Losses from tumbling Rupee drag Bharti net 25.6%

Written by feBureau | New Delhi | Updated: Oct 31 2013, 10:23am hrs
The countrys largest telecom operator, Bharti Airtel, on Wednesday posted a sound set of numbers during the July-September quarter. Barring the net profit numbers, where Bharti performed below expectations, most of the other numbers were either in-line with estimates or surpassed them in a quarter, which is generally seen weak for mobile operators.

The companys net profit at Rs 512 crore was down 25.6% on a sequential basis from Rs 688 crore for the first quarter ended June 2013. The companys net profit was down 29% from Rs 721.2 crore on a year-on-year basis. It was largely pulled down by a forex loss of Rs 342 crore, against a loss of Rs 534 crore in the preceding quarter. Total revenues at Rs 21,324 crore were up 5.23% on a sequential basis and 10% on a y-o-y basis.

Though operating metrics like average realisation per user (Arpu) and minutes of usage (MoU) were down sequentially, they were better than expectations since the quarter is seen as weak for the operators.

Both the Arpu and MoU were down 4% sequentially at Rs 192 and 437 minutes, respectively. The good part is that despite withdrawing freebies like free minutes in the pre-paid segment, the churn rate was static at 3.2% on a sequential basis. This means that the strategy to revise tariffs by withdrawing free minutes to increase realisations has paid off well.

The Ebitda margin was flat at 32%, compared with the preceding quarter when it was at 32.3%. However, on a yearly basis it showed an improvement over 30.6% during the same quarter last year. The companys shares closed up 5.23% at Rs 359.05 on the BSE on a day when the Sensex closed at record high of 21,033.97, up 104.96 points.

In short, solid operational set of numbers despite the miss at the net income level, Kotak Institutional Equities said in its report. Operationally, both India and Africa wireless businesses surprised positively India on margins and Africa on revenue growth...Even as we need sustenance of good performance in Africa to change our view there, the quarter provided ample data points to support out positive view on the India wireless business, it added.

The major positive for the company, as well as the sector, is the sustained rise in data revenue. During the period, data at 9.2% as a percentage of mobile revenue was higher than 7.4% in the preceding quarter. Even data Arpu at Rs 70 was 11% higher than Rs 63 in the preceding quarter.

Though regulatory risks like payment of one-time fee for excess spectrum and penalty for intra-circle 3G roaming pacts still looms large over the company, the overall regulatory scenario promises to turn positive. The governments decision to allow foreign operators to have 100% stake in their Indian ventures, the recent Telecom Regulatory Authority of India recommendations reducing the reserve price for spectrum by up to 60% as well as capping spectrum usage charge at 5%, a likely merger and acquisition guidelines which would encourage consolidation and likelihood of availability of more 3G spectrum through a swap arrangement with the defence; augurs well for the company.

Bhartis Africa business continues to post losses. However, the quarter saw improvement in the operating metrics there. Net loss in the African arm during the period stood at $105 million, lower than $106 million in the preceding quarter but higher than $97 million during the same period last year. Total revenues was at $1,119 million, compared with $1,062 million in the preceding quarter and $1,097 million during the same period last year. The Arpu at $5.7 was up 5% on a sequential basis while MoU at 143 minutes was up 7%.