Telecom Sector Q2 Results Preview: Centrum predicts 7-8% QoQ ARPU rise for telecom cos; Bharti Airtel among top picks

Telecom Sector Q2 Results Preview: Centrum Broking's Q2FY25 Results Preview report forecasts a 7-8% QoQ increase in average revenue per user (ARPU) for the three telecom operators, attributed to the recent tariff hike. Both Reliance Jio and Airtel are expected to experience a flattish QoQ subscriber base, influenced by the recent tariff hike. The strong data usage per customer is expected to persist, driven by the growing adoption of mobile internet. Investors are eagerly awaiting the progress of 5G implementation by Reliance Jio and Airtel in India.

In the telecom sector, Bharti Airtel is the preferred choice of the brokerage house, with business growth stemming from consistent subscriber and ARPU growth, in addition to capturing market share from Vodafone Idea. It is expected to uphold its industry-leading ARPU owing to its superior customer mix.

The brokerage noted that the pricing situation has gotten better as there are now only three major players in addition to one smaller player. This positive change was clearly seen in the recent price increase announced by all three telecommunications companies, showing a shift towards improving ARPU in order to enhance the overall Return on Capital Employed (ROCE) profile.

Furthermore, Centrum Broking highlighted that the growing digital penetration would strengthen the overall performance of internet-based firms. The pandemic has sped up the market share growth for internet-based companies, with a stronger focus on improving profitability. Emudhra's growth remains strong due to the expansion of its enterprise business in the US and Europe, the brokerage said.

Let's review the key points concerning the brokerage's Q2FY25E preview.

Reliance Jio

With an increase in ARPU of 7.5% QoQ to ₹195/month due to the latest pricing hike, Reliance Jio is predicted to gain 1 million users QoQ to 491 million customers. This would translate into an 8.5% QoQ increase in income.

Bharti Airtel

Bharti Airtel is likely to lose ~1.0mn customers QoQ to 354 mn users, with ARPU rising by 8% QoQ to ₹228/month(industry leading ARPU), led by recent rate rise and continued migration of consumers from 2G to 4G.With strong support from other business sectors, a sequential revenue rise of about 6.0% is anticipated.

Vodafone Idea

The continuing shift from 2G to 4G technology and the recent rate rise are projected to fuel Vodafone Idea's growth in ARPU, which is predicted to reach ₹156/month, and drop of 3.5 million customers QoQ. Most important to keep an eye out for would be the management's comments on their current capital expenditure activities.

Nazara Technologies

With the help of recent acquisitions, Nazara Technologies is predicted to report sequential revenue growth of 20%+ and an EBITDA margin increase of over 12%.

MapmyIndia

With broad-based development across all categories driving high teen revenue growth, MapmyIndia is predicted to record consecutively high teen revenue growth of 41.2% EBITDA margin. Key would be management comments on its ambitions for B2C and international expansion.

Emudhra

Emudhra anticipates a 20% increase in revenue compared to the previous period, driven by the acquisition of Two95 and the expansion of the Enterprise business in the important markets of the US and Europe. The EBITDA margin is projected to be approximately 31%.

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