Bharti Airtel’s revenue is likely to get further dented by 2-5% in the current fiscal, according to S&P Ratings. The global ratings agency in its latest report said that the competition post Jio’s entry may also impact the revenues and profits of the telecom operators in the current fiscal as well as the next.
“The increased competition has resulted in pricing pressure for the incumbents (such as Bharti) and is likely to continue to dent their revenue growth and profitability until fiscal 2019. As a result, we estimate that Bharti’s consolidated revenue, which is mainly driven by its India operations, will fall by another 2-5% in fiscal 2018 before returning to growth in fiscal 2019,” it said.
S&P added that it expects a 300-350 basis points dip in the firm’s Ebitda margins for its India operations on an unadjusted basis over the next two years, from 41.4% in fiscal 2017, however improvement in its Africa operations and strong focus on cutting costs should help temper the weakness.
Bharti, which came out with its March quarter results on Tuesday, reported a 26% decline in net profit sequentially at Rs 373 crore, while revenues fell 6% to Rs 21,935 crore. Despite the free services challenge from Jio, Bharti managed to bring down its subscriber churn to 3.6% in January-March from 4.4% a quarter ago. Its data usage and voice usage too registered a growth, however realisation from both fell during the quarter.
S&P said that Bharti’s size, operational diversity, and recent spectrum acquisition can help it face up to the intense competition in India’s telecom market. “Nevertheless, the trend in revenue market share and profitability of incumbents remains uncertain until Reliance Jio ends it current promotional services and Vodafone India and Idea Cellular start operating as a combined unit”.
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Recently, the company sold 10.3% stake in its tower arm, Bharti Infratel, for $952 million and used the proceeds to reduce debt. “The repayment provided some buffer to the company’s financial ratios. Bharti Airtel still has 61.4% stake in Bharti Infratel of which it could sell a further 10% stake. Such a sale could help further improve the rating headroom,” the ratings agency added.