Bharti Airtel Ltd on Friday reported a 72 per cent drop in net income at Rs 284 crore during the October-December quarter, disappointing market expectations. The fall was due to high interest costs on loans taken for African operations, forex fluctuation and a higher taxable income due to the end of one-time tax benefits it used to get in Africa.
The result marks the 12th consecutive quarter of decline in net profit for the country’s largest telecom operator by subscriber base. The telecom major had posted a net income of Rs 1,011 crore in the corresponding quarter of the previous financial year.
Bharti’s results follow another lacklustre performance by Reliance Communications, which reported a 43.3 per cent drop in net profit in the third quarter, as heavy debt continued to weigh on earnings. Idea Cellular had reported a 14 per cent increase in its net profit, but that was much lower than expected.
Consolidated average revenue per user in India increased to Rs 185 during October-December, against Rs 177 in July-September. But an area of worry for telcos has been how to increase average realisation per minute — the money the company makes from customers. Average realisation per minute for voice in India fell one per cent to 35.2 paise from 35.4 paise in the previous quarter. Average realisation per MB for data came down nine per cent to 29.3 paise from 32.4 paise.
Outgoing CEO (India and South Asia) Sanjay Kapoor said it would be possible to improve average realisation per minute next quarter with the recent tariff increase and more increases.
Finance costs jumped 69 per cent during the third quarter to Rs 1,332 crore, from the year-ago period. Income tax expense rose 20 per cent. Total revenues rose 9.5 per cent to Rs 20,239 crore in the period under review, from Rs 18,477 crore in the year-ago period. However, Ebitda margin dipped to 30.6 per cent in October-December, against 31.3 per cent in the July-September quarter.
Chairman Sunil Mittal said in a statement: “Market conditions have been challenging in recent quarters due to pricing pressures and rising input costs, which have put enough pressure on the sector and, consequently, the margins. However, the worst seems to be getting over, with corrections taking place in customer acquisition practices and tariffs.”
The stock market responded negatively, with the Bharti Airtel share price on Friday falling by 2.62 per cent against yesterday’s close and ending at Rs 330.50 on the BSE.
The company’s efforts to disconnect connections to customers who do not use their SIM cards are paying off in India. The strict activation norms have reduced churn to 5.9 per cent during the quarter from 8.5 per cent in the previous quarter and post a better visitor location register — the percentage of active customers in the customer base. “This would further help us in pushing up the margins,” said Bharti Airtel’s outgoing CEO (India and south Asia) Sanjay Kapoor. The company’s Bangladesh operations had also turned Ebitda-positive during the quarter, he added.
To reduce interest costs, Bharti hopes to issue dollar bonds of up to $1 billion by the end of the financial year, said Sarvjit Dhillon, Group CFO, Bharti Enterprises.
Goldman Sachs analysts said Airtel’s Africa revenue and Ebitda margin growth have been disappointing (against the strong performance last quarter), suggesting it is taking more time to show restructuring benefits.
Ankita Somani, telecom analyst, Angel Broking, said: “We expect Bharti’s margins to improve due to tariff hike and drop in advertising spend. However, regulatory concerns will continue for a while. Decline in arpm (average revenue per minute) was a dampener. We maintain a neutral rating on the stock for now.”