NIL IUC regime to benefit Airtel; impact expected on Vodafone Idea: Report

Bharti Airtel’s EBITDA is likely to benefit by Rs 1 billion due to nil IUC that came into effect from 1st January, 2021, while Vodafone Idea would be hurt by Rs 0.8 million from the change, ICICI Securities said in a note.

Interconnect charges moved to nil from 1st Jan’21 from the earlier 6ps/min.

“We estimate the consequent ARPU impact at Rs14 each for Bharti and VIL. Bharti was net IUC payer of Rs1bn-1.2bn, while VIL was net IUC receiver of Rs0.8bn (thus Bharti’s EBITDA should benefit from nil IUC while VIL’s stands to get hurt),” ICICI Securities said.

The brokerage said that the Q4FY21 had 90 days compared to 92 days in Q3, hence it expects a 2% QoQ impact from the lower number of days.

“Bharti is likely to continue its strong subs growth (8mn) while VIL would lose subs (1.5mn), but lower than in previous quarters. Both companies’ comparable ARPU may slightly rise QoQ on higher 4G subs addition.”

Vodafone Idea’s EBITDA is expected to dip 2.4% QoQ to Rs42 billion. “We expect VIL’s revenues (L2L) to dip 0.6% QoQ to Rs97bn. This would be due to continued loss of subs (down 1.5mn), which should start stabilising soon. ARPU (L2L) is likely to be stable QoQ on rise in 4G subs. EBITDA is expected to dip 2.4% QoQ to Rs42bn on negative impact from IUC. We estimate a net loss of Rs63bn for VIL due to nil tax rebate.,” the brokerage added.

Bharti Airtel’s consolidated EBITDA is expected to be up 1.8% QoQ to Rs123 billion. Bharti’s India revenues are likely to grow (L2L) 2% QoQ (11.9% YoY) to Rs182 billion, led by mobile segment (up 3.0% QoQ / 18% YoY) on the back of subs growth of 2.6% QoQ.

“India EBITDA is expected to be up 4.1% QoQ to Rs89bn. Bharti’s Africa USD revenues and EBITDA are likely to fall 1% QoQ to US$1,044mn and 2% QoQ to US$492mn respectively, on seasonality. We expect consolidated revenues (L2L) to rise 1.0% QoQ to Rs255bn and EBITDA 1.8% to Rs123bn. We estimate net profit at Rs2.9bn,” it added.

The brokerage also expects Indus’ tenancies to rise by 3,500. However, rental per tenant may fall 4.5% QoQ to Rs42,819 as the base had the benefit of higher penalty collections.

“We estimate rental revenues to dip 4.7% QoQ (+4.9% YoY) to Rs41bn. EBITDA is likely to shrink 12.5% QoQ (+8.9% YoY) to Rs31bn on normalisation of cost (base had one-off benefits due to merger). We expect net profit to drop 17.5% QoQ and rise 13.8% YoY to Rs11bn,” it added.