Bharti Airtel’s June quarter profit declines 31% to Rs1,462 crore

Forex losses due to devaluation of the Nigerian currency and higher spectrum costs seen as reasons for the fall in the telecom firm’s profit

Airtel’s consolidated mobile data revenues at Rs4,640 crore, grew by 34.1% on year-on-year basis. Photo: Pradeep Gaur/Mint
Airtel’s consolidated mobile data revenues at Rs4,640 crore, grew by 34.1% on year-on-year basis. Photo: Pradeep Gaur/Mint

New Delhi: Bharti Airtel Ltd said quarterly profit declined 31% because of foreign exchange losses related to the devaluation of the Nigerian currency and higher spectrum costs.

Net profit fell to Rs.1,462 crore for the quarter ended 30 June from Rs.2,113 crore in the year-ago period, India’s biggest telecom operator said Wednesday.

Bharti’s profit still beat the Rs.1,360.20 crore average profit estimate of 13 analysts surveyed by Bloomberg.

The steep losses in the Nigerian naira after the country’s central bank ended its currency peg to the dollar has singed several Indian firms with a presence in the African nation, including Bharti, which generates about 7% of its operating profit from the African nation, analysts said.

“Currency devaluation will continue to have an impact, there is no doubt about it,” said an analyst with a Mumbai-based brokerage, requesting anonymity. “We are not very bullish on Airtel’s Africa business anyway. What we are looking at is how they monetize their assets and their tower sale. Having said that, the African operations have stabilized as margins are not declining.”

During the quarter, the Nigerian naira weakened 42%, leading to a net forex loss of Rs.748 crore for Bharti. The plunge in global crude oil prices limited the ability of the oil-dependent Nigerian government to maintain its currency peg to the dollar.

A spectrum auction later this year, requiring further investments, may add to the problems of Indian telecom operators that have recently emerged from years of bruising tariff wars.

Bharti’s net interest costs rose 45% to Rs.1,631 crore in the June quarter from a year earlier on higher spectrum interest costs, the company said in a statement.

Bharti Airtel said net profit for the year-earlier June quarter has been restated to Ind-AS accounting standard and includes a one-time gain of Rs.556 crore on account of this. According to the older IFRS format, the net profit was Rs.1,554.3 crore in April-June 2015-16.

Listed companies with a net worth of more than Rs.500 crore have been asked by the corporate affairs ministry to prepare financial statements as per the Ind-AS norms from the current fiscal year.

Bharti’s consolidated revenue rose 8.4% to Rs.25,546 crore, in line with analysts’ estimates of Rs.25,541 crore. Domestic revenue rose 10.3% to Rs.19,155 crore.

Africa revenue rose 3.8% to $935 million in the June quarter from $916 million in the year-earlier period after adjusting for the sale of some of its units.

Mobile data traffic grew 62.5% and data revenue increased by 34% to Rs.4,640 crore from a year earlier.

Average monthly revenue per user in India fell 1.3% to Rs.196.

The clarity in Bharti Airtel’s strategy makes it a safe bet in the long-term, said the analyst cited above. “They have investments plans well laid out and execution of strategy has improved. Operating margin has been growing quarter on quarter,” the analyst said.

The analyst added that there will be an impact on the revenue and margins of the industry as billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd starts commercial services later this year.

“But we are not sure how much Airtel will suffer. In the next spectrum auction, Bharti does not really need to bid aggressively. Even if they do, it will be in very judicious manner,” she said.

Bharti Airtel has readied a war chest to counter Reliance Jio. It plans to spend Rs.60,000 crore over three years to overhaul its network. The market leader has rolled out 4G services as it seeks to migrate existing customers to the high-speed network. Bharti Airtel is seeking to improve call quality by expanding the tower network and laying more optic fibre.

Earlier this year, Bharti bought 4G airwaves from Aircel Ltd, allowing it to offer the so-called long-term evolution (LTE) services in all 22 circles in the country and matching Reliance Jio in terms of spectrum footprint.

Reliance Jio is set to spend a record Rs.1.5 trillion to build infrastructure to offer high-speed data services across India.

The entry of the Ambani-controlled company and its deep pockets may spark a price war, some analysts fear.

That fear may be exaggerated as Reliance Jio’s record investment is likely to limit its ability to cut prices irrationally, Mint reported on 20 June.

Reliance Jio is expected to compete on network quality and offer exclusive content to users, though Airtel is well-placed to offer these as well, since it has had enough lead time to prepare, with Reliance Jio’s launch delayed by around three years.

To improve its image, Bharti has launched the so-called open network and Project Leap programme, which seek to bring transparency and build trust with customers.

“In continuation of our Project Leap announcement, we have now transparently opened up our entire mobile network to our customers so as to partner them in striving to deliver a world class experience,” Gopal Vittal, chief executive of India and South Asia at Bharti Airtel, said in a statement.

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