Bharti Airtel’s consolidated net profit for the fiscal third quarter fell to Rs 504 crore, less than half of that in the same quarter a year ago. The fall was much sharper than estimated, hurt by a tariff war due to Reliance Jio’s entry leading to a sharp fall in money earned per customer, demonetisation and exceptional one-time costs.
“The quarter has seen turbulence due to the continued predatory pricing by a new operator,” Bharti Airtel’s India and South Asia MD and CEO Gopal Vittal said in an obvious reference to Reliance Jio. “The present termination costs at 14 paise which are well below cost has resulted in a tsunami of minutes terminating into our network. This has led to an unprecedented year on year revenue decline for the industry, pressure on margins and a serious impact on the financial health of the sector,” Vittal added.
Airtel’s consolidated revenue at Rs 23,336 crore in Oct-Dec fell 3% on-year but was flat on underlying basis, it said.
EBITDA, EBIT, PAT
Further, while both EBITDA and EBITDA margins rose, the EBIT fell over 10% on-year on account of higher amortisation costs.
Consolidated EBITDA at Rs 8,570 crore grew 1.1% on-year with EBITDA margin expanding by 1.5% to 36.7%. The expansion in margin was driven by Africa margin expansion of 4.9% on-year on an underlying basis, Bharti Airtel said.
“The consolidated EBIT of Rs 3,675 crore represents (on-year) de-growth of 10.3% on account of higher spectrum amortisation costs in India,” Airtel said.
Also, spectrum related interest costs led to an increase in the net interest costs rising to Rs 1,810 crore in Oct-Dec from Rs 1,360 crore in the same quarter a year ago, it said. Higher forex and derivatives losses led to further erosion in the bottomline.
Tariff war with Reliance Jio
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.
“Slowdown in mobile revenue growth (is) primarily due to free voice and data offering by a new operator,” Airtel said in a statement.
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Reliance added over 19 million users in October, far exceeding the largest competing incumbent Bharti Airtel, which added 2.33 million in the same month.
Reliance Jio recently extended its inaugural free voice and data plan till March 31 drawing complaints and criticisms from its biggest rivals Airtel and Vodafone, who assert that its anti-competitive practices and freebies are hurting the industry. Vodafone went as far as to write down the value of its India business on hyper competition from the new entrant.
A national tribunal is set to hear a case regarding the company’s anti-competitive on February 1, following Airtel’s complaint.
Nuts and bolts
Bharti Airtel had an overall 364.6 million customers across 17 countries as on December 31, up 8.4% on-year.
The company’s total India revenues for Q3Fy17 at Rs 18,013 crore grew by 1.8% on-year, and its total Africa revenue for the quarter grew 6% on-year on underlying basis. While Airtel’s consolidated mobile data revenue was flat on-year at Rs 4,049 crore, its India mobile data revenue at Rs 3,087 crore fell 3% on-year.
Its consolidated mobile data traffic in Oct-Dec rose 36.4% on-year to 216 billion MBs. Mobile data revenue contributes to 22.8% 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 has increased to $14.34 billion from $12.23 billion in the previous quarter. “High spectrum costs and consequent increase in associated amortisation costs has resulted in deterioration of Return on Capital Employed (ROCE) to 7.1% from 8.6% in the corresponding quarter last year,” Airtel said.