Bharti Airtel Ltd reported a 50 per cent decline in net profit to Rs 509 crore during the fourth quarter ended March 31, 2013 compared with Rs 1,006 crore in the corresponding quarter last year.
Profitability was hit by higher interest costs and a tax charge as well as continued losses in its Africa operations. This is the 13th consecutive quarter of declining profits.
ARPU rises
But usage trends suggest the worst may be over for the company. Average Revenue Per User has increased by 2 per cent from Rs 189 to Rs 193 as the company cut down on discounts and freebies.
“Pricing is becoming more stable, churn has reduced and the quality of subscriber acquisition has improved. All this is positive going forward,” said Gopal Vittal, the new Chief Executive Officer of Airtel’s India operations. This was the last quarter for Sanjay Kapoor as the CEO of the company. Kapoor will exit on May 15.
Monthly churn (percentage of users leaving the network) has dropped to 3.2 per cent during the quarter compared with 8.8 per cent a year ago. Overall minutes on the network has gone up by 10 per cent.
Data service is now beginning to show uptake. Non-voice revenue now accounts for 17.4 per cent of the overall income compared with 16.2 per cent last year. Of this, 6.5 per cent is from data services.
Growing 3G user base
Airtel has more than doubled its 3G user base to 6.3 million from 2.7 million. Data average revenue per user is at Rs 55 compared with Rs 44 last year.
The profits were hit by higher depreciation and amortisation cost (Rs 515 crore), net interest costs (Rs 132 crore), dividend distribution tax (Rs 37 crore) and higher deferred tax charge due to hike in surcharge ( Rs 96 crore).
Africa business continued to remain under pressure. There, the company posted 13 per cent decline in ARPU. African operations reported a net loss of Rs 485 crore during the quarter ended March 31, 2013 compared with a loss of Rs 340 cr in last year.
The company now has to deal with regulatory uncertainty including one-time fee for excess spectrum, licence renewal fee and impending court ruling on 3G intra-circle roaming agreements.
Ankita Somani, Research Analyst-IT & Telecom at Angel Broking, said, “Going ahead, we are positive on the Indian operations and expect tariff to inch up but there are concerns regarding the African operations which might weigh upon Bharti Airtel’s performance. Elevated costs are likely to exert pressure on Bharti Airtel’s margins in the next couple of quarters.”
“Bharti surprised positively on minutes of usage growth in India, indicating that larger telcos are benefiting from smaller telcos selectively shutting down operations. While the momentum at core India business for Bharti remains stable, we believe Africa and forex expenses continue to drag the overall profitability of the company,” said Goldman Sachs Global Investment Research.
On the BSE, Bharti Airtel’s share price was down by 0.64 per cent to close at Rs 316.70 on Thursday.