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India’s new telecom market leader Vodafone Idea Ltd (VIL), which will present consolidated earnings for the first time, is likely to report a sizeable loss in the fiscal second quarter ended September 30, paced by low subscriber additions and rising 4G network expansion costs.
No.
2 carrier Bharti Airtel is also likely to post a significant consolidated net loss in the July-September quarter – a first in nearly 15 years – hit by a combination of factors such as mounting costs, rupee depreciation, and customer losses after the reduction in the price of JioPhones.
Reliance Industries’ recent featurephone exchange offer had lowered the price of JioPhones.
Mukesh Ambani-owned Reliance Jio Infocomm, though, is likely to yet again outshine older rivals by reporting a higher net profit, propelled by strong customer adds and healthy uptake of its 4G feature-phones.
For Vodafone Idea, brokerages IIFL Institutional Equities and ICICI Securities estimated a net loss in the vicinity of ₹2,600 crore, although Credit Suisse pegged it lower at ₹1050.5 crore.
Revenue is estimated to be in the ₹7,813-8,106 crore range for the September quarter.
Brokerages expect Bharti Airtel to report a net loss in the range of ₹8.4 crore to ₹1,266 crore.
The company had posted a ₹97.3 crore net profit in the June quarter, helped by a one-time exceptional gain, and a ₹343 crore net profit in the same quarter a year ago.
The wide variation in Airtel’s loss estimates is due to the possibility of the telco being hit by high depreciation and interest costs in the September quarter.
Also, since 30 per cent of Airtel’s consolidated debt is dollar-linked, a 5 per cent depreciation of the rupee against the US currency in the quarter is expected to widen the losses by as much as ₹500 crore, said brokerage CLSA.
Analysts also expect Airtel’s capex burden to rise since 50 per cent of the company’s $3-billion India capex is in dollars.
Jio is estimated to report its fourth successive quarter in the black, with analysts pencilling in a higher net profit in the ₹622-795 crore range, propelled by 33 million subscriber adds during the July-September period.
Shares in Vodafone Idea closed nearly 1 per cent lower on BSE on Friday at ₹33.55, while the Bharti Airtel scrip fell nearly 4.3 per cent to ₹296.75.
BNP Paribas expects VIL and Airtel to report another weak quarter, with revenue declines due to “loss of customers post the recent JioPhone price cut and seasonal weakness”.
Analysts said reduction in JioPhone’s pricing from an earlier ₹1,500 deposit to a flat exchange price of ₹501 has been the most aggressive move by the 4G entrant in the July-September period, which will particularly hit prepaid revenues of the two incumbent carriers.
Vodafone Idea, it said, might also have to shell out a hefty penalty for exiting tower contracts, which if fully provided, could be to “the tune of ₹3,000-3500 crore, but is likely to be treated as an extraordinary item”.
Bank of America estimates Airtel’s India cellular revenue “will decline 3 per cent on-quarter” due to the “Jio feature-phone impact on prepaid revenues, coupled with post-paid weakness”.
Brokerage CLSA, though, expects Airtel to report strong performance in Africa amid stable local currencies, and estimates 6 per cent sequential growth in quarterly revenues in the continent.
IDFC Securities said a combination of “weak seasonality, rising fuel costs and site rollouts would weigh on the operating income (Ebitda) performance of the incumbent operators”.
Credit Suisse said “timely completion of Airtel’s plans to raise capital by listing its Africa business, and later selling its stake in the Bharti Infratel-Indus (combined tower entity) would be important for the Sunil Mittal-led telco to sustain capex investments on a par with Jio”.
The Swiss brokerage estimates Airtel’s consolidated revenue in FY19 second quarter to fall 6.7 per cent from ₹21,777 crore a year ago.
In marked contrast, Jio’s revenue is expected to jump 48 per cent from ₹6,147 crore a year earlier.
