His note added that comparing gross revenues (GR) would give a more accurate picture of the industry trend. “T3 AGR is strictly not comparable due to the change in definition of AGR after the recent Supreme Court verdict which reduces transmission, thereby increasing AGR,” ICICI said.
On October 24, the Supreme Court broadened the definition of the AGR to include non-essential income.
ICICI Securities said the growth in gross revenue (GR) is becoming more comparable to explain the underlying performance of operators, excluding the impact of the change in mix for interconnection usage charges (IUC). The gross revenue of a telecommunications company is equal to the AGR plus inter-operator revenue such as UCI and roaming charges.
According to third quarter data released by the Telecommunications Regulatory Authority of India (Trai), the sector GR rose 5.3% to 43,700 crore in October-December.
Reliance Jio Infocomm ended the quarter with a 34.7% GR market share, leading the industry, despite a 73 basis points (bps) decline from the quarter. Bharti Airtel’s GR market share rose 131 basis points to 32.7%, while Vodafone Idea’s share of 29.4% fell to 29.6% in the second quarter, ICICI Securities said.
Based on AGR, the industry experienced a 9% increase in AGR in October-December (down from 3% in FY 2). Jio and Bharti Airtel’s AGR increased to 35.4% and 31%, respectively, while that of Vodafone Idea fell to 26.2% in the quarter.
The sequential increase in the AGR market share of Reliance Jio (+50bp) and the decrease in the GR market share (-73bp) during the period October-December could be due to the loss of revenue from the IUC phone company since it started charging 6 paise per minute as an IUC in November, analysts said.
“This is not a structural loss for Jio, but a tactical loss as they can afford to lose GR market share in a quarter while achieving higher Ebitda margins,” said an analyst at a house of brokerage based in Mumbai.
Analysts believe that after taking into account the profits of telecom operators from non-essential services such as dividends, interest income or profits on the sale of any investment or property, plant and equipment, the AGR would automatically increase sharply over the course of year 3T, and this number does not represent structural growth.