Bharti Airtel, India's largest private mobile operator, today reported a 72 per cent slump in its third quarter (Q3) net profit as a weak rupee increased interest and network equipment costs.
This is the 12th consecutive quarter for Bharti Airtel when profit has dropped. Net profit in October-December slumped to Rs 284 crore from Rs 1,011 crore a year ago.
The total revenues of billionaire Sunil Mittal-owned company, however, rose 9.5 per cent to Rs 20,239 crore for the quarter from Rs 18,477 crore in the year-ago period.
"Market conditions have been challenging in recent quarters due to pricing pressures and rising input costs, which have put enormous pressure on the sector and consequently the margins," Bharti Airtel Chairman and Managing Director Sunil Bharti Mittal said.
Led by decline in margins and increasing costs, the company recently increased rates of special tariff vouchers and reduced free minutes usage for customers.
"What we have said in the past is that this industry is laid with a huge amount of unnecessary leakages that happened between the headline tariffs and realised tariffs and I think it is upon us now to start correcting those leakages and those excessive discounts because they are unhealthy and untenable," Bharti Airtel CEO (India and South Asia) Sanjay Kapoor told reporters here.
He added the endeavour is to reduce the gap between realised tariff and headline tariff.
Kapoor said the quality of customers has actually gone up post the revision.
"Yes, the quality of customers has gone up and that gets specified by two indices, one is the churn ratio coming down at a very fast pace and the VLR is going up," he said.
"The worst seems to be getting over with corrections taking place in customer acquisition practices and the tariffs, which are driving quality of acquisitions and improving efficiencies," Mittal said.
The company's overall customer base stood at 262.27 million across mobile telephony, telemedia and digital services across geographies.
Monthly average revenue per user (ARPU), a key metric for telecom carriers, from Bharti's Indian operations declined to 185 during the reporting quarter from 187 in the same period last year.
The net debt of the company stood at Rs 64,282.5 crore as on December 31, 2012.
The company also has to pay Rs 5,201 crore as one-time fee to government for spectrum it holds above 4.4 MHz.
Airtel added 6.6 billion minutes on network during the quarter.
"Despite a negative net additions, the data has done exceedingly well, 0.9 million mobile data customers have been added on the network and the data has grown 24.5 per cent quarter on quarter," Kapoor said.
Shares of the company closed down by 2.62 per cent at Rs 330.50 on the BSE.
Stocks More on Bharti Airtel
Company INFO More on Bharti Airtel
TEXT - Fitch: Bharti - credit positives amid regulatory uncertainty
(The following statement was released by the rating agency: Reuters)
Fitch Ratings says that India-based Bharti Airtel Limited's (Bharti, 'BBB-'/Negative) financial profile could improve in the year ending March 2014 (FY14), aided by manageable spectrum payments and the likely return of pricing power. This is despite the persistence of regulatory uncertainty over the final auction price of the 900MHz spectrum in March 2013.
Bharti's January 2013 decision to double its voice tariff to INR2 per minute from INR1 per minute in phases will help the company to deleverage in FY14. Fitch believes that this move indicates a likely first sign of a return in pricing power, as competitive intensity abates due to the exit of some operators, on-going operating losses for weaker telcos and high spectrum prices.
Regulatory risk surrounding spectrum-related cash outflows is now fading because the government has allowed telcos to pay the one-time fee for excess spectrum over 6.2MHz in phases over the life of the licences. Furthermore, spectrum prices could come down further in 2013 from the reserve price used in the last auction held in November 2012. Such payments too can now be paid in phases as announced by the regulator in late 2012.
Bharti can partially pay a one-time spectrum fee of INR52bn (USD963m) with proceeds from its December 2012 sale of its stake in its Tower arm - Bharti Infratel - for which it received USD583m. Also, the Indian government's decision to allow such fees to be paid in phases - one-third upfront and the rest over the remaining life of the license - will help the company in managing its cash flows. While this payment is currently under dispute by Bharti and an Indian High Court has stayed the demand of such charges, Fitch believes Bharti's annual cash outflow from the one-time fee will be a maximum of USD200m.
Also, following the limited participation in the auction held for 1800MHz auction in November 2012, where only 42% of the offered spectrum was sold, the Indian government reduced the spectrum price of unsold circles by 30% (mainly Delhi and Mumbai) and the spectrum price of CDMA by 50%. The government is planning to hold another auction of the 900MHz and 1800MHz spectrums in March 2013. The price of spectrum in 900MHz has been fixed at two times the price of airwaves in the 1800 MHz spectrum, although it is probable that the final price may be lower.
Bharti's nine months ended December 2012 (9M12) results were in line with Fitch's expectations. Revenue and EBITDA rose by 14% and 5% respectively year-on-year due to a growing Indian and African subscriber base. EBITDA margin, however, deteriorated by 200bps to 31% on higher network operating costs (+21%) and marketing cost (+22%) as the company rolled out its 3G network and competed aggressively to regain its lost revenue market share. Also, Bharti's leverage will benefit from its downward FY13 capex revision to USD2.5bn-2.6bn from USD2.8bn-3bn earlier.
Bharti Airtel profit sinks, misses estimates
(Reuters) Profit at India's top mobile network operator Bharti Airtel Ltd fell for the twelfth successive quarter, with higher costs dragging its results well below market expectations.
Bharti Airtel, controlled by billionaire Sunil Mittal, said consolidated net profit fell to 2.84 billion rupees ($53.39 million) in the fiscal third quarter that ended Dec. 31, from 10.11 billion rupees a year earlier.
Revenue rose 9.5 percent to 202.4 billion rupees, but the company was hit by foreign exchange losses, higher taxes and financing costs.
Analysts had expected the company to report net profit of 8.45 billion rupees on revenue of 202.79 billion rupees, according to Thomson Reuters I/B/E/S.
Shares in the company, valued at $24 billion, were down 2 percent at 0500 GMT, while the broader market was slightly up.
"Market conditions have been challenging in recent quarters due to pricing pressures and rising input costs, which have put enormous pressure on the sector and consequently the margins," Chairman Sunil Mittal said in a statement.
"However, the worst seems to be getting over, with corrections taking place in customer acquisition practices and the tariffs", he said.
For years, stiff competition in a crowded market has limited Indian telecoms companies' ability to raise prices. The outlook for bigger firms including Bharti Airtel has improved since an early 2012 court order to revoke permits of several operators, signalling the exit of some smaller companies from the market.
Bharti Airtel and Idea Cellular, India's No. 3 mobile carrier by revenue, recently raised call prices by withdrawing discounts. This week Idea reported a smaller-than-expected increase in quarterly profit as higher network operating costs ate into margins.
NEW SPECTRUM NEEDED
The government wants established operators to pay surcharges on their airwaves, which will mean a bill of almost $1 billion for Bharti, the country's No.1 operator by both revenue and number of subscribers, which also needs to buy new spectrum in an auction due in March.
In 2010, it ventured into 15 African countries, buying mobile assets there for $9 billion. It has yet to turn around the money-losing African businesses.
Finance costs for Bharti Airtel rose 69 percent during the December quarter to 13.32 billion rupees from a year earlier, and income tax expense rose 20 percent.
The company also recorded a forex loss of 2.48 billion rupees compared with a gain of 132 million rupees a year earlier
Monthly average revenue per user, a key metric for telecoms carriers, rose 4 percent from the previous quarter to 185 rupees for its Indian operations.
Singapore's SingTel Ltd owns almost a third of the firm.
($1 = 53.1900 Indian rupees)