Bharti Airtel’s first quarter performance has revived hopes of a turnaround in the telecom sector, which has been battered down due to poor market conditions over the last 18 months.
Though the company reported declining profits for the 14th straight quarter, the rate of decline has come down significantly. While profits had declined between 30-70 per cent in the previous four quarters, Airtel reported a 9.6 per cent drop in profit for the quarter ended June 2013 to Rs 689 crore from Rs 762 crore in the corresponding quarter last year.
There are a number of reasons for key indicators looking better for the company. The level of competition has come down significantly with a number of new players exiting the market. As a result, Airtel has been able to increase tariffs over the last four months.
ARPU RISES
The company’s average revenue per user has increased 8 per cent to Rs 200 from Rs 185 a year ago. Data service is beginning to show traction with 83 per cent growth in 3G subscriber base to 6.8 million. Data average revenue per user has increased 59 per cent to Rs 63 a month.
“Operational key performance indicators of core cellular business surprised us and consensus positively implying that the larger telcos like Bharti/Idea are benefiting at a faster-than-expected pace from declining competitive intensity,” Goldman Sachs said in a report.
Airtel’s share price was up by 7.3 per cent at Rs 344.90 at close on Wednesday on the BSE. The consolidated net debt has decreased by $908 million during the quarter to close at $9,779 million. The Net Debt to EBITDA ratio (dollar terms) now stands at 2.21 compared with 2.50 at the end of the previous quarter.
African biz
However, African operations continue to be a drag on the company. The revenues remained flat in the continent. Revenue growth was little soft due to few significant regulatory changes in Nigeria; Tanzania; DRC & Gabon and one-time impact of emergency declared in 3 States by Government of Nigeria leading to complete shutdown of telecommunication services during significant part of the quarter.
Derivative and exchange fluctuation losses during the quarter were Rs 534 crore, mainly caused by rupee depreciation, compared to gains of Rs 160 crore in the same period last year. Consolidated tax charges rose to Rs 968 crore from Rs 454 crore last year, mainly up in Africa.