Airtel Q3 profit falls 39% on cut in IUC
TELCO RIVALRY Price war triggered by Jio also takes toll
NEW DELHI: Bharti Airtel Ltd’s quarterly profit plunged 39%, missing analysts’ estimates, as India’s telecom regulator more than halved interconnection fees and a pricing war triggered by the entry of Reliance Jio Infocomm Ltd continued unabated.
Net profit fell to Rs306 crore in the three months ended December 31 from ₹504 crore in the year earlier, India’s largest telecom operator said in a statement on Thursday. That compares with the ₹398 crore profit estimate of 10 analysts surveyed by Thomson Reuters.
Telecom operators, already reeling from a fierce price war that started with the entry of Jio in September 2016, were hit hard by the telecom regulator’s decision to slash interconnect usage charges (IUC) levied by mobile networks handling incoming calls from rival networks.
The Telecom Regulatory Authority of India cut charges from 14 paise a minute to 6 paise effective October 1.
“Although the company faced pressure from Reliance Jio, the impact of the IUC cut is the biggest hit,” a Mumbai-based telecom analyst said on condition of anonymity. “With consolidation in the sector, it is still the best placed among all operators.”
Revenue dropped 12.9% to ₹20,319 crore in the December quarter from ₹23,335 crore in the year earlier.
Pricing pressure is evident from the fact that Airtel’s mobile data traffic rose more than fivefold to 1.18 billion megabytes (MBs) in the quarter.
“Regulatory fiat in the form of a cut in domestic IUC rates has exacerbated the industry ARPU
(average revenue per user) decline in Q318. The recent announcement of reduction in international termination rates will further accentuate this decline and benefit foreign operators with no commensurate benefit to customers,” Gopal Vittal, managing director and chief executive officer, India and South Asia, said in a statement.
The cuts in interconnect fees have worsened the already strained health of telecom operators in the country. Things started souring after Jio started commercial services in September 2016 with six months of free services, followed by rock-bottom tariffs. Airtel has since recorded a fall in net profit for five straight quarters as it cut tariffs to take on Jio.
Consolidated Ebitda fell 11.5% year-on-year to ₹7,587 crore in the quarter ended December, Airtel said. Ebitda is earnings before interest, taxes, depreciation and amortisation.
Airtel’s December quarter revenues from India fell 11.3% year on year to ₹15,294 crore on an underlying basis, adjusted for the impact in reduction of domestic termination rates, primarily led by a drop in the mobile segment, the company said.
Airtel’s monthly ARPU (in India) fell sharply to ₹123 in the December quarter from ₹172 a year ago. The number of minutes spent on calls on its network, however, grew 49.8% in India during the quarter while the total data consumed on its network rose more than six-fold.
Performance of the company’s Africa unit has saved the company some blushes. In constant currency terms, Africa revenues grew by 5.3% year-on-year, led by strong growth in data and Airtel Money transactions, the company said in a statement.