OTT platforms to remain in focus: Leading broadcasters ZEEL and Sun TV have their own OTT platforms namely ZEE5 and SunNXT. ZEEL has already started releasing originals on its OTT content, while Sun TV has guided in Q2FY18 that it will start focusing more on OTT content going forward. Both the companies have not yet started sharing the revenue contribution from their digital platforms. Hence, it would be interesting to see the guidance for digital platforms of both the companies.
Margins under pressure for Telecom companies: We believe that rising competition rivalry amongst telecom players is expected to negatively affect their margins. Bharti Airtel’s EBITDA margins are expected to decline by 16bps qoq owing to higher operating expenses. This quarter is expected to remain weaker for Bharti Infratel as well, owing to declining tenancies due to Vodafone and Idea’s merger.
Our top picks in Media and Telecom space are ZEEL and Sun TV
|ZEEL||Q3FY19E||qoq (%)||yoy (%)|
|EBITDA margin (%)||32.2||-197bps||-9bps|
ZEEL is expected to see ~13% yoy revenue growth owing to robust advertisement revenues. ZEEL's network market share has already reached ~19.9% by Q2FY19, which will aid in the growth. We expect EBITDA margin to contract by ~9bps yoy to 32%. Further, digital platform, ZEE5's performance would be the key factor to watch.
|Sun TV||Q3FY19E||qoq (%)||yoy (%)|
|EBITDA margin (%)||73.7||-17bps||87bps|
Sun TV Network, is expected to report a revenue growth of ~16% owing to strong growth of subscription revenues (~17% yoy) owing to digitization in TamilNadu. Further, strong box office performance of its movie is likely to aid in the revenue growth. We expect EBITDA margin to expand by 87bps yoy. Progress of digitization and management's commentary on OTT platform will be the key things to watch for in the results.
|Bharti Infratel||Q3FY19E||qoq (%)||yoy (%)|
|EBITDA margin (%)||38.3||-279bps||-587bps|
We expect Bharti Infratel’s revenue to decline by 3% qoq on the back of tenancy decline. Further, we expect rent revenues are likely to decline by ~5% qoq. This is likely to affect the margins as well. The EBITDA margins are expected to contract by 279bps qoq to 38.3%. Expected time line of merger with Indus and tenancies guidance would be the key thing to watch for in the commentary.
|Bharti Airtel||Q3FY19E||qoq (%)||yoy (%)|
|EBITDA margin (%)||30.7||-16bps||-603bps|
Bharti Airtel’s revenue is expected to grow 1% qoq on the back of strong revenue growth of Africa business (3% qoq). In India wireless business, we estimate revenue decline of 1% qoq. We expect ARPU of India business to increase by 1% qoq during the quarter. Higher operational expenses are expected to result in contraction in EBITDA margin by 16bps qoq to 30.7%.
|Vodafone Idea*||Q3FY19E||qoq (%)||yoy (%)|
|EBITDA margin (%)||9.4||340bps||-937bps|
*This would be the first full quarter result for Vodafone Idea Ltd post-merger, hence, results are not comparable. Synergy benefits from the merger and ARPU guidance would be the key things to watch for in the commentary.