Bharti Airtel Q4 profit misses estimates, reports first Arpu dip in five years

New Delhi: Bharti Airtel reported a 33.5% year-on-year (y-o-y) fall in fourth-quarter profit on Wednesday due to one-time items and a high base effect, even as revenue growth remained steady despite a rare sequential dip in average revenue per user (Arpu).

Arpu slipped for the first time in five years to ₹257 per month from ₹259 in the preceding quarter, reflecting slowing monetization momentum amid the absence of tariff hikes. On a yearly basis, however, Arpu rose 4.9%, aided by premium users and subscriber additions.

India’s second-largest telecom service provider by number of subscribers reported consolidated net profit of ₹7,325 crore in the March quarter compared to ₹11,022 crore in the year-ago period, and about 5% lower than Bloomberg’s estimate of ₹7,690 crore.

The decline in profit was partly due to a deferred tax credit of ₹2,892 crore booked in the year-ago quarter. During the March quarter, the company also recognised a charge of ₹3,161 crore related to regulatory and government levies.

Consolidated revenue rose 15.7% y-o-y to ₹55,383 crore in the quarter, driven by an increase in its mainstay mobile services business, enterprise business, its focus on premium services, upgrades from 2G to 4G/5G, postpaid subscribers, and its Africa business.

Mobile services India business, which contributes over 52% to Airtel’s topline, witnessed a 0.6% q-o-q and 8.3% y-o-y increase in revenue to ₹28,831 crore.

“India Mobile achieved sequential growth of 0.6%, despite two lesser number of days in the quarter,” Gopal Vittal, executive vice chairman of Bharti Airtel, said in a statement. “We added 5.8 million smartphone customers and 0.8 million postpaid customers, underscoring our focus on quality customers and portfolio premiumization.”

Vittal, however, added that “at the same time, we believe further tariff repair remains critical to support continued investments and long-term value creation”.

“We fortified our leadership in the postpaid segment, as evidenced by sustained net additions of 0.8 million customers, bringing our total (postpaid) customer base to 29 million,” the company said.

Brokerage house BNP Paribas said in a note dated 13 May, “India mobile business growth was muted q-q due to lesser number of days in the quarter. We expect India mobile revenue growth trends to remain stable until the tariff hike which we are building in 1HFY27.”

The company’s mobile user base in India was at 373.2 million at the end of the quarter, and 482 million in total including fibre-to-the-home (FTTH), machine-to-machine, and wireline connections.

Separately, the telecom operator also approved a nearly ₹28,200-crore share-swap (no-cash) transaction to increase its stake in Airtel Africa plc.

Shares of Bharti Airtel ended 1.4% higher at ₹1,781.2 on the National Stock Exchange on Wednesday, while the benchmark Nifty 50 ended flat.

Tariff pause weighs on Arpu

The last time the company witnessed a sequential fall in its Arpu was in March 2021, when the Telecom Regulatory Authority of India (Trai) eliminated Interconnection Usage Charges (IUC), which meant operators stopped earning termination charges on incoming calls from other networks.

Analysts attribute Q4’s sequential drop in Arpu to two fewer days during the quarter (February had 28 days) and the absence of a much-anticipated tariff hike, which is needed by companies to improve their return on capital employed (ROCE).

To be sure, Reliance Jio, too, witnessed a flat Arpu of ₹214 per month as of March-end in the absence of a tariff hike.

The fall in revenue per user for Bharti Airtel comes even as it has been adding mobile subscribers. “The moderation in Arpu momentum suggests that subscriber additions may not have translated proportionately into higher per-user monetisation,” said Parag Kar, an independent telecom analyst.

According to Kar, in the absence of a broad-based tariff hike, telecom operators are relying more on selective plan optimisation and premiumisation. The revenue flow-through from such changes usually takes time and may not impact the top line instantaneously, he said.

Operational performance

In the March quarter, Bharti Airtel’s earnings before interest, tax, depreciation and amortization (Ebitda) rose 16.9% y-o-y and 2.9% q-o-q to ₹32,038 crore.

Airtel Business, which houses the enterprise connectivity solutions including data centres, cloud and internet of things (IoT) solutions, saw a 3.3% y-o-y and 2.6% sequential increase in revenue to ₹5,490 crore.

The company said its home business, which includes FTTH broadband connectivity and fixed wireless access (FWA), sustained a robust growth trajectory with sequential revenue increase of 9.5% to ₹2,191 crore, led by 1.1 million net customer additions.

In the full fiscal year FY26, the company witnessed a 22% increase in revenue from operations to ₹2.1 trillion and Ebitda rose 28.7% to ₹1.2 trillion. However, net profit fell 20.4% to ₹26,695 crore during the year.

The Africa connection

Meanwhile, Bharti Airtel said in an exchange filing on Wednesday that it will acquire shares held by promoter-group entity Indian Continent Investment Limited (ICIL) in its Africa business. In the March quarter, Airtel Africa reported a 33% y-o-y increase in revenue to $1.75 billion.

Bharti Airtel currently holds 62.73% in Airtel Africa through its wholly owned subsidiary Airtel Africa Mauritius Ltd, the filing showed.

As part of the deal, Airtel will acquire an additional 16.31% from ICIL, and in turn issue about 146.7 million shares, representing a 2.4% stake in Bharti Airtel, at ₹1,923 per share.

“The Board recognized that the transaction is in line with the objective of consolidating/ strengthening shareholding in a strategic subsidiary. Apart from being cash-less and leverage neutral, the transaction is accretive to EPS (earning per share) of Airtel India with additional earnings outweighing the dilution,” the company statement said.

“Additionally, for the purpose of this swap transaction, the shares of Airtel India are proposed to be issued at a premium of 9.5% to the last closing price prior to the Relevant Date and the corresponding shares of Airtel Africa shall be acquired at 11.6% discount to the last closing price prior to Relevant Date,” the company said.

“Airtel Africa has delivered strong results in recent years, and while there is an equity dilution, Airtel shares are being issued at a premium and Africa shares are being acquired at a discount to the current market price, which provides comfort,” BNP Paribas said in its note.