Broadband subscriptions, average revenue per user growth to drive Q3 for Jio, Airtel, VI

Continued robustness in mobile broadband subscriber additions, along with ARPU growth from upscaling and higher data usage are expected to drive the third-quarter telecom industry performance, according to analysts.

JM Financial in its Q3FY21 preview note has predicted ARPU growth of 1.5 per cent sequentially for both Bharti and Jio, while for Vodafone Idea, it could be higher due to more headroom for higher data usage and decline in low-ARPU 2G subscriber.

The average revenue per user (ARPU) measures the realisation per subscriber and is a key monitorable metric for telecom firms.

"We expect 3QFY21 to be marked by continued robustness in MBB (Mobile Broadband – 3G/4G) subscriber additions, primarily driven by the demand for ed-tech and the continuing work from home and the strong smartphone shipments," JM Financial said.

In the absence of tariff hikes, it expects ARPU growth to be led by mobile broadband additions and higher data usage.

Bharti Airtel is likely to outperform Jio in subscriber additions for the second quarter in a row primarily due to its higher subscriber market share among incremental mobile broadband users, it said, anticipating continued subscriber losses for Vodafone Idea (VIL).

Axis Capital has said wireless service providers' revenue should improve year-on-year in Q3FY21 on continued subscriber addition, as the impact of tariff hike of December 2019 for Bharti Airtel and RJio has already been captured.

"ARPU to improve driven by upscaling (migration to 4G from 2G)...Subscriber addition for Jio to be muted, while Vodafone Idea to continue losing subscribers," it said.

Motilal Oswal's telecom results preview said 4G subscriber growth may continue to drive earnings.

In the absence of price action, ARPUs will be governed by improving 4G additions with subscriber mix benefit, the return of feature phone recharges that were impacted by the lockdown and some lingering benefit of previous price hikes taken by telcos, it added.

Motilal Oswal estimated sequential ARPU improvement by 3 per cent for Jio and 1.5 per cent for Airtel.

"Lastly, we expect VIL's ARPU to improve 2.5 per cent...led by the churn of low-ARPU feature phone customers during the lockdown and the benefit of an increase in customer traction and select postpaid price plans," it said.

Bharti and Jio's earnings are expected to improve, while VIL would trail, it added.

BofA Securities said, overall, it expects all telcos to show stable revenue and ARPU improvement in Q3.

It expects Q3 to continue to show the impact of SIM consolidation at the lower end and predicted that Bharti will emerge as the beneficiary in terms of market share gain.

"We estimate Bharti to show 4.8 per cent q-o-q (quarter on quarter) growth in India cellular revenues versus 3.6 per cent/2 per cent for Jio/VIL," said a report by BofA Securities.