BackAirtel thrives on voice and data volumes
Data services now contributes almost one-fifth of Airtel's mobile revenues compared to 12.4% a year ago
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The increased demand for mobile data services is showing up in the earnings of telecom firms such as Idea Cellular Ltd and Bharti Airtel Ltd. For the latter, the strong performance of the Indian mobile services division, including voice, helped compensate for the drag from the Africa business.
Bharti Airtel’s June quarter consolidated earnings before interest, tax, depreciation and amortization (Ebitda) grew 6.4% from a year ago.
The big surprise in the India operations was the 3% sequential growth in mobile revenues, when the Street was expecting something in the order of 1%. Ebitda in this segment grew 3.4%. Net profit rose 40.1% to ₹ 1,554 crore and revenue to ₹ 23,671 crore.
The revenue growth was driven by a strong surge in voice volume which grew 4.7% from the end of March, again better than expected. However, average price realizations fell 3.6% quarter on quarter. While this is partly explained by the reduction in termination charges that happened in March, it is worse than what analysts had forecast and suggests that voice prices are still weak.
The story was the same with data. Volumes rose a strong 17.8% quarter on quarter, better than rival Idea Cellular’s 15%. Data usage per customer also grew 7.6% sequentially, but realizations fell by 4.7%. One reason for that could be the increased usage itself, with bigger data packs being sold at discounted rates. Data consumption is very price elastic and consumers tend to use more data when prices are slashed for the same bill amount.
For Bharti Airtel, the increasing importance of data services is underlined by the fact that this business now contributes almost one-fifth of mobile revenues compared to 12.4% a year ago.
But the performance of the Africa business was nothing much to write about. That region’s Ebitda fell 10.9% from a year ago in constant currency terms. In nominal US dollar terms, Ebitda was down by 29.5% from a year ago. Sequentially, it dropped by 3.7%, worse than the 1-2% expected by the Street. While voice volumes grew 5.6% sequentially and data usage increased by 23%, realizations were hit.
Investors should take heart from the strong showing in Bharti Airtel’s main business—mobile services. The worrying factor in the medium term continues to be Reliance Jio and a swathe of cable operators. Together, this competition threatens not only the mobile data business but also other segments such as telemedia and broadband. It would also necessitate higher capital expenditure and drive up finance costs, but investors seem comforted by Bharti Airtel’s plan to sell a part of its African business, which would give it some breathing space.
The writer does not have positions in the companies discussed here.
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