In a seasonally weak quarter, India’s largest mobile telephony services provider reported results which were broadly in line with expectations. While traffic volume and number of subscribers declined, the company managed to hold on to revenues it earns per minute. Goldman Sachs analysts say that flat revenues per minute indicate declining competitive intensity. This comes on the back of companies curbing dealer commissions and focussing on profitability. Though headline tariffs are up, analysts believe that there is still discounting at the retail level which has resulted in higher churn and lower voice realisations. However, going forward Bharti management expects tariffs to move upward and clarity to emerge after the auctions scheduled this month. The company’s CEO of India/South Asia operations Sanjay Kapoor in an investor concall said that the current tariffs do not reflect pricing pressures companies are likely to face going ahead and tariffs are bound to move up.
Though most analysts believe that Bharti is in a better position than other weaker players, regulatory uncertainty continues to be the biggest overhang on the stock, which slipped 0.9% to close at Rs 271.10 on the BSE.
Steady volumes, data focus
Given the seasonality, voice traffic was down two% as compared to four% of Idea. Bharti is less impacted by seasonality than its smaller competitor, as the latter has 55% of its subscriber base in rural areas compared to Bharti’s 42%, say Goldman Sachs analysts. Minutes of usage, too, fell four% for Bharti compared to Idea’s five%. The company continues to focus on data, which as a percentage of revenues increased by 90 basis points to 5.2%. This helped its non-voice revenues (messaging and VAS revenues fell) increase by 50 basis points to 16.8%. However, for these services to contribute to profitability, tariffs especially on the 2G data plans have to increase, believe analysts.
One-off gains
Bharti’s revenues were up four% sequentially due to a favourable TDSAT order on inter connect agreements. This resulted in one-time revenue increase of Rs 586 crore. Adjusted for these, India revenues were down 1.4% while net profit was down 31% quarter-on-quarter. Net profit was also pegged back due to higher interest costs as well as a sharp jump in taxes (dividend distribution tax on dividend received from Indus). In line with the industry trend, the company, on the back of lower dealer commissions was able to curtail its selling, general and administrative costs.
Good quarter for Africa biz
Bharti’s Africa operations performed better than expected as the company managed to increase traffic volumes by 20% on the back of price cuts. Though revenues per minute declined 15% higher traffic helped grow overall revenues three%. An analyst with a foreign brokerage says that the company managed to cut prices in a revenue accretive manner. Lower access charges as well as network costs helped the company post a 140 basis points rise in Ebidta margins to 27.2%.