Bharti Airtel, the country’s largest telecom company, posted a 24 per cent increase in net profit for the first quarter ended June 30 to Rs 2,516.7 crore — up from Rs 2,025 crore posted last year — in line with market expectations.
The net profit, however, was bolstered primarily through an income of Rs 250 crore from foreign exchange fluctuation in the quarter, compared with a loss of Rs 236 crore last year, as well as a tax write-back of around Rs 237 crore. The company pays minimum alternate tax (MAT) in advance, like all corporates. However, as telecom companies have a 10-year tax holiday, the tax paid comes back into the company.
However, analysts were expecting the company to show a more robust growth in revenues, which went up by around 17 per cent to Rs 9,941.6 crore in the reporting quarter over the previous year. But was sequentially flat, growing at only 1.3 per cent over the previous quarter.
Analysts say the slower revenue growth is primarily because of the reduction in termination charges (which an operator pays to another competing operator to connect its call) by 10 paise, as announced by the government, effective from April 1 and which made a dent in overall revenue growth.
The markets, however, responded to the Bharti results in the negative, with stock price falling by 1.09 per cent from Rs 822.85 yesterday to 813.90 today on the BSE. The reason, analysts say, are fears that, with rural penetration as the only way to grow, the company’s cost of acquisition might go up even as various parameters on average revenue per user (Arpu) and minutes of usage per subscriber show a drastic drop (rural consumers spend less).
Also, the company admitted that there have been some signs of a slowdown in the business-to-business arena due to the overall slowdown. For instance, Arpu in the reporting quarter fell by 9 per cent from Rs 305 in the quarter ended March 2009 to Rs 278 in June 2009. Average minutes of usage have also fallen by 2 per cent.
However, executives of Bharti are not too worried about whether the market is getting saturated or more congested. Manoj Kohli, CEO and joint managing director, said the company’s rural marketing strategy has worked well and 60 per cent of the net additions are coming from rural India.
Averred Akhil Gupta, deputy group CEO, who said a substantial part of the next 100 million subscribers (it reached the 100 million mark this quarter) will come from rural India in the next 36 months.
“We have added over 10 billion more minutes this quarter and we are in 425,000 cities, towns and villages, covering 75 per cent of the villages in India,” Gupta said.
Gupta also said it is focusing on reducing costs and improving efficiency reflected in the fact that the number of customers per employee has gone up by 12 per cent, from 3,939 in the quarter ended March 2009 to 4,422 in the quarter ended June 09.
