Airtel may eye African biz to offset poor show at home
The African business could cushion Bharti Airtel against rival Reliance Jio’s aggressive pricing, analysts said.
An analyst said Bharti Airtel’s African business was likely to improve in the next three quarters, but others were sceptical that it could offset the impact of Reliance Jio. “The stakes are much higher in India,” an analyst said.
Another analyst said margins in Bharti Airtel’s African business had improved but the competition had intensified as well.
Bharti Airtel posted a net profit of R373 crore in the March quarter, a 72 per cent fall from R1,319 crore in the same period a year ago. Its consolidated revenue was down 12 per cent, year on year (y-o-y), at R21,935 crore.
Bharti Airtel bore the brunt of Reliance Jio’s launch of its free voice and data plan last September, which was extended till March. Reliance Jio still offers free voice services and its data rates are lower than those of its competitors.
Reliance Jio’s pricing has also weighed down Idea Cellular’s earnings. The company reported a net loss of R328 crore in the March quarter.
“Sustained predatory pricing by the new operator has led to a decline in revenue growth for the second quarter in a row. The deteriorating health of the industry was compounded by the tsunami of incoming voice traffic from the new operator,” Gopal Vittal, managing director and chief executive officer (MD & CEO), India and South Asia, Bharti Airtel, had said in an official release. The telecom industry owes R4.6 lakh crore to financial institutions.
Bharti Airtel’s average revenue per user (Arpu) declined 18.9 per cent, y-o-y, to R158 during the quarter. Its voice Arpu declined 17.2 per cent to R114 and data Arpu 17 per cent to R162.
A day after the announcement of its March quarter results, Bharti Airtel’s stock climbed nearly 10 per cent on the BSE. Analysts said this was on hopes that the company’s African business would do well in the future.
In constant currency terms, fourth-quarter revenues of Bharti Airtel’s African operations grew two per cent, year on year.
“Airtel’s Africa revenues grew 4.4 per cent in constant currency during 2016-17. Revenue market shares continue to accelerate,” said Raghunath Mandava, MD & CEO, Bharti Airtel Africa.
JP Morgan India in a report said Bharti Airtel fared much better than expected in turning around its African operations with consistent improvement in earnings before interest, tax, depreciation and amortisation margins — 26.8 per cent in the fourth quarter of 2016-17 from 19.6 per cent in the same period of the previous financial year. Bharti Airtel Africa generated free cash flows of $103 million in March.
Analysts attributed the turnaround of the African business to the sale of tower assets that resulted in decreased debt. Bharti Airtel in October 2015 sold 8,300 African mobile towers for $1.7 billion. In May 2016, the company entered into a pact with Helios Towers Africa to sell 950 towers in the Democratic Republic of Congo.
Bharti Airtel’s consolidated net debt was $14.09 billion in January-March 2017, up from $14.3 billion in the previous quarter and $12.60 billion a year ago.