New Delhi: Bharti Airtel Ltd, India’s biggest mobile phone services firm by customers, reported an almost 42% year-on-year growth in its net profits to Rs1,722 crore in the December quarter, sustaining profitability by combating lower tariffs with increased phone usage.
The third quarter (Q3) saw its revenues rise 42%, too, over the year-ago period to Rs6,963 crore, and the New Delhi-based?firm?added?more than six million subscribers in the period, besting all its rivals.
Bharti Airtel sustained its performance on key profitability measures such as Ebitda margins (Ebitda is short for earnings before interest, taxes, depreciation and amortization, and the Ebitda margin is a good measure of operating profitability), which stood at 42.6% for Q3, close to its highest ever operating margin of 42.8%, recorded in the September quarter. This was “despite making an investment of over Rs3,300 crore in network expansion and other capital expenditure,” in Q3, said Manoj Kohli, president and CEO of the firm.
Bharti Airtel has committed Rs13,650 crore towards capital expenditure for this fiscal year. “By March 2008, we will increase our population coverage to over 70%,” Kohli added.
With 55 million customers for its mobile services, Bharti Airtel will see more than half of its new subscribers coming from smaller towns and villages next year. “By 2010, when we reach (the) 125 million customer mark, the rural customers will definitely account for over one-third of our subscriber base,” Kohli said. Currently, around 20% of the firm’s customers are from rural areas, where just one in 10 people owns a mobile phone.
Bharti Airtel’s revenue per minute, which was around 78 paise in the second quarter ended September, came down to 76 paise per minute in Q3. “This could go below 70 paise in the coming quarters,” said Yogesh Kirve, an equity analyst at Anand Rathi Securities Ltd. “However, as long as Bharti is able to bring its (capital expenditure) down and increase the volume of traffic, the profit margins will not be a worrying factor,” he added.
Analysts predict tough competition for Bharti Airtel as new firms such as Videocon Industries Ltd and Tata Teleservices Ltd enter the GSM market. GSM is a wireless technology that powers networks accounting for nearly three-fourths of the country’s 233 million mobile phone subscribers.
Airtel Bharti’s nearest rival, Reliance Communications Ltd, which will report its earnings for Q3 on Thursday, plans investments estimated at $5.6 billion (Rs2.2 trillion) in a countrywide GSM-based network. The firm is India’s largest CDMA player. CDMA is a rival technology to GSM. Nine firms were given approval by the Centre in December to start phone services in India.
Kohli, however, shrugged off fears of competition. “Over the past few years, whenever new competition has come in, the market has grown, and as the brand leader, we will grow as well.” The firm has received approval for fresh spectrum, or radio waves, in five licensed areas—West Bengal, Gujarat, western Uttar Pradesh, Assam and Haryana—and is in line for?such?allocation?in?five more. Apart from pressure on mobile tariffs from new entrants, it will also have to cope with increased expenses on account of new licence fees to be paid to the Centre. “From this April?onwards,?companies such as Bharti will have to pay an additional 2% of their revenues as licence fees,” said Kirve. This may impact the net profits of the firm by 1%.