Airtel India business reports ~6.5 billion loss

Telecommunications sector leader, BhartiAirtel, has reported a 78 percent year-on-year drop in consolidated net profit to ~830 million, for the quarter ended March 31, as an intense price war roils the industry. Acutin international termination rates further impacted the revenues of thecompany.

This is the lowest consolidated quarterly profit forth eSunilBh ar ti Mitt al-led company inn early 15 years. But, it was still better than analysts’ estimates that suggested a net loss for the company. Air te l’ s net profit was ~3.73 billion in the same quarter last financial year. The India( stand alone) business reported a net loss before exceptional items of ~6.52 billion in the quarter, versus a profit of ~7.71 billion in the year ago period and a profit of ~952 million in the December 2017 quarter. This is the first loss by Air te l’ s India business in many years, and reflects the competitive intensity in the domestic telecom industry after the launch of Reliance J io’ s operations.

The India business is important as it accounted for 70 per cent of Bharti Airtel's consolidated revenue in 2017-18. Revenues in India operations fell 13.5 per cent year-on-year in 2017-18, pulling down consolidated revenue by 12.3 per cent. For the March quarter, too total revenues of the company dropped 10.5 per cent to ~196.34 billion for the period, compared to ~219.35 billion in the same period of the last financial year. The profit for 2017-18 was down 71 per cent to ~10.99 billion, compared to ~38 billion a year ago. Total revenue decreased by 12.3 per cent to ~836.88 billion from ~954.68 billion a year ago.

Since the entry of Reliance Jio, most telecom operators have reported drastic drop in revenues and decreasing profitability, as they have been forced to match low tariffs to remain competitive.

“The telecom industry continues to witness low cost, amd artificially suppressed pricing. Industry revenues were further adversely impacted this quarter due to the reduction in international termination rates,” said Gopal Vittal, managing director and chief executive officer, Airtel (India and South Asia).

The company’s consolidated net debt has increased to ~952.28 billion whereas the net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio for the quarter stood at 3.23. A lower Ebitda, along with rising spectrum costs and continued investments, have resulted in deterioration of return on capital employed to 4.7 per cent from 6.5 per cent the previous year.

Airtel said the year was marked by a number of regulatory developments and heightened financial stress. The Telecom Regulatory Authority of India (Trai) had reduced domestic mobile termination charges (MTC) from ~0.14 per minute to ~0.06 per minute effective October 1, 2017, and the international MTC rate was reduced from ~0.53 per minute to ~0.30 per minute effective February 1, 2018. Airtel said these rate cuts had led to further decline in industry average revenue per user (ARPU). In India, mobile data traffic has grown more than six times to 1,540 billion MBs in the March quarter as compared to 225 billion MBs in the corresponding quarter last year. Mobile broadband customers increased by 79.3 per cent to 76.6 million from 42.7 million in the corresponding quarter last year. The total customer base of Airtel stood at 304.19 million in India. The ARPU for India declined 26.7 per cent to ~116 at the end of March 2018 from ~158 in the same period last year.

“Our strategic investments in data capacities, innovative digital content through Airtel TV, customer friendly bundles and upgrade programmes led to the highest ever mobile data customer additions of 15 million during the quarter,” Vittal said, adding usage parameters remained robust on a year-on-year basis, and data and voice traffic grew 584 per cent and 55 per cent, respectively.