Home >Markets >Mark To Market >Bharti Airtel’s Q2 sneak preview holds some hope for investors

Investors predictably cheered Bharti Airtel Ltd’s September quarter headline numbers. The stock gained 2% on Wednesday after the operating metrics showed an improvement in customer base and revenue from the June quarter. On Tuesday, the stock had fallen about 3% after the company said it has deferred its Q2 results announcement owing to the uncertainty caused by the Supreme Court verdict against telecom companies on the calculation of license fees.

Graphic by Satish Kumar/Mint
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Graphic by Satish Kumar/Mint

While the headline numbers on revenue and subscribers were better than expectations, part of the gains in the stock can also be attributed to the government’s conciliatory tone on the financial stress in the telecom sector. It has appointed a committee to suggest measures to alleviate stress in the sector.

The headline numbers underscore the recovery in the mainstay India mobile services business. Sequential revenues from mobile services grew 0.8%, which makes it the third consecutive quarter of expansion. At least two large domestic brokers had estimated a sequential fall in revenue for the September quarter.

Customer losses eased considerably and the company added subscribers on a net basis, after four consecutive quarters of losses. Monthly churn in subscriber base eased considerably from 2.6% in June to 2.1% last quarter.

Importantly, better yielding 4G data customers continued to expand; the subscriber base in this segment increased 8.3% in the last quarter. They now constitute 83% of the total data subscriber base. As a consequence, data volumes on the firm’s network grew by a healthy 15.2%.

Average revenue-per-user (RPU) dropped slightly (down 1%) and voice minutes on the network fell 2.8%. But given the seasonal weakness in the second quarter, the softness is not something investors need to worry about.

The company did not provide other metrics, such as operating profit and net earnings, pending clarity on the liability arising out of the recent Supreme Court verdict on license fee dues. Also, the segmental data indicate a weak show at home services business. The business saw a notable fall in net additions, customer-additions and average RPU. But the fact that the customer base and revenue at the mainstay mobile services business are on the mend is comforting. “Barring a cost shocker in India wireless, we believe Ebitda (earnings before interest tax depreciation and amortization) print should be quite decent and ahead of expectations. We continue to like what we see," analysts at Kotak Institutional Equities said in a note.

The performance strengthens the Street’s view that Airtel’s relatively better financial position and 4G network execution is helping it withstand the volatility in the market better than its rival, Vodafone Idea Ltd. How well it is delivering on earnings will be known when it releases its full quarterly earnings.

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