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  • Sector alert | Telecom: A new low

    Publish date: July 5, 2018

    The telecom sector has shrunk by a third, according to the Telecom Regulatory Authority of India (TRAI), citing reduced consumer spending levels. While this has been a boon for consumers, the intense competition post Reliance JIO’s entry has scorched the telecom players’ bottomline

    We believe the sector will continue to struggle as the major players will record weak earnings in the first quarter of the FY2019.

    Key Highlights

    • Annualized consumer spends have declined by 32%, as per TRAI data. The spendings are a new low in the already-low global ratio.
    • Consumers are the beneficiaries of the intense competition in this sector. There has been a double-digit growth in attractive bundled plans, heavy data schemes and unlimited call options.
    • This also means reduced earnings for key market players. Wireless revenues for Bharti and Airtel are expected to slide further. The sole silver lining is Bharti’s performance n Africa. Jio, mean-while, saw its data volumes market share come down to 61% in March 2018, down from 68% in September 2017.
    • BHIN and TCOM will have a soft quarter. Bharti Infratel’s (BHIN) quarterly print is expected to be low due to loss of leases from Telenor, seasonal plunge in energy spread and delayed tenancy gains. We also expect TCOM’s EBITDA to be stagnant due to losses seen in QoQ and YoY.

    Valuation & outlook

    In all this, our recommendation for the telecom sector is cautious. That’s mainly because we do not expect the freefalling Average Revenue Per User (ARPU) to recover any time soon. You can read our detailed report to get a better picture.

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