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    End of IUC dents telcos revenues; tariff hikes critical, Bharti Airtel top pick, says CLSA

    End of IUC dents telcos revenues; tariff hikes critical, Bharti Airtel top pick, says CLSA

    End of IUC dents telcos revenues; tariff hikes critical, Bharti Airtel top pick, says CLSA
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    By Ankit Gohel   IST (Updated)

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    With the end of interconnection usage charges (IUC), the combined revenues of the top three telecom companies in India declined seven percent sequentially to Rs 41,000 crore in the quarter ended March 2021.

    With the end of interconnection usage charges (IUC), the combined revenues of the top three telecom companies in India declined seven percent sequentially to Rs 41,000 crore in the quarter ended March 2021.
    Bharti Airtel's revenue fall was lowest at 4.7 percent QoQ followed by Reliance Jio at six percent QoQ decline. Vodafone Idea (VIdea) had the highest 11.8 percent sequential decline in revenues even as its mobile subscriber loss decelerated to two million versus 21 million in 9MFY21 and 4G additions were four million.
    The average revenue per user (ARPU) declined for the aforementioned companies with the end of IUC. Bharti Airtel’s ARPU at Rs 145 was ahead of Reliance Jio at Rs 138 and VIdea at Rs 119 when RJio/VIdea include enterprise revenues in ARPU.
    "The cost comparison of three telcos available as India operations (including mobile and non-mobile) shows access charges, which were 8-14 percent of revenues, have declined with the end of IUC," brokerage firm CLSA said.
    Reliance Jio had a high 88 percent QoQ decline in access charges versus 55-60 percent QoQ fall for Bharti Airtel/VIdea.
    Meanwhile, VIdea is reeling under an enormous $24 billion debt yet management is confident of fundraising.
    The Aditya Birla group firm VIdea and Sunil Bharti Mittal-led Bharti Airtel are awaiting a Supreme Court hearing on correction of errors in AGR demands.
    “In absence of relief, VIdea is headed for financial crisis with $24 billion debt, of which 88 percent is for spectrum and AGR yet management is confident of fundraising $3.4 billion. Meanwhile, tariff hikes are critical and Bharti will raise rates albeit not unilaterally,” CLSA noted.
    Bharti Airtel Ebitda growth at four percent QoQ was ahead of Reliance Jio at two percent QoQ and VIdea at three percent QoQ, the brokerage said in a report.
    In Q4FY21, the combined data traffic of these three telcos’ was up seven percent QoQ and 32 percent YoY led by Bharti Airtel.
    “Share gains for Bharti Airtel will likely continue as 4G penetration is at 56 percent of its 321 million subscribers. Bharti Airtel data usage per subscriber at 16.8GB/month is 27 percent ahead of leading 4G player RJio,” CLSA said.
    Bharti Airtel remains CLSA’s sector pick with 4G penetration at 56 percent of its own 321 million India mobile subscribers, gearing at 3x Ebitda, and stock valuation at 6x EV/Ebitda for FY23CL.
    (Disclosure
    : Reliance Industries Ltd, which owns Jio, is the sole beneficiary of Independent Media Trust that controls Network18, the parent company of CNBCTV18.com.)
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