Fighting back Reliance Jio impact: Bharti Airtel Q1 results surprise, beat analysts estimates

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New Delhi | Published: July 26, 2017 7:36:57 AM

The company, however, saw a big sequential decline of 9.5% in average voice realisations per customer at 21.98 paise.

Bharti Airtel on Tuesday surprised the Street with a set of numbers for the June quarter that were well ahead of analysts’ estimates. (Reuters)

Bharti Airtel on Tuesday surprised the Street with a set of numbers for the June quarter that were well ahead of analysts’ estimates. The country’s biggest telco posted a net profit of Rs 367 crore in Q1FY18, down 1.61% sequentially, beating Bloomberg’s consensus estimate of Rs 282 crore. The company, however, saw a big sequential decline of 9.5% in average voice realisations per customer at 21.98 paise. Moreover, realisations from data services dipped a sharp 51.1% sequentially to 5.97 paise per customer. Nevertheless, following new bundled offers from the telco, the usage, both on the voice and data fronts, has jumped. Voice usage per customer saw a 7.7% sequential growth to 507 minutes in the June quarter while data usage per customer jumped 96.2% to 2611 megabytes (MB). Revenues in the June quarter, at Rs 21,958 crore, were marginally up 0.10% sequentially. Ebitda or earnings before interest, taxes, depreciation and amortisation was down 2.13% at Rs 7,823 crore. The Ebitda margin stood at 35.6% compared with 36.4% in the preceding quarter. Bharti’s results in the previous two quarters were disappointing with key metrics hit by the disruption caused by Reliance Jio’s free voice and cheap data services. The telco’s average realisation per user (Arpu) for voice declined 2.5% sequentially to `111 in Q1FY18. The Arpu for data services fell 4% to Rs 156. The company’s mobile revenues declined 0.4% sequentially to Rs 12,914 crore.

Following Jio’s free voice and low data rates, Bharti has also bundled voice and data packs, offering more data at lower rates. Where earlier data rates were Rs 250 per GB, these are now down to  Rs 50 per GB and even Rs 10 per GB in certain bundled offers. Acknowledging that the disruption in the market continues, Gopal Vittal, managing director and CEO, India and South Asia, said, “The pricing disruption in the Indian telecom market caused by the entry of a new operator continued with industry revenues declining over 15% year on year, creating further stress on sector profitability, cash flows and leverages. Consequently, our revenues declined 10% and Ebitda margin eroded by 5.3% year-on-year.”

Bharti said that its mobile data revenues decreased 18.8% to Rs 3,765 crore compared with Rs 4,639 crore in the corresponding quarter last year. Mobile data revenues now represent 17.1% of total revenues against 18.2% in the corresponding quarter last year. Though the quarter saw monthly churn increasing to 3.8% from 3.6% in the preceding quarter, it still shows that Bharti is not losing customers despite the challenge from Jio. Its data customer base (3G & 4G) in fact increased by 14.5% sequentially to around 49 million. Bharti is likely to face fresh heat from Jio September onwards when the latter starts deliveries of its 4G, VoLTE feature phones which are virtually for free as subscribers need to pay a refundable security deposit of Rs 1,500 that can be taken back after returning the phone after 36 months.

Base tariff is Rs 153 per month with 0.5 GB data per day while the Rs 309 offer provides 1 GB data for 56 days and the ability to connect the content from phone to television sets via a cable connector. Around three to four hours of daily video can be seen under this plan. Since more than 200 million subscribers fall in this segment, Bharti will face a tough fight from Jio here. Bharti is already in the Telecom Disputes Settlement and Appellate Tribunal, where it has challenged the Telecom Regulatory Authority of India’s passive approach towards Jio’s free services, which it contends is not allowed under regulations.

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