The adverse impact of rate wars and foreign exchange losses has resulted in Bharti Airtel, the country’s largest telecom service provider, showing a decline (over the same period last year) in net profit by 32 per cent to Rs 1,682 crore during the quarter ended June.
It had a net profit of Rs 2,475 crore in the previous quarter, which did not include financials for the Zain acquisition. Bharti bought Zain’s African operations for $10.7 billion, for which the deal was closed in June. The net loss from those operations for the period included in Bharti’s accounts was Rs 69.7 crore.
There were other reasons for the net profit decline. That from its Indian and South Asia operations fell by 23 per cent, to Rs 1,904 crore. This impact of the rate wars was clearly reflected in the company's Ebitda (earnings before interest, taxes, depreciation and amortisation) margins. For the Indian and South Asian operations, this fell to 37.6 per cent this quarter over 41 per cent last year. At a consolidated level, which includes Zain's operations, the Ebitda margin for this quarter was 36.1 per cent.
This is the first time Bharti has announced quarterly accounting results in line with International Financial Reporting Standards (IFRS).
The April-June quarter also witnessed an adverse impact after the dollar strengthened against the rupee and several African currencies. As a result, derivatives’ and exchange fluctuation losses were Rs 216 crore, compared to a gain of Rs 279 crore in the same quarter last year, said the company.
Despite forex losses and competition in the domestic market, the company has managed to protect its margins, said Chief Executive Officer Sanjay Kapoor.
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Total income, however, increased by 17.4 per cent to Rs 12,231 crore during the quarter, from Rs 10,414 crore in the same period last year. The result includes the figures of the newly-acquired African operations for 23 days of the quarter, effective from June 8, the company said.
The average revenue per user declined to Rs 215 in the first quarter, down two per cent from Rs 220 in the January-March quarter. The average minutes of usage for each consumer during the quarter rose by three per cent, to 480 from 468 on March 31.
“The decline in revenue per minute is partly due to the increasing adoption rate of per-second pricing plans. Second, the minutes’ growth in India was led by elasticity in the lower income segment,” UBS India said in a report.
For the ongoing financial year, Bharti announced capital expenditure of $3.1 billion (Rs 14,400 crore). "We will invest $2 billion for India and South Asia operations, $800 million for our Africa operations and $350 million for passive infrastructure," said Manik Jhangiani, group chief financial officer.
The company had net debt of Rs 60,230 crore ($12,925 million) as on June 30.
During the quarter, the company paid Rs 15,609 crore towards 3G and BWA spectrum. The capital expenditure during the quarter was restricted to Rs 1,836 crore due to delays in security clearance for equipment imports, the company said.
Bharti Airtel also said it would acquire 100 per cent stake in Telecom Seychelles (TS) for $62 million (Rs 288 crore). "The board of directors has approved the acquisition deal today morning," said Manoj Kohli, CEO (International) and joint managing director. With this, the company would expand its African footprint to 16 countries and its overall presence to 19 nations.
Earlier, TS was just using the Airtel brand name; the latter had no stake in TS, Kohli said. Telecom Seychelles began operations in 1998 with mobile services and currently offers 3G mobile and integrated wireline services across the island nation. It has 57 per cent of the mobile market .
Bharti also added 6,489 employees during the April-June period, taking its headcount to 24,843 at the end of the quarter.
At end-June, it had an aggregate of 183.3 million customers — 176.9 million in mobiles, 3.153 million in telemedia and 3.243 million in digital TV. The customer base as on June was 71.3 per cent more than that in June 2009.
Bhavesh Gandhi, analyst, Indiainfoline, said: “Excluding Zain's contribution, the results are above expectations. We could probably see a stabilisation in tariffs (rates) in the third or fourth quarter.”
Sushil Sharma, analyst, BRICS Securities, says the result was not up to expectations. “But the overall business environment and fundamentals seem to be improving. We have been saying for a while that the tariff war is over and the management is saying the same thing. And, the eGoM (empowered group of ministers) decision on Trai (the telecom regulator) recommendations would be a considered view and could be an informed decision, with consultation of telecom players. So, there seems to be a ray of hope. This quarter, there has been a significant forex loss. Due to the Zain acquisition, there could be high levels of uncertainty in the coming quarters.”
The Bharti stocks lost 1.42 per cent to close at Rs 319.70 on the Bombay Stock Exchange today.