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We expect revenue and EBITDA growth for telecom companies to be moderate at 2-4% QoQ in 2QFY23; growth is likely to be aided by MBB upgrades-led growth in ARPU. The industry continues to see outsized churn in the lower ARPU segments given the entry level prepaid tariff hike in Jul’21, followed by another sharp hike in Nov’21. Hence, subscriber (subs) addition is likely to remain muted. However, upgrades to high ARPU MBB (3G/4G) plans are expected to remain healthy for the industry as the impact from semiconductor chip shortages starts to moderate. EBITDA growth will also be aided by some moderation in SUC (spectrum usage charge); though full impact will be visible from 3QFY23 onwards. We expect Jio’s net subs to grow by 5mn in 2QFY23 and its ARPU to rise 2.5% QoQ to INR 180, driving 4.4% growth in revenue and 4.7% QoQ growth in Jio EBITDA. For Bharti, we expect MBB subs addition at ~4mn, resulting in 2% QoQ rise in ARPU to INR 187, driving 2.4% growth in India wireless revenue and 3.1% growth in EBITDA. We expect VIL’s subs losses to continue; however, its ARPU is likely to rise 3% QoQ to INR 132. We expect net tenancy additions for Indus Towers to improve; but rentals are likely to decline after recent renewals Bharti remains our top pick (TP of INR 920) as we expect tariff hikes to be more frequent, going forward, with Jio more willing to participate in tariff hikes given that it also needs to start focussing on profitability. We maintain HOLD on Indus Towers (TP of INR 240) due to duopoly risks and a SELL on VIL (TP of INR 9) due to concerns around survivability.

Jio’s EBITDA to rise 4.7% QoQ led by 2.5% QoQ rise in ARPU to INR 180 and 5mn rise in net subs:

We expect Jio to report a net addition of 5mn subscribers in 2QFY23 (TRAI’s Jul’22 subscriber data showed 2.9mn net subscriber addition for Jio in Jul’22) – this will be the second quarter of net addition of subscribers (net addition of 10mn in 1QFY23), after having reported net decline of 11mn/9mn/11mn subscribers in 4QFY22/3QFY22/2QFY22 due to repurposing of customer retention efforts for low-ARPU subscribers. Further, ARPU is likely to rise by 2.5% QoQ to INR180 in 2QFY23 driven by new subscriber upgradation to smartphones and towards higher tariff plans. ARPU growth is also being supported by improving subscriber mix given the gradual decline in low ARPU subscribers. Further, strong traction in FTTH additions is likely to continue with addition of ~0.7mn. Hence, we expect 4.4% QoQ growth in Jio standalone revenue to INR 229bn, with EBITDA likely to grow 4.7% QoQ to INR 116bn. EBITDA growth will also be aided by moderation in SUC given NIL SUC for spectrum bought in recent auctions, though full impact will be visible from 3QFY23 onwards

Bharti India wireless EBITDA to grow 3.1% QoQ led by 2% QoQ rise in ARPU to INR 187 and ~4mn addition to MBB subs:

Bharti is expected to add only 1.4mn subscribers in 2QFY23 due to continued churn in the low-ARPU segment. However, MBB subscriber addition is likely to continue to be healthy at ~4mn, like that witnessed in the last couple of quarters (TRAI’s Jul'22 subscriber data showed 2.6mn addition in MBB subscribers) as the impact of semiconductor chip shortages moderates. ARPU is expected to increase 2% QoQ to INR 187 (vs. INR 183 in 1QFY23). We build in 2.4% QoQ growth in the India wireless business to INR 187bn and EBITDA growth of 3.1% QoQ to INR 96bn; EBITDA growth will also be aided by moderation in SUC. Enterprise business is also expected to post a healthy growth of 3.4% QoQ, while we expect steady additions in FTTH (~0.3mn subscriber addition QoQ).

VIL’s subs losses likely to continue; however, ARPU to rise 3% QoQ to INR 132:

: We expect VIL’s subscriber loss trend to continue, with net subs declining by ~3mn in 2QFY23 (had witnessed decline of 3mn/3mn/6mn/2mn/12mn in 1QFY23/4QFY22/3QFY22/2QFY22/1QFY22) due to migration of subscribers to other telcos. However, we expect ~1.5mn addition to MBB subscriber base; hence, ARPU is expected to rise 3% QoQ to INR 132 in 2QFY23 (vs. INR 128 in 1QFY23). We expect revenue to rise 1.5% QoQ to INR 106bn; EBITDA is likely to grow ~10% QoQ to INR 48bn

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