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Published on 3/08/2020 12:39:36 PM | Source: Motilal Oswal Financial Services Ltd

Telecom Sector Update - Industry revenue growth robust on tariff hikes in Dec`19 By Motilal Oswal

Posted in Broking Firm Views - Sector Report| #Telecom Sector #Motilal Oswal #Sector Report

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Industry revenue growth robust on tariff hikes in Dec’19

* The Telecom Regulatory Authority of India’s (TRAI) 4QFY20 industry report reflects strong revenue growth due to the benefit of price hikes taken in Dec’19. Industry revenue (AGR incl. NLD) increased 11% QoQ (21% YoY) to INR398b while gross revenue was up 7% (11% YoY) to INR565b in 4QFY20.  RJio’s revenue growth (AGR incl. NLD) stood at 6% YoY (in line with growth reported by the company). However, we note a discrepancy in Bharti/VIL’s revenue growth (AGR incl. NLD) at 8.1%/15.5% (v/s company reported growth of 16%/6%), which could potentially be due to provisioning/write-back adjustments. Subsequently, RJio’s market share has declined 150bp to 34.3% (70bp QoQ to 30.6%); however, RJio still retains the top spot in AGR market share. VIL’s market share has grown 110bp to 26.4%.

* Even on gross basis, RJio’s market share declined 40bp QoQ to 30.5% – the company ranks #2 on gross revenue market share. Bharti’s gross revenues grew 6% QoQ, but its market share fell to 34% (-20bp QoQ); however, Bharti continues to rank #1 on gross revenue market share. VIL’s gross revenue market share remained flattish at 28.9% (- 10bp). Surprisingly, BSNL witnessed 25% QoQ growth in gross revenue market share.

* In gross revenue terms (in 22 circles), Bharti gained market share in 20 circles and is ranked #1 in 10 circles, RJio leads in 6 circles while VIL is ranked #1 in 6 circles. On an AGR basis (in 22 circles), Bharti gained market share in 19 circles and is now ranked #1 in 5 circles, RJio leads in 15 circles and is ranked #2 in the rest 7 circles, while VIL is ranked #1 in just 2 circles.

* RJio’s ARPU growth stood at a mere 2% QoQ while Bharti/VIL’s ARPU grew 25%/8%. RJio’s ARPU growth should outpace that of Bharti/VIL in FY21 due to majority of the price hike benefits accruing; however, this could be partly offset by higher growth in low ARPU Jiophone subscribers. VIL’s continued subscriber loss could impact its revenue market share. We expect industry revenue growth to remain healthy as ARPUs may inch up over time

 

Industry adjusted AGR/GR jumps 11%/7% QoQ

Industry’s adjusted AGR* increased 11% QoQ (+21% YoY) to INR398b in 4QFY20. Gross revenue was up 7% (11% YoY) to INR565b. This rise in industry’s revenue is on account of ~25% tariff hikes taken by all telecom operators in Dec’19. RJio’s revenue growth (AGR incl. NLD) stood at 6% YoY (in line with growth reported by the company). However, we note a discrepancy in Bharti/VIL’s revenue growth (AGR incl. NLD) at 8.1%/15.5% (v/s company reported growth of 16%/6%), which could potentially be due to provisioning/write-back adjustments.

 

Bharti maintains number one position

Bharti’s gross revenue grew 6% QoQ to INR192b. The company’s market share, however, declined 30bp QoQ to 34% but it continues to lead the market in gross revenues. Bharti’s focus remains on improving subscriber mix and up-trading of subscribers with minimum churn ratio, which is expected to drive revenues, despite subscriber base growing at a slower pace.

 

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