Bharti Airtel — India’s largest telecommunication services company for now — will release its fiscal fourth quarter results on Tuesday, likely reporting a steep fall in revenue and pressure on all the key financial metrics, hit by an exodus of customers to rival Reliance Jio Infocomm and erosion in tariff earnings due to intense competition.
Airtel’s fiscal results have been under pressure since the entry of Reliance Jio, which, with its aggressive pricing strategy, has been successful in swaying a major chunk of the customer base of incumbent operators over to its services.
In the previous quarter, Q3FY17, Airtel’s net profit dropped 55% to Rs 503.7 crore from Rs 1,108 crore in the corresponding period the previous year. The Sunil Bharti Mittal-led telecom operator had then acknowledged the fact that price war with Reliance Jio did hurt business. “India revenues for Q3’17 at Rs 18,013 crore grew by 1.8% Y-o-Y. A slowdown in Mobile revenue growth primarily due to free voice and data offering by a new operator,” the company had said in a statement at the time.
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Here are the key things to watch for from Airtel’s Q4FY17 results tomorrow:
Revenue / Earning
Brokerage house Motilal Oswal expects Airtel’s consolidated revenue to drop 4.7% on quarter and 10.9% on-year to Rs 222.4 billion, mainly impacted by Jio’s free offers. “We expect India wireless revenue to decline 6.7% QoQ (and 11.9% YoY) to Rs 129.1 billion and Africa revenue to decline 1.9% QoQ to ~$901 billion,” Motilal Oswal said in a report. Further, Edelweiss Securities expects the consolidated revenue to decline 2.6% QoQ to Rs 227.2 billion.
EBITDA / Profitability
Airtel’s margins are likely to continue to be under pressure as tariffs continued to fall through the quarter in the company’s frantic efforts to maintain its user base. Motilal Oswal expects the company’s consolidated EBITDA margin to fall 1.9% sequentially. “EBITDA margin (consolidated) is likely to decline 190 basis points QoQ to 34.3%, led by 330 basis points contraction in India wireless margin to 34.7%, partly offset by 20 basis points expansion in Africa EBITDA margin to 23.9%,” Motilal Oswal said in a report.
Edelweiss Securities expects the company’s EBITDA to decline 2.6%. “We expect India and South Africa’s EBITDA margins to decline 260 bps QoQ to 37.4%. We estimate Africa business to clock overall revenue of $797 million, up 0.6% QoQ, with EBITDA margin of 24% due to seasonal weakness and 1.3% currency impact,” the brokerage house said in a report.
Other key items
Any management commentary outlook and synergies from Telenor acquisition will be keenly watched. Earlier February, Airtel agreed to acquire Telenor India to further augment its customer base and network, amid the ongoing consolidation in the Indian telecom sector after the entry of Reliance Jio with its free voice and data services. The acquisition will add Telenor’s about 44 million subscribers to Bharti Airtel’s existing 266 million mobile users in India, taking the total to about 310 million, and will give it another 43.4 MHz spectrum in the precious 1800 MHz band, which could be used to offer the highly sought after 4G services.
Stakeholders will also look for any management commentary on the outlook for the industry, especially given that Reliance Jio continues to offer services at very aggressive prices. It will be important to see if there are any signs of revival in the realisations.
Another business segment which will be of interest is Airtel’s payments bank. Use of digital wallets and payments banks has surged in India following demonetisation, which sucked out 86% of the currency from circulation, leaving people scrambling for cash to meet their daily needs. Airtel, which launched a payments bank earlier this year, already enrolled over one million customers during the pilots. Rival Paytm claims it has over 150 million e-wallet users.