Bharti Airtel said on Tuesday its fiscal fourth quarter net profit plunged 71.7% and revenue fell 8.8% on-year on underlying basis as India’s largest telecommunication services company’s aggressive tariff offers to counter relentless competition from Reliance Jio hurt earnings.
Bharti Airtel’s consolidated net profit in the Jan-Mar quarter fell to Rs 373 crore from Rs 1,319 crore in the corresponding period previous year, it said in a statement. The company’s consolidated revenue for the quarter ended March 31, 2017 dipped to Rs 21,935 crore from Rs 24,960 crore in the same quarter a year ago, as the ongoing tariff war in the telecommunication sector led to a sharp fall in the money earned per customer.
“The sustained predatory pricing by the new operator has led to a decline in revenue growth for the second quarter in a row. The telecom industry as a whole also witnessed a revenue decline for the first time ever on a full year basis.,” Bharti Airtel’s India and South Asia MD and CEO Gopal Vittal said in statement, in an obvious reference to Reliance Jio.
EBITDA, EBIT, PAT
Airtel’s consolidated EBITDA at Rs 7,993 crore fell 13% on-year with EBITDA margin dropping 0.4% to 36.4% on account of 2.4% drop in SA margins. EBIT for the quarter fell 31.4% on-year. “The consolidated EBIT of Rs 2,964 crore represents a Y-o-Y de-growth of 31.4% on account of higher spectrum amortization costs in India,” Airtel said.
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Also, spectrum related interest costs led to an increase in the net interest costs rising to Rs 1,908 crore in Jan-Mar from Rs 1,524 crore in the same quarter a year ago, it said. Higher forex and derivatives losses led to further erosion in the bottomline.
Reliance’s entry into the telecom space has forced the incumbent players to drastically cut tariffs – as much as by 66% – in order to retain their customer base, and has put the entire sector under tremendous pressure of choosing between protecting margins and user base. Mukesh Ambani-led Reliance Jio grew at a breakneck speed since the official rollout of services in September last year, and crossed 50 million subscribers in just 83 days and 100 million in 170 days, helped by its back-to-back offers providing the services almost for free.
Though Jio recently started charging money for use of its telecom services beginning April, its still aggressive offers have forced other operators such as Airtel to keep their own tariffs low with attractive offerings such as 1 GB data per day.
Nuts and bolts
Bharti Airtel had an overall 372.4 million customers across 17 countries as on March 31, up 8.5% on-year. The company’s total India revenues for Q4FY17 at Rs 17,036 crore fell 7.1% on-year, and its total Africa revenue for the quarter grew 2.6% on-year on underlying basis in constant currency terms.
Airtel’s consolidated mobile data revenue fell 14.6% on an underlying basis on-year to Rs 3,686 crore. Its consolidated mobile data traffic in Jan-Mar rose 56.3% on-year to 271 billion MBs. Mobile data revenue contributes to 21.5% of Airtel’s India mobile revenue.
Consequent to the spectrum acquired worth Rs 14,281 crore during Oct’16 auction, the company’s consolidated net debt was at $14.09 billion on March 31. Though it fell from $14.34 billion in the previous quarter. “ High spectrum costs and consequent increase in associated amortization costs has resulted in deterioration of Return on Capital Employed (ROCE) to 6.5% from 8.3% in the previous year,” Airtel said.