rose 19 percent and 5 percent, respectively in this period. The BSE Telecom index has fallen 2 percent in 2019 as compared to a 5 percent rise in the BSE Sensex.
Going ahead, the rollout of minimum recharge plans by providers is likely to have a limited impact on average revenue per user (ARPU) now as the impact was majorly captured in 4QFY19. The brokerage believes that the downtrading of price plans by customers is also largely over and will have minimum impact on the revenues this quarter.
With Jio’s rising subscriber market share, competitors interconnection usage charge (IUC) revenue should continue to decline before it reduces to zero by 4QFY20 as per the TRAI policy, MOSL added.
Bharti Airtel is expected to report a net loss of Rs 630 crore in this quarter but the consolidated revenue is expected to remain flat QoQ and up 3 percent YoY at Rs 20,600 crore, MOSL estimated.
India wireless revenue is likely to grow 1.1 percent QoQ to Rs 10,750 crore, as the benefits of the ARPU uptick (from the rollout of minimum recharge plans) will outweigh the decline in subscribers, it added.
The brokerage has further raised its weightage in Bharti Airtel as it believes the ARPUs have bottomed out and balance sheet deleveraging is in place.
For Vodafone Idea, MOSL expects the net loss to narrow to Rs 9,840 crore and the revenue to remain flat QoQ at Rs 11,880 crore as the uptick in ARPU will be largely offset by the decline in subscriber base and revenue dilution from IUC.
Despite flat revenue, EBITDA is likely to grow 6 percent to Rs 1,890 crore on the back of merger synergies, it added.
The brokerage has a 'buy' call on both the telecom providers.
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Disclosure: RIL, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.