NEW DELHI: Having seen off the AGR millstone around its neck, the second quarter of the current financial year (Q2 FY21) is set to indicate the trajectory that telecom sector is likely to take over the next few quarters.
Excluding Reliance Jio, which only entered the market four years ago and hence had very little pending AGR liability, telecom companies have had to set aside significant provisions towards their massive AGR dues over the past few quarters.
However, with the Supreme Court now granting a 10-year timeframe to pay back the dues, Q2 is set to be the first quarter in nearly a year without those liabilities casting a long shadow over balance sheets. According to analysts, all telecom service providers—Jio, Airtel, and Vi—are likely to see both revenues and profitability rise.
“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,” noted ICICI Securities.
Analysts at Emkay Securities note, that “the rise in wireless revenue (is expected) to be more pronounced for Bharti (2.7 per cent qoq) than Vi (1.4 per cent qoq) as we estimate Vi to continue to report subscriber loss, albeit at a slower pace”. Vi is expected to lose 3 million users while Airtel is expected to gain as many. Jio may to continue outpacing its rivals, with expected subscriber additions at 11 million, though ARPU increase is expected to remain muted at 2%.
“After seeing improvement in the last two quarters, ARPU is likely to rise by only 1% for Airtel. Vi shall record a 4 per cent rise in ARPU, led by a low base and a 4 million increase in data subscribers after a 6 per cent dip in ARPU in the previous quarter,” they said. Average Revenue Per User (ARPU) is a measure of profitability and this metric has been increasing steadily since prices were hiked last year.