Telcos may see slide in revenue per user in Q2

Telcos are in for a tough quarter as analysts predict a 3 per cent fall in average revenue per user (ARPU) on a sequential basis during the second quarter of this financial year. This is likely to result in a 3-5 per cent decline in India wireless revenues.

ARPUs are expected to bottom out gradually in the September quarter. However, for the quarter, telcos would have to bear the brunt of higher foreign exchange costs, diesel price uncertainties as well as strong competition from some of Jio’s recent offerings.

In the June quarter, ARPU declined by 8.8 per cent for Airtel (~105), 4.8 per cent for Idea (~100), 3.3 per cent for Vodafone (~102) and 1.9 per cent for Reliance Jio (~135), respectively, on a quarter-on-quarter (QoQ) basis.

“Given that this plan involves the exchange of the customer’s old featurephone for JioPhone, it also means that spend on the incumbent SIM goes straight down to zero. Impact on the incumbents will likely increase from 3Q as the impact in 2Q was limited to less than half a quarter,” said Rohita Chordia, research analyst, Kotak Institutional Equities, in a report.

He expects Bharti Airtel to report 3 per cent QoQ decline in India wireless revenues and a 5.7 per cent decline for Vodafone Idea (based on their independent performances).

Some analysts are of the view that the industry’s revenue is likely to improve in the short term in the wake of slower 4G subscriber addition in July. This will also slow down the price war in the industry.