Airtel net down 30% on high costs, squeezed margins

By : BS Reporter
Last Updated: Wed, Nov 07, 2012 21:40 hrs

Hit by increased network costs and squeezed margins amid stiff competition, Bharti Airtel Ltd, the country’s largest telecom operator, on Wednesday reported a 30 per cent fall in net income at Rs 721.2 crore for the July-September quarter. The company, which had posted a net income of Rs 1,027 crore in the corresponding quarter last year, is now looking to increase rate as the present business model “is not sustainable”.

During the April-June quarter, it had reported a net income of Rs 762.2 crore.

“We have lost close to 40 per cent pricing power in the last 12 quarters. Considering the inflation that has hit the country over the last 12 quarters, the least we deserve is to go back to the levels we were at,” Sanjay Kapoor, chief executive officer (India and South Asia), told reporters here on Wednesday. Kapoor said prices had to rise as the “present model is not sustainable”.

Asked whether the company had calculated the additional burden it had to face due to refarming, one-time fee and auctions, Kapoor said: "We are yet to take a decision on these issues as the policies have not been finalised till now."

Total revenue rose 17 per cent to Rs 20,273 crore during the September quarter against Rs 17,270 crore in the corresponding period a year ago. “Despite the seasonally most weak quarter, I think this performance is satisfactory,” said Kapoor.

Meanwhile, the company has received Rs 586 crore during the July-September quarter because of a favourable order order by TDSAT to an outstanding dispute pertaining to inter-connect agreements. The helped the company is reporting high revenues and higher profit before tax and net income during the quarter. According to an analyst, Bharti Airtel could have reported degrowth in revenues, profit before tax and net income from Indian operations.

"On prima facie Bharti results seems good but it is led by the one-off payment due to the TDSAT order favouring the company. Without the one-off payment, the revenue for the quarter and operating margins would have come in line with the street estimates. However, the bottomline disappointed because of the higher tax paid," said Ankita Somani, research analyst for It and telecom, Angel Broking.

According to another analyst, Bharti Airtel could have reported degrowth in revenues, profit before tax and net income from Indian operations.The market leader’s number of subscribers in India fell as the company embarked on a strategy to weed out inactive customers (as additional spectrum allocation is no longer linked to the number of subscribers). Besides, average revenue per user (Arpu) dipped four per cent to Rs 177 in India during July-September, compared with Rs 185 in the April-June quarter. In Africa, however, the Arpu fall was less substantial at two per cent to $6.4.

The total number of minutes on the India network also dipped two per cent during the quarter against the previous one. However, the company’s earnings before interest, taxes, depreciation and amortisation margin increased marginally to 31.3 per cent in the quarter from 30.2 per cent in the previous three-month period.

The total average voice use per user dropped to 417 minutes during the period from 433 minutes during April-June, reflecting seasonal slowdown in consumption.

As on September 30, Bharti Airtel recorded 5.4 million active third generation (3G) customers of which 4 million are active 3G data customers. Its data Arpu stood at Rs 43 in India, backed by 133 MBs of data download per user per month.

Kapoor said Airtel was expanding its 4G network in the country and was expected to cover five more cities soon. The company, which has licence for 4G services in Maharashtra, Kolkata, Karnataka and Punjab, has acquired a stake in Qualcomm's Indian venture which has licence for 4G services in Delhi, Mumbai, Kerala and Haryana circles.

On its African operations, Manoj Kohli, joint managing director, said: “We have achieved leadership position in most African markets." However, he agreed the company was facing tough competition in Nigeria as the market leader had dropped tariffs by 30 percent, adding Airtel was still gaining market share in Nigeria.

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