New Delhi: Bharti Airtel Ltd’s Q1 profit plunged 75%, the third straight quarterly decline, as new entrant Reliance Jio Infocomm Ltd, backed by India’s richest man, sparked a price war aimed at upending the telecom sector.

Bharti Airtel’s net profit declined to Rs367 crore in the three moths ended 30 June from Rs1,462 crore in the year earlier, the company said on Tuesday. That exceeded the Rs282 crore profit estimate of eight analysts surveyed by Bloomberg.

The better-than-expected Q1 results was partly because pressure eased on Airtel after Reliance Jio started charging customers in April, after offering services for free for almost six months. The reprieve for incumbent operators is likely to be temporary as Reliance Industries Ltd chairman Mukesh Ambani has doubled down on his telecom bet by offering free 4G handsets to Reliance Jio users.

“Jio will continue to damage these guys. They all got it wrong while bidding for spectrum and that will keep them bleeding," said Dharmesh Shah, a Mumbai-based independent analyst tracking telecom sector, referring to the huge amounts telecom firms such as Airtel bid for radio waves.

Airtel Q1 results: Is the Reliance Jio impact wearing off?

Shares of Bharti Airtel rose 1.76% to Rs427.60 on BSE, while the exchange’s benchmark Sensex shed 0.05% to 32,228.27 points.

Airtel’s India revenue declined 10% to Rs17,244 crore as the company offered discounts to customers to keep them from defecting to Reliance Jio’s network. The company attributed the decline in India revenue primarily to a 14.1% drop in mobile revenues. It blamed Reliance Jio for the stress on its financials.

Still, it signed up 5.2 million new customers in the June quarter, the highest ever quarterly addition.

Competition is unlikely to ease soon. Ambani on Friday announced the launch of the JioPhone which could cause a second upheaval in the telecom market and may lure a significant number of customers, many of whom are on older so-called 2G networks, to the Reliance Jio network.

The 4G-capable JioPhone, with unlimited data and optional TV streaming, will be free for subscribers who will merely pay a Rs1,500 security deposit refundable after three years.

Gopal Vittal, Bharti Airtel’s chief executive and managing director for India and South Asia region, said that the price disruption in the Indian telecom market caused by the entry of a new telecom firm has caused further stress on sector profitability, cash flows and leverage.

“Consequently, our revenues declined 10% and Ebitda (earnings before interest taxes, depreciation and amortization) margin eroded by 5.3% y-o-y. We remain committed to providing the best value and experience to our customers and continue to invest towards it," Vittal said in a statement.

During the company’s annual general meeting on Tuesday, Vittal was re-appointed as managing director and CEO (India and South Asia) at Airtel for a period of five years with effect from 1 February 2018.

Bharti Airtel’s operating margin from mobile services narrowed sharply to 34.3% in the June quarter from 42.6% in the year-ago period as revenues fell and costs rose.

Increased competition from Reliance Jio has forced operators to boost spending on their network to deliver faster data services.

Bharti Airtel significantly stepped up capital expenditure in the June quarter to Rs5,072.9 crore, primarily to enhance its data capabilities to fight competition. This capex investment along with decline in operating profit has resulted in cash burn of Rs644.8 crore for the quarter as compared to positive cash flow of Rs3,216.5 crore in the corresponding quarter last year, the company said.

Bharti Airtel’s monthly average revenue per user, or ARPU, fell sharply to Rs154 in the June quarter from Rs196 a year ago.

Data ARPU fell to Rs156 from Rs202 during the quarter. The number of minutes spent on calls on its network, however, grew 34% during the quarter.

In an indication of how Airtel tried to retain its customers from moving to Reliance Jio’s network, mobile data usage per customer during the quarter rose 189% to 2.6 GB per month as compared to 0.9 GB during the year ago period.

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