Airtel, Vi and Jio to reduce spectrum usage charges in FY2Q

In the fiscal second quarter, Bharti Airtel and Reliance Jio are expected to post consistent revenue growth, aided by significant 4G user additions, while experts predicted that Vodafone Idea’s modest revenue growth would be further dampened by significant customer losses.

However, they anticipate that all three telecoms would report stronger operating margins in the September quarter thanks in part to the reduction in spectrum usage charges (SUC) that followed their participation in the recent 5G spectrum sale.

With the support of the extra day in the quarter, ICICI Securities predicts that Airtel and Jio Platforms (JPL) will record sequential rise in their India mobile revenue of 2.3% and 3.1%, respectively, for the period of July to September. However, it lowers Vi’s sequential revenue growth to 1.5%, which is negatively impacted by another quarter of significant client losses.

Despite the rising cost of mobile services, I-Sec anticipates Airtel and JPL to attract 3 million and 4 million users in Q2FY23, respectively, while expecting Vi to lose another 4 million users as its cash flow problems prevent it from making network investments and inability to hold customers.

With more customers on longer-validity plans than the other two carriers, Jio is predicted by Emkay Global to report the highest average revenue per user (ARPU) growth in the July–September period, at 3% on-quarter, to Rs 181. This growth will be aided by residual benefits from the tariff increase in December of last year. On this crucial indicator, it anticipates Airtel and Vi to both post 1% sequential growth, to Rs 185 and Rs 129, respectively.

According to sources, the decreased SUC payouts will partially enhance operating margin spread for telcos over the 2nd and 3rd quarters of FY23 by 2-3 percentage points.

The operating margins of Airtel, Jio, and Vi are expected to increase by 97 basis points (bps), 109 bps, and 37 bps, respectively, to 51.6%, 49.8%, and 42% in Q2FY23, according to analysts at I-Sec. A basis point, or bps, equals 0.01%.

The government has abolished the 3% floor rate on the mandatory charge, which will cause the SUC payout for telecoms, which was between three and five percent of AGR, to decline to minimal levels – below one percent of AGR.

I-Sec predicts that Airtel’s consolidated net profit for the second quarter would increase by over 77% sequentially to about Rs 2,850 crore, aided by significant user growth in India as well as by revenue and operational income growth in Africa.

However, an analyst claimed that the possibility of an improved profit contribution from Indus Towers, in which Airtel has a 47.76% share, is another factor contributing to Airtel’s high PAT growth projection.

Due to a combination of rising Ebitda and strong user additions, analysts at I-Sec predict Jio Platforms will record a 6.2% sequential increase in net profit in the September quarter to around Rs 4,811 crore – its 20th consecutive quarterly profit.

Due to significant subscriber losses and its ongoing failure to successfully compete with its two more powerful rivals, BofA Securities projects that Vi’s September quarter loss will increase sequentially to around Rs 7,340 crore.