Published on 3/12/2020 12:11:52 PM | Source: ICICI Direct

Telecom Sector Update - Stable quarter expected for telcos By ICICI Direct

Posted in Broking Firm Views - Sector Report| #Telecom Sector #Sector Report #ICICI Direct

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Stable quarter expected for telcos!

We expect both subscriber and ARPUs to remain firm in an otherwise seasonally weak quarter given a) return of migrants to cities, b) continued higher data usage and thereby pack upgrades and c) improved availability of recharges both digitally/physically as cities/towns have largely restarted post lockdowns. For Bharti Airtel (Airtel), we bake in subscriber addition of ~3 million (mn), while for Vodafone Idea (VIL), we expect sub loss of ~3 mn (much lower than average churn of ~10 mn seen in the last four quarters). For Airtel, reported ARPU is likely to see ~2% QoQ growth at | 160. Indian wireless revenues are expected to see 2.6% QoQ growth at | 13,213 crore. For Vodafone Idea, with ARPU growth of ~3% QoQ at | 117, we expect overall revenues to grow 0.9% QoQ at | 10,753 crore.


Bharti to grow EBITDA; VIL to witness decline QoQ

For Airtel, we expect sequentially flattish India EBITDA margins at 44.3% Africa margins are expected to be stable QoQ at 44%. Reported EBITDA at | 10,660 crore is expected to grow 2.4% QoQ with margins expected at 43.5%, flattish QoQ. For Airtel, we expect a net loss of | 167 crore. For Vodafone Idea, we expect margins of 36.4%, down 200 bps QoQ as Q1 had one-off benefits of | 300 crore in licence fee and network & IT cost. The company is expected to post a net loss of | 5892 crore.


Infratel to report muted numbers

For Infratel, we expect net tenancy addition of ~1600. We expect 0.4% QoQ growth in rental revenues at | 2252 crore, also aided by some catchup exit charge of Q1. Overall margins are expected at 50.5%, flattish QoQ. Key monitorable will tenancy addition outlook.


Stable Q2 for TCom; STL to witness weak quarter

Tata Communication (TCom) is likely to report a stable performance. Overall revenue is expected to grow 1.3% QoQ (4.4% YoY) at | 4459 crore driven by 2.8% QoQ (~9% YoY) data segment topline while voice business is expected to decline ~5.4% QoQ (down 13.5% YoY). Overall margins are expected at 23% (down 70 bps QoQ as Q1 had one-off costs benefits). Sterlite Tech (STL) is expected to witness the impact of weak product demand as well as some Covid-19 impact on services segment execution resulting in 19%, 31% decline in topline, EBITDA, respectively. PAT is expected to decline ~60% YoY given the incremental depreciation and interest of new capacity


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