Cut-throat tariff competition, high interest burden to repay acquisition costs and an expensive rebranding exercise saw Bharti Airtel on Wednesday report a 41 per cent fall in its net profit at Rs 1,303.3 crore for the third quarter ended December, 2010.
The telecom company, which is undergoing a consolidation of its telco assets after buying Zain Telecom, has been witnessing a decline in its net profit since January-March quarter of 2010. The company had posted a net profit of Rs 2,194.9 crore for the December quarter in the financial year 2009-10. The total revenues, however, increased by 51.1 per cent to Rs 15,756 crore during the third quarter from Rs 10,305.3 crore in the same quarter last year.
The adverse currency movements in India and Africa, which also resulted in a restatement loss of Rs 151 crore, and the a one-time rebranding cost of Rs 340 crore were the main factors that dragged the net income down, Bharti Group CFO Manik Jhangiani said.
There was also an outgo on account of additional spectrum charge of Rs 80 crore and interest outgo related to acquisition of Rs 471 crore during the quarter he added. "However if we discount the additional spectrum charge and interest outgo, there would have been a flat growth in the net profit," he said.
There were, of course, clear signs that there is competitive pressures in the market. The average minute of usage per user also witnessed a declined at 449 in the quarter against 454 in the second quarter. The Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin shrank to 33.8 per cent from 39.8 per cent a year earlier, but would have been stable if one time branding costs are taken away.
The average revenue per user (ARPU) in India fell to Rs 198 in the third quarter from Rs 202 in the second quarter. Importantly, the churn rate has increased significantly to 7.8 per cent, from 5.9 per cent in the second quarter. However, the company does not see the churn rate increasing due to launch of mobile number portability across the country. MNP allows mobile users to change their service providers while retaining their numbers.
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Bharti, which acquired African operations of Zain last year at an enterprise value of $10.7 billion, has completed its integration process. The company's losses from the Africa unit stood at Rs 216.3 crore, from Rs 106 crore in the second quarter, while revenue rose 4.2 per cent to Rs 4,053 crore, against Rs 3,891 crore.
“In the next few quarters, there will be a healthy improvement in both revenues and Ebitda. We are confident of profitability in Africa,” said Manoj Kohli, Bharti’s international business CEO and head of African operations.
Bharti had slashed tariffs in 10 of 16 African countries to increase the usage among the mobile users. "Our objective is to provide affordability in Africa. You will see as the restructuring continues and gets completed in the next one or two quarters, the operating cost will get under control and profitability will grow," Kohli said.
During the quarter, the company has also repaid $415 million of its net debt in the third quarter, a major portion of which was towards the repayment of loans for 3G and BWA license.
The company said it will roll out its 3G services in all the 13 circles by the end of March. It had a total user base of 199.1 million at the end of December 2010, of which 42.1 million users were in Africa.