Telecom companies to report subdued fourth quarter numbers as Reliance Jio pressure continues

Kotak Securities said the March quarter performance will mark a weak end to what has been a challenging year.

Published: 15th April 2018 01:32 PM  |   Last Updated: 15th April 2018 01:32 PM   |  A+A-

Reliance Jio (Photo | Reuters)

By PTI

MUMBAI: The battered telecom sector companies will be reporting another set of subdued numbers for the January-March quarter, with revenues likely to show a correction of as much as 40 per cent, analysts have said.

"The competitive intensity in telecom industry further intensified since January 2018 after the new entrant started passing on the benefits of cut in interconnect usage charges to customers through lower tariffs," largest ratings agency Crisil said in a report.

It said the revenue is expected to fall by up to 40 per cent due to "heightened competitive intensity", and added that factors like pullout of Reliance Communication from 2G services and efforts by the incumbents to retain high data users will be impacting revenue growth.

Domestic brokerage Motilal Oswal said there is a "lack of earnings visibility" in the sector and estimated that the largest telco Airtel will report a 80 per cent decline in profits, while third largest operator Idea Cellular's losses will continue to be elevated.

Its peer Emkay Global Financial Services estimated a 10.1 per cent decline in sales for the telecom sector on a year-on-year basis during the March quarter, while the pretax margins will contract by 2.40 per cent.

Kotak Securities said the March quarter performance will mark a weak end to what has been a challenging year.

"Jio's pricing moves in the month of January 2018, impact of international termination rate (ITR) cut effective February 1, 2018, and continued ARPU downtrading are likely to reflect in another quarter of sharp sequential revenue decline for the incumbents," it said.

It can be noted that the aggressive play by the cash rich Reliance Jio in the segment has led to massive pain among the incumbents, and led to a slew of corporate actions including exists and almost forced mergers and acquisitions.

Idea and Vodafone, the third and the second largest operators, respectively, are in the final stage of getting regulatory go-aheads to merge, while others like RCom have virtually retreated.

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