Bharti Airtel profit up 40% on data growth

Exceptional items drive 40% growth in profit after tax; India margins up 160 bps to 38.8% despite pressure on voice business

The world’s third largest telecom company, Bharti Airtel reported a 40.2 per cent jump in net profit for the quarter ended June at ~1,554 crore. However, the quarter’s numbers were riddled with several exceptional items and accounting adjustments like sale of the tower business, which helped shore up the bottomline. Adjusting for one- offs, net profit grew 13 per cent year-on-year, explain analysts. Bharti’s consolidated revenues during the quarter grew by a modest 3.1 per cent year-on-year (Y-o-Y) to ~23,671 crore.

Strong data growth —both in India and Africa—is a key highlight of the quarter. During the quarter, mobile data revenues (consolidated) grew 57 per cent year-on-year to ~3,459 crore, as data traffic rose by 86.5 per cent. Mobile data revenues now account for 14.6 per cent of the total revenues compared to 9.6 per cent in the corresponding quarter last year. Data revenues have grown at a healthy clip in India and Africa. Commenting on the company’s performance, Managing Director & Chief Executive Officer (India and South Asia) Gopal Vittal said, “The year has begun on a healthy note, with underlying revenue growth accelerating to 12.7 per cent in India. Mobile minutes and data traffic have grown by 7.4 per cent and 83.4 per cent, respectively."

Bharti’s India revenues, which accounts for 74 per cent of total sales, grew 10 per cent year-on-year to ~17,369 crore, led by 22 per cent growth in “airtel business” and 15.8 per cent in Digital TV. India wireless revenues grew by eight per cent Y-o-Y. Adjusted for the impact in reduction of termination rates, India revenues grew on an underlying basis by 12.7 per cent and mobile revenues grew 12.2 per cent Y-o-Y. India wireless business has grown at a healthy clip, so has the company’s profitability.

The company’s managed to expand operating margins by 160 basis points year-on-year to 38.8 per cent during the quarter even though voice realisation declined four per cent sequentially and eight per cent Y-o-Y. Explains Vivekanand Subbaraman, telecom analyst at HDFC Securities, “The India business has done well and that is a recurring highlight for the company. Bharti’s voice revenues grown by one per cent sequential but has declined by one per cent Y-o-Y. However, data revenue growth has been very healthy. Outperformance in the India business and revenue growth continue to be key highlight."

India’s mobile data revenues grew 67.3 per cent to ~2,609 crore, as data consumer base increased by 26 per cent and traffic by 83.4 per cent. Analysts claim that even though Bharti Airtel saw some impact in minutes growth, its data growth is nearly in line with Idea, which saw data revenues grow by 81 per cent. Average revenue per user in the India mobile business has risen ~42 to ~181 during the quarter, led by 42.7 per cent increase in data usage per customer. Mobile data revenues contribute to 19.2 per cent of India's mobile revenues compared to 12.4 per cent in the corresponding quarter last year. Africa continues to be a pain point for Bharti, as revenues remain under pressure. In constant currency, revenues rose one per cent Y-o-Y, which analysts believe is a negative trend. Average revenue per user declined in Africa two per cent sequentially and 10 per cent year-on-year even as customer base grew. Voice realisations per minute also decline seven per cent sequentially and 19 per cent Y-o-Y.

57% Amount by which mobile data revenues (consolidated) grew during the quarter year-on-year to ~3,459 cr