Data drives Bharti Airtel’s Q2 earnings
Net profit rises to Rs1,380 crore in the fiscal second quarter, from Rs512 crore in the year-ago period
New Delhi: Bharti Airtel Ltd’s profit more than doubled in the fiscal second quarter as India’s largest communications services provider benefited from a surge in mobile data consumption and lower finance costs and investment losses.
Profit rose to ₹ 1,383 crore in the three months ended 30 September from ₹ 512 crore a year earlier, the company said on Thursday. Revenue rose 7.1% to ₹ 22,845 crore from ₹ 21,324 crore,
The profit and revenue figures were slightly above market expectations. Bharti Airtel had been expected to post a profit of ₹ 1,300 crore on revenue of ₹ 23,280 crore, according to a Bloomberg survey of 24 analysts.
After 15 consecutive quarters of falling net profit, it’s the fourth straight quarter that Bharti Airtel has posted a profit increase, confirming that it’s in the midst of a turnaround, helped by greater focus on operational efficiencies, the return of pricing power with the end of intense tariff competition and a surge in data revenue.
Consolidated mobile data revenue rose 66.7% to ₹ 2,540 crore from the year-earlier period, making up two-thirds of the telco’s incremental earnings for the quarter.
It benefited in other ways. In the year-ago period, the company had been hurt by mark-to-market losses on investments, which it said had decreased in the three months to September. Mark-to-market refers to the accounting practice of recording the price or value of investments to reflect its current market value. Bharti Airtel didn’t specify figures; the company doesn’t provide details on investments.
Bharti and other phone service providers have gained from a surge in mobile data consumption triggered by the proliferation of cheap smartphones.
“We continue to see strong momentum in mobile data," Gopal Vittal, chief executive officer for India and South Asia, said in a company statement. The introduction of fourth-generation services in 15 cities “is now witnessing stronger customer acceptance", he said.
The company’s India mobile data revenue surged 74% to ₹ 1,805 crore from a year earlier while data volume almost doubled to 67.6 billion megabytes (MBs). Data subscriber base for the telco grew 43% to 40.1 million while data usage per customer went up 31.2% to 563MBs, the company reported.
This significant increase in data services has enabled the company to escape any adverse impact of the second quarter being seasonally the weakest quarter for India’s telecom industry.
The increased data consumption helped India (and South Asia) revenue rise 12.3% to ₹ 16,182.7 crore over the same period last year.
Initiatives to improve efficiencies are also enabling the company to garner strong revenue growth from basic voice services as well. Mobile voice realizations rose as much as 0.90 paise per minute to 37.69 paise while average revenue per user (Arpu) rose 3% to ₹ 198 (from ₹ 192).
Non-voice revenue now makes up 20% of the company’s total India mobile revenue with data making up 14.5% and messaging the rest.
Africa operations, however, continue to weigh on the telco, with loss from the 17-country operation widening to ₹ 753.6 crore from ₹ 288.4 crore a year earlier. Africa revenue was down 1.8% to ₹ 6,895.6 crore. However, in constant currency terms, revenue was up 6.4% in local currency and 1.5% taking into account the dollar’s appreciation during the period, the company said.
With ₹ 6,445 crore going towards spectrum payments, the company’s net debt rose to $10.1 billion and net debt-to-Ebitda (earnings before interest, taxation, depreciation, and amortisation margin) ratio rose to 2.06 times from 2.20 in the same quarter last year.
“The overall numbers are in line with expectations we had. But there is some lack of clarity in the details. The sales and distribution costs have fallen significantly—far more than the competition, which is usually a good thing, depending on the reasons. The reason for such a big drop is unclear," a Mumbai-based analyst with a multinational brokerage firm said.
“The seasonal impact is less on Bharti as compared to Idea (that announced earnings last week) but data rates have come down in line with the rest of the industry. If it had not been for the lower finance charges and forex losses, the numbers would tell a very different story," he added on condition of anonymity.
Other analysts, too, are cautious.
“The worry in our minds, after both Idea and Bharti results, is on sustainability of industry discipline on tariffs. For both Bharti and Idea, voice pricing in India is either flat or down vs pre-Feb-14 auction levels," Sunil Tirumalai and Chunky Shah, analysts with Credit Suisse Securities Research and Analytics, wrote in a report.
“This clearly shows that industry has failed to pass on any of the higher spectrum costs onto the customers (quite contrary to most telco managements talking about tariff increases for much of he last 12-18 months)," they wrote.
Bharti shares rose 0.58% to ₹ 407.50 on BSE on a day the benchmark Sensex gained 0.92% to 27,346.33 points.
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