Reliance Jio, spectrum cost dent Airtel’s Q2 profit
Airtel’s net profit declined to Rs1,460.7 crore in the three months ended 30 September from Rs1,536.1 crore in the year-earlier period
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New Delhi: Bharti Airtel Ltd’s quarterly profit fell 4.9%—it still exceeded analysts estimates—as India’s biggest mobile service provider cut data tariffs to protect its market share in the face of competition from new entrant Reliance Jio Infocomm Ltd (RJio).
Net profit declined to Rs1,460.7 crore in the three months ended 30 September from Rs1,536.1 crore in the year-earlier period.
A Bloomberg survey of 12 analysts expected Bharti to post Rs1,230 crore profit.
Bharti has responded to Reliance Jio’s aggressive moves by cutting tariffs to retain users.
Mukesh Ambani-led Reliance Jio has offered a lifetime of voice calls for free; it is offering data for free until 31 December.
Bharti Airtel has offered users lucrative data plans. In the latest such offer on 19 October, it announced a tariff cut on 10 GB of data, which is available for Rs259 for new 4G handset users.
The reduction in tariffs and initiatives to retain customers has hurt profits, said Rishi Tejpal, principal research analyst at Gartner Inc.
“Competition mainly from newly launched Reliance Jio offering free voice and data at very low prices led to these tariff cuts. Going further, along with low data prices, relevant content—particularly video—will help boost data usage,” Tejpal said.
“More than pricing, service availability and quality of service will be the differentiating factors to compete effectively,” he said, adding that the profit margins will be under pressure as the telcos are launching various retention strategies to avoid losing customers to Jio.
Average revenue per user (Arpu) rose to Rs201 in the September quarter from Rs193 in the year-earlier period. However, voice Arpu declined to Rs132 in the second quarter from Rs140 in the year ago period.
Total revenue from operations rose 3.42% to Rs24,651.5 crore in the September quarter from Rs23,835.7 crore a year ago.
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The company’s India operating margin expanded to 42.8% in the three months ended 30 September from 40.2% in the year earlier.
“Depreciation and amortization expenses amounted to Rs4,956 crore as compared to Rs4,239 crore in the corresponding quarter last year, which reflects an increase of 16.9%, primarily led by incremental depreciation on capex and higher spectrum amortization expenses in India,” the company said in a statement.
High spectrum costs and consequent increase in associated amortization costs has also resulted in a decline of return on capital employed (ROCE) to 7.4% from 9.1% in the corresponding quarter last year.
The company said that in Africa, exchange rates stabilized during the quarter, but it continues to face problems in Nigeria.
“The revenue-weighted currency depreciation during the quarter has been 2.1%, compared with the previous quarter, mainly caused by depreciation in Nigerian Naira by 7.9%,” the firm said.
On Tuesday, shares of Bharti rose 1.48% to Rs311.05 on BSE, while the exchange’s benchmark Sensex shed 0.31% to 28,091.42 points. Bharti announced its earnings after the end of trading in Mumbai.