Airtel net falls again despite rise in revenue, margin

Global operations, led by Africa, still a drain; shares rise seven per cent on BSE

Bharti Airtel Ltd on Wednesday reported a 9.6 per cent drop in net income at Rs 689 crore during the April-June quarter. This fall, it said, was driven by a derivatives loss of Rs 534 crore due to rupee depreciation and tax charges of Rs 968 crore. During the same quarter in 2012-13, tax charges were lower at Rs 454 crore and it also had derivative and exchange gains of Rs 160 crore.

Bharti Airtel stock closed 7.3 per cent higher at Rs 344.90 on BSE on Wednesday, registering its biggest single-day percentage gain in more than three years.

The result marks a 14th quarter of decline in net profit for the country’s largest telecom operator by subscriber base. It had a net income of Rs 762 crore in the corresponding quarter of the previous financial year. The company said substitution of the Africa acquisition debt with a longer tenure dollar bond for $1.5 billion during the January-March  quarter had also resulted in higher outgo on interest. However, net income is about 35 per cent higher than in January-March.

Earnings
Revenue for the quarter was Rs 20,264 crore, up 9.2 per cent over the year-ago quarter and higher than the Rs 19,582 crore in the March quarter.

Revenue from mobiles (India) increased by 10.9 per cent, the digital TV business grew 34 per cent, business-to-business services rose 17.9 per cent and businesses in other South Asian markets grew 37 per cent during the quarter under review. Bharti’s earnings before interest, tax, depreciation and amortisation (Ebitda) margin in India improved to 34.9 per cent from 31.9 per cent last year, while the international margins improved to 25.4 per cent from 24 per cent. The consolidated Ebitda was Rs 6,545 crore and consolidated Ebitda margin was Rs 32.2 per cent. Consolidated average revenue per user (Arpu) in India rose to Rs 200 during the April-June quarter, against Rs 193 during the previous one. An area of worry for telcos has been on how to raise the average realisation per minute (ARM), the money the company makes from customers. Bharti has reported an improvement in this area. ARM for voice in India rose four per cent to 36.39 paise from 35p in the previous quarter. Average realisation per MB for data rose six per cent to 30.97 paise from 29.27p, with its third-generation (3G) services subscriber base rising to 8.7 mn (6.8 mn active) till June 30. Chairman Sunil Mittal said: “Results for the quarter reflect the overall stability of our operations, and demonstrate the potential for growth, particularly seeing the robust data growth across all geographies. The results for Airtel India reflect rationality returning to the sector, which needs to be complemented by a more enabling regulatory environment for a deeper penetration of telecom and broadband services.”

Africa

It continues to lose money in its Africa operations. It ventured there in 2010 with a $9-bn acquisition and is yet to break even.

The African operations were hurt by regulatory changes and political unrest in some key markets, Bharti said. Arpu in Africa dipped seven per cent to $4.5 in April-June from $4.9 in the previous quarter. Voice realisation per minute was down 14 per cent to 3.38 cents but data realisation per MB increased by 10 per cent to 1.81 cents. Data usage per customer in Africa was down four per cent to 70.2 MB per second.



A rise in minutes on the network in both Africa and India is a sign of improvement in the market. Minutes on the network rose 11 per cent in Africa and about two per cent in India. “Larger telcos, like Bharti, are benefiting at a faster rate than expected from declining competitive intensity. Bharti is expected to continue to gain momentum in the core business. Africa business revenue and Ebitda were as expected, despite a cut in interconnect rate implying steady operational momentum,” said an analyst with Goldman Sachs.  “The market seems to be coming to some kind of rationality,” said Sarvjit Dhillon, chief financial officer at Bharti Airtel’s parent firm. But regulation is “still an issue”.

International revenue in the June quarter, mainly from Africa, was Rs 6,332 crore, up from Rs 6,044 crore in the year-ago quarter. These operations, which include Africa, Bangladesh and Sri Lanka, made a loss of Rs 703 crore in April-June, down from Rs 816 crore of loss in the year-ago period. Capital expenditure on international operations was Rs 1,015 crore in the quarter, and its operating free cash flow from these was Rs 590.8 crore (down from Rs 607 crore last June), an indication that African operations are taking longer than expected to become profitable.

“Yes, the African markets are tougher than we expected,” said Manoj Kohli, managing director. Kohli, who also heads the international operations for Bharti Airtel, said the company would look for further “in-country consolidation” for expansion in the immediate future.

The company said revenue growth was a little soft due to a few significant regulatory changes in Nigeria, Tanzania, Congo & Gabon, and the one-time impact of an emergency declared in three states by Nigeria’s federal government, leading to complete shutdown of telecommunication services during a significant part of the quarter.

“Also, we took over the operations of Warid in Uganda during the quarter and integration of operations is well on path,” it added.

Other items
During the quarter, Bharti also repaid Rs 6,796 crore of debt from the proceeds of the five per cent stake sale to Qatar Foundation Endowment. At the end of June, the total debt burden was $9.8 bn (Rs 58,380 crore) from $10.7 bn as on March 31. The debt-equity ratio was 1.01, healthier than 1.16 at the end of the March quarter and 1.32 at the end of last year’s June quarter.

The company has finalised plans to sell its data centre undertaking (business) by way of a slump sale to its newly incorporated wholly owned subsidiary, Nxtra Data Ltd.