Airtel outshines Vodafone and Idea in Q2, hints at recovery
KOLKATA: Bharti Airtel turned in a stronger performance than rivals Vodafone India and Idea Cellular in the seasonally weak second quarter, signalling a recovery amid consolidation in the sector and Reliance Jio Infocomm increasing prices, analysts said.
“Bharti continues to execute better than both Idea and Vodafone on subscriber acquisition as well as on the cost sides,” Edelweiss said in a note. While margins for Vodafone and Idea deteriorated in the September quarter, Bharti’s expanded by 30 basis points on-quarter, it said.
Morgan Stanley and BNP Paribas said Airtel “showcased better margin performance” on the back of tight cost control measures.
Idea’s operating profit margin declined 290 basis points (bps) on-quarter to 20.1%. The margin for Vodafone India fell by 350 bps to 21.3% in the first half of FY18. Airtel’s India wireless margin was steady at 34.4%, helped by disciplined cost management in the second quarter.
According to Edelweiss, Idea and Vodafone lost a combined 11.1 million subscribers, while Bharti added 1.4 million customers in the quarter.
Analysts said Idea and Vodafone fared worse than Bharti Airtel on revenue performance, too.
Compared with Airtel’s 5% onquarter fall, the second and third-largest telcos reported steeper 6.5% and 9% sequential dips in revenue, respectively. BNP Paribas anticipated an easing of revenue pressures amid “accelerated consolidation and Jio increasing prices.”
Jio, which started services on a 4G network in September last year with free calls and internet access that triggered price wars with its rivals, has started increasing rates for data plans.
Analysts at JP Morgan said Idea’s 4G penetration and coverage are “inferior to Bharti Airtel, making the company more vulnerable to Jio’s onslaught on data.”
This weakness could stand exposed with Jio’s 4G feature phone launch, it said.
Muted growth in Idea’s data subscribers compared with Bharti, according to the US brokerage, suggested Airtel “was better able to get data customers back on its network after losing some to Jio in prior quarters.”
Analysts said that as Idea keeps cutting back on capital expenditure and focuses on making its ongoing merger with Vodafone work, the risks of sub-base erosion increases, which precipitates revenue market share loss.
Bharti increased its FY18 capex guidance by Rs 5,000 crore to Rs 25,000 crore to bolster its 4G network to combat Jio.
Brokerage JM Financial said Idea’s high leverage ratio, coupled with negative free cashflows, constrain the company’s ability to ramp up spending to defend revenue, a scenario that “would necessitate equity raising, post-merger” with Vodafone India.
Idea has said the seasonal slowdown during the July-September quarter was more pronounced, given its higher share of rural subscribers.
Idea, however, beat Airtel on data volume growth, reporting a 74% on-quarter jump to Airtel’s 66%, although both had average monthly data usage at 4 GB per subscriber.
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Via:: Economic Times – Stocks