Airtel profit plunges 39% in Q3 as IUC cut, Reliance Jio price war take their toll
Bharti Airtel’s net profit tanked 39.3% in December quarter to Rs305.8 crore, while revenue fell 13% to Rs20,319 crore
New Delhi: Bharti Airtel Ltd’s quarterly profit plunged 39%, missing analysts’ estimates, as India’s telecom regulator more than halved interconnection fees and a pricing war triggered by the entry of Reliance Jio Infocomm Ltd continued unabated.
Net profit fell to Rs306 crore in the three months ended 31 December from Rs504 crore in the year earlier, India’s largest telecom operator said in a statement on Thursday. That compares with the Rs398 crore profit estimate of 10 analysts surveyed by Thomson Reuters.
Telecom operators, already reeling from a fierce price war that started with the entry of Reliance Jio in September 2016, were hit hard by the telecom regulator’s decision to slash interconnection usage charges (IUC) levied by mobile networks handling incoming calls from rival networks.
The Telecom Regulatory Authority of India (Trai) cut IUC from 14 paise a minute to 6 paise effective 1 October.
“Although the company faced pressure from Reliance Jio, the impact of the IUC cut is the biggest hit,” a Mumbai-based telecom analyst said on condition of anonymity. “With consolidation in the sector, it is still the best placed among all operators.”
Revenue dropped 12.9% to Rs20,319 crore in the December quarter from Rs23,335 crore in the year earlier. Pricing pressure is evident from the fact that Airtel’s mobile data traffic rose more than five-fold to 1.18 billion megabytes (MBs) in the quarter.
“Regulatory fiat in the form of a cut in domestic IUC rates has exacerbated the industry ARPU (average revenue per user) decline in Q3’18. The recent announcement of reduction in international termination rates will further accentuate this decline and benefit foreign operators with no commensurate benefit to customers,” Gopal Vittal, managing director and chief executive officer (India and South Asia) at Bharti Airtel, said in a statement.
The IUC cut has worsened the already strained health of telecom operators. Things started souring after Reliance Jio started commercial services in September 2016 with six months of free services, followed by rock-bottom tariffs. Airtel has since recorded a fall in net profit for five straight quarters as it cut tariffs to take on Jio.
Consolidated Ebitda fell 11.5% year-on-year to Rs7,587 crore in the quarter ended December, Airtel said. Ebitda is earnings before interest, taxes, depreciation and amortization.
Airtel’s December quarter revenues from India fell 11.3% year on year to Rs15,294 crore on an underlying basis, adjusted for the impact in reduction of domestic termination rates, primarily led by a drop in the mobile segment, the company said.
Airtel’s monthly ARPU (in India) fell sharply to Rs123 in the December quarter from Rs172 a year ago. The number of minutes spent on calls on its network, however, grew 49.8% in India during the quarter while the total data consumed on its network rose more than six-fold.
Performance of the company’s Africa unit has saved the company some blushes. In constant currency terms, Africa revenues grew by 5.3% year-on-year, led by strong growth in data and Airtel Money transactions, the company said.
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