Bharti Airtel’s September quarter earnings’ report is a perfect narrative for the rapidly changing telecoms business in India. The share of data as a percentage of mobile services has risen to 21.5 per cent in the September quarter for Bharti from 14.5 per cent a year ago, while voice continued to decline. Despite the changing dynamics, the company managed to beat the Street's estimates with a 10 per cent year-on-year (y-o-y) growth in its net profit at Rs 1,523 crore. The company's consolidated revenues grew 4.3 per cent y-o-y to Rs 23,836 crore. After adjusting for the reduction in interconnect charges and sale of towers in Africa, Bharti's underlying revenue growth was 6.6 per cent.
The voice business remained weak during the quarter, even though the company added 4.5 million new subscribers. The total number of minutes per user declined five per cent quarter-on-quarter (q-o-q) and three per cent y-o-y to 404 minutes. Voice revenue per minute fell one per cent q-o-q and eight per cent y-o-y to 34.58 paise. Bharti's average revenue per user for voice declined six per cent q-o-q and 11 per cent y-o-y to Rs 140.
Despite the pressure on voice and higher operational expenditure, Bharti has managed to maintain India operating margins at 40.2 per cent, up 1.6 per cent y-o-y. At the consolidated level, Bharti's operating margin expanded by 80 basis points to 34.7 per cent, driven by expansion of margins in the India wireless business. In a note, UBS Global Research says, “In the second quarter, Bharti reported an eight per cent y-o-y revenue growth and 180 basis points Ebitda margin expansion for its Indian mobile business. African business continues to be a drag operationally.”
Citi is of the opinion that Airtel is best placed to counter Jio’s LTE network due to its superior spectrum portfolio, willingness to invest and good execution.