BackBharti Airtel’s surprise results impress analysts
Despite low expectation, Bharti Airtel's results for the quarter ended March have been excellent
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New Delhi: It’s fairly unusual for telecom companies to beat consensus earnings estimates these days, given the hyper competition in the industry, but India’s top telecom carrier Bharti Airtel, which announced its results for the March quarter on Wednesday, has done it.
It is yet to be seen how Idea Cellular, which will announce its results later on Thursday, fares. The third largest telecom company in the country is expected to announce a fall in net profit owing to competition, along with other telecom carriers. Bharti Airtel, Idea Cellular and Reliance Communications are seen reporting flattish voice revenue and sluggish data volumes growth in the January-March period, stung by slow uptake of 4G amid mounting interest and amortisation costs linked to past spectrum purchases, but analysts said rising call volumes could bring some cheer, according to an Economic Times report.
“4G uptake has been slow and is unlikely to help the surprisingly slow momentum of data volume growth," said brokerage Kotak in a note.
Despite low expectation, Bharti Airtel’s results for the quarter ended March have been excellent. Its earnings before interest, taxes, depreciation and amortization (Ebitda) rose 14.3% year-on-year to ₹ 9,188.3 crore. Most analysts had expected Ebitda to grow by around 7.5%, slightly lower than the 8.3% growth in the December quarter.
Net income at the company controlled by billionaire Sunil Mittal rose 2.8% to ₹ 1,290 crore ($194 million) in the quarter ended 31 March, exceeding the ₹ 1,150 crore average estimate compiled by Bloomberg. Revenue rose 8.4% to ₹ 24,980 crore, compared with the average estimate of ₹ 24,700 crore.
Bharti is preparing to fend off billionaire Mukesh Ambani’s new carrier, which is planning to enter the industry this year with fourth-generation (4G) services. Even with a billion subscriptions, Indian phone companies are under mounting pressure to consolidate as a dozen carriers battle for market share.
Concerns about added competition brought on by the entry of Jio, the telecom unit of Ambani’s flagship Reliance Industries Ltd, prompted Fitch Ratings to downgrade its 2016 outlook for the Indian phone industry to negative from stable in November.
But in the last two months, Bharti has spent about $1.2 billion on buying radio spectrum to expand its 4G service, Reuters reported.
Airtel, almost a third owned by Singapore Telecommunications, has been offering 4G services at 3G rates to attract data customers over the past few months. Data now accounts for almost a quarter of the carrier’s mobile revenue at 23.3% compared with 17.6% a year ago and 23.1% in the previous three-month period. Mobile data revenue in the country during the quarter grew 44.5% on year to ₹ 3,357 crore.
Bharti’s India unit saw an on-quarter 10% rise in mobile data traffic and a 2% sequential fall in average revenue per user (ARPU). It registered a 4% fall in data realisation per MB due to increasing competition, which led to a reduction in data rates.
Voice rates, too, are on a downward trend across the industry due to intense competition. This encouraged more calls and helped the company’s voice business register a sequential growth of 6% in total minutes on the network and ARPU to rise marginally to ₹ 138 from ₹ 137. Average realisation from voice services per minute dipped 1%.
At a meeting held on Wednesday, Bharti Airtel also approved the proposal to buy back the fully paid-up equity shares with a face value of ₹ 5 each of the company from the shareholders on a proportionate basis through a tender offer. The buyback shall be up to an aggregate amount not exceeding ₹ 1,434 crore at a price of ₹ 400 per equity share, translating into approximately 3,58,50,000 shares, representing 0.90% of the total paid-up equity share capital of the company, subject to the regulatory and other approvals, if any.
India has over 1 billion mobile phone users, making it the second biggest market behind China, and the market for mobile internet services is growing fast as only a third of phone users already have smartphones, Reuters reported.
Over 100 million smartphones were sold in India last year and that number is expected to grow by over 25% this year, while network operators are investing heavily in providing 4G broadband.
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