Q4FY20 RMS trend: One-off quarter for Bharti and Jio
* AGR for the industry, including NLD, clocked a 10.5% qoq and 27.4% yoy increase, one of the highest-ever gains driven by tariff hike, to stand at Rs402bn. However, NLD revenues dropped 3% qoq on a 22% fall recorded by Bharti, while Jio and VIL were flat.
* Bharti saw a 9.2% rise in AGR (including NLD) combined with TTSL, with the latter growing at a faster pace. RMS declined 39bps sequentially to 31.9% due to weak NLD revenues, while excluding the same, RMS improved 172bps qoq.
* Jio’s AGR rose 6% qoq, with NLD revenues remaining flat. This led to a RMS loss of 139bps qoq to 34%. We expect RMS to rebound as impact of the tariff hike is yet to reflect in revenues. It commands number one position in 15 circles vs 17 circles in Q3FY20.
* After losing market share for the last few quarters, VIL recorded a 98bps increase in RMS, accompanied by a 15% rise in AGR, including NLD. We reiterate that stability in subscriber base and clarity in the ongoing AGR case are key for the company.
AGR for the industry, including NLD revenues, rose 11% qoq and 27% yoy to stand at Rs402bn in Q4FY20. This sequential growth was driven by: 1) sustained growth in Bharti’s and Jio’s revenues; 2) VIL clocking a revenue rise for the second-consecutive quarter, with sequential AGR growth in Q4FY20 being higher than Bharti and Jio; 3) 30% jump posted by BSNL, which is attributable to the sharp rise in its NLD revenues; and 4) significant surge of 33% for TTSL. In a change in trend, Bharti and Jio lost RMS, while VIL posted a 98bps gain, after a few quarters of decline. However, note that all comparisons, unless specified, are based on AGR due to the non-availability of circle-wise NLD revenues. Our circle-wise analysis is based on AGR (ex-NLD).
Jio: AGR, including NLD, grew 6% qoq to Rs137bn in Q4FY20. RMS contracted 139bps qoq, while expanding 234bps yoy to 34%. Jio continues to enjoy a strong position in B and C circles and commands number one position in 15 circles, a decrease from 17 circles in the last quarter. JIO lost pole position in Maharashtra and AP. We believe that the RMS for the quarter is an aberration and Jio will revert to adding RMS as the impact of the tariff hike initiated in Dec’19 is yet to reflect.
Bharti Airtel (including TTSL): Including NLD, AGR rose 9%/40% qoq/yoy to Rs128bn. RMS contracted 39bps qoq, restricted by the gain posted by TTSL (+28bps qoq) to 31.9%. NLD revenue was down 22% qoq to Rs24bn, impacting RMS on a standalone basis. Bharti reported qoq revenue increases in key circles such as Gujarat (+40%) and Maharashtra (+20%), while J&K continued to decline. Revenue from Top-7 circles increased 18% qoq and contributed 59% to its total revenues.
Vodafone-Idea (VIL): For the second-consecutive quarter, VIL posted an increase in AGR, including of NLD, of 15%/8% qoq/yoy, taking the AGR, including NLD to Rs109bn. In addition, RMS improved by 98bps qoq while contracting 502bps yoy to 27.2%. Sequential revenue growth was boosted by rise in major circles such as Delhi (+31%), Maharashtra (+23%) and Gujarat (+25%). Of the 22 telecom circles, only two circles reported qoq declines, which is a significant change from the usual trend. AGR for the Top-7 circles, which contribute 62% to total revenues, was up 21% qoq
Others: Boosted by NLD revenues, which have been volatile over the past few quarters, BSNL posted a sharp 30% increase in revenue, with RMS improving 93bps qoq to stand at 6.3%. Further, MTNL reported a 13% qoq increase in AGR.
We maintain OW on Bharti and UW on VIL in EAP
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