Bharti Airtel Ltd’s revenue growth numbers for the June quarter were as flat as a pancake. In the key India wireless business, revenues were 0.6% lower compared to the March quarter, while consolidated revenues of the company were 0.9% higher.
But investors won’t complain. In fact, flat revenues are a good sign. Despite the hefty tariff hikes in December, and the impact on incomes due to the pandemic, consumers haven’t gone down the downtrading path. On a year-on-year basis, India wireless revenues have risen 18.5%, while Ebitda of the segment is 35% higher. Ebitda stands for earnings before interest, tax, depreciation and amortization.
“Overall, it’s a steady quarter to follow the blockbuster March quarter," analysts at Kotak Institutional Equities wrote in a note to clients. The March quarter had captured the full benefit of the December tariff hike, and also helped Airtel capture a fair amount of market share from Reliance Jio Infocomm Ltd. When Jio reports its Q1 results later today, a key metric to watch would be whether tariff hikes have eventually reflected in its revenues, and whether the market share losses have been recouped.
While Airtel’s March quarter results were driven by the tariff hikes, the June quarter results were influenced by a number of moving parts. One would have imagined phone usage to explode, both in terms of voice minutes as well as data traffic. But oddly, voice usage was 0.2% lower compared to Q4, and the 12.2% growth in data traffic was lower than the 15-16% growth in the past three quarters.
In the low income segment, recharges are estimated to have reduced. Of course, curtailed business activity in some industries would have also had a role to play. On the other hand, work from home in many industries led to an increase in call activity and was an offsetting factor. It’s important to note here that even if voice traffic had increased meaningfully, revenues and profits would not have moved meaningfully, simply because of the bundled pack phenomenon, which comes with unlimited talk time.
Likewise, even as data usage per customer increased sharply last quarter, most customers would still be within the data allowance included in their bundled packs. The reason data traffic didn’t grow at the same rate as preceding quarters was the hit on smartphone sales during the lockdown. 4G customers rose by only 2 million last quarter, compared to an average of 13.7 million in the preceding three quarters. Airtel and other telcos also asked providers of streaming services to curb the use of high-definition videos to lower bandwidth usage.
In the fixed broadband business, while most analysts were expecting a jump in revenues, Airtel again ended up with only 1% growth. While some home users upgraded to meet work-from-home requirements, this was offset by informal work establishments, who paused connections or stopped paying.
Given these various moving parts, “Bharti’s 1% sequential revenue growth and 2% sequential Ebitda growth can be termed respectable," Kotak’s analysts said in the note.
Airtel shares are trading at their pre-pandemic highs of around ₹570 a piece on Thursday. While many industries have been hit severely by the pandemic, Airtel’s world is flat, and investors are evidently relieved at the outcome.