The stock of Bharti Airtel, one of the largest players in the telecom market, rallied 8 per cent to close at ₹372 on Wednesday buoyed by the March quarter results for FY2016-17.
While strong competition and predatory pricing of the new entrant, Reliance Jio, dragged the performance of the company, the increase in customer base in the March quarter is being viewed as a positive by markets.
The company reported 72 per cent decline in net profit in March quarter of 2017 compared to the corresponding quarter of the previous year due to increase in finance costs and regulatory and litigation levies. Sustained free services in voice and data offered by Reliance Jio resulted in customer migration, hurting the revenue of Bharti Airtel, which declined 12 per cent year-on-year in March 2017 quarter. The impact was mainly on Airtel’s mobile services that declined 11 per cent. The increase in advertising and network operating cost made the operating profit decline 13 per cent to ₹7,993 crore.
Overall customer base of the company has improved about 9 per cent in the March quarter over the corresponding period in the previous year. Under data, the broadband segment added the maximum number of customers, registering an increase of 21 per cent for the current quarter. The customer base in the other segments such as home services and digital TV have also registered a growth of 8.4 per cent for the March quarter 2017.
Addition to the subscriber base has however not helped revenue. Average revenue per user (ARPU) in both voice and data has declined 17 per cent in the fourth quarter of 2017 due to sharp cuts in tariff. The voice ARPU fell to ₹114 for March quarter from ₹138 from the same quarter the previous year. However, the voice minutes charged have increased 24 per cent to 381,236 minutes in March 2017 quarter.
Similarly, data usage has also recorded a jump. Total MBs (Mega Byte) consumed on the network have increased 53 per cent to 225,109 MB for the same period but the data ARPU is now at ₹162, down from ₹192 in March 2016. The ARPU of home services have also declined 7 per cent to ₹1,064, while digital TV services’ ARPU have declined 0.7 per cent to ₹228.
Bharti’s non-mobile India services such as home services, digital TV services, Airtel business and tower infrastructure services have recorded a strong performance in this quarter witnessing revenue growth of 3, 10, 9 and 13 per cent respectively.
In order to meet the future data needs of the customers, the company has stepped up its data investment in March quarter 2017 and has installed 190,860 mobile broadband base stations, about 62 per cent higher than the same period last year.
OutlookThe company’s acquisition of Tikona’s 4G business in the 2300 Mhz band will help in providing fastest data connectivity and meeting the increased data demand. Similarly, the acquisition of Telenor India will enable the company to fill the network connectivity gap in certain circles such as Gujarat, UP and Assam. This would further augment the customer base for Bharti Airtel. The recent spectrum acquisition along with the spectrum acquired in October 2016 auction has loaded the company with net debt of ₹91,399 for March quarter 2017 from ₹83,510 crore in the same period previous year. However, these acquisitions have helped the company to hold the highest spectrum capacity per site in the industry.
Going ahead, Bharti Airtel would be in a position to maintain its pricing advantage in the market when Reliance Jio increases its cost of services to survive and grow. Although for a short term there would be ARPU compression, the potential for long-term growth is good for the company.
Cost pressure could ease for the company if the committee formed by the Centre (to look into the financial situation of telecos) addresses issues such as the heavy tax structure, spectrum charge and licence fees and the cost of spectrum.