A decline in realisations from voice services, growing losses from African operations and increasing energy costs impacted Bharti Airtel’s financial performance during the quarter ended March 2013. The operator reported a decline in its net consolidated profit for the thirteenth successive quarter. While it performed strongly on the domestic front, its African business continued to register losses, thereby impacting the overall margins.

Bharti Airtel recorded a decline of 49 per cent in its net consolidated profits from Rs 10.05 billion for the quarter ended March 2012 to Rs 5.08 billion for the corresponding quarter in 2013. Profits were also impacted by the one-time provision of Rs 1.33 billion for taxes. The operator’s revenues grew by 9.17 per cent from Rs 187.29 billion in the quarter ended March 2012 to Rs 204.48 billion in the corresponding quarter in 2013. Meanwhile, its operating income also increased by 4.07 per cent from Rs 62.32 billion to Rs 64.87 billion during this period.

Indian and South Asian operations

Bharti Airtel’s profits for its Indian and South Asian operations declined by 26.26 per cent year on year to Rs 9.93 billion for the quarter ended March 2013. Its revenues increased by 8.42 per cent from Rs 134.21 billion to Rs 145.51 billion during this period. However, this did not translate into high operating margins as the opex, and depreciation and amortisation costs grew by 12 per cent and 15 per cent respectively.

Meanwhile, with respect to its Indian operations, the company’s subscriber base increased by 4 per cent from 181.27 million for the quarter ended March 2012 to 188.22 million for the quarter ended March 2013. During this period, the ARPU rose by 2 per cent to Rs 193. This was primarily due to a 10 per cent increase in the minutes of usage from 230.36 billion to 253.14 billion. However, the average realisation per minute (ARPM) declined by 23.25 per cent from Re 0.43 in January-March 2012 to Re 0.42 in the same quarter in 2013.

The operator’s non-voice revenues witnessed steady growth during this period. The contribution of non-voice services to total revenues increased from 16.2 per cent during January-March 2012 to 17.4 per cent during the same quarter in 2013. This was on account of a surge in data usage. While the revenue contribution from SMS and value-added services declined from 11 per cent to 9.9 per cent, the contribution from data services increased from 4.1 per cent to 6.5 per cent.

The overall data usage on Bharti Airtel’s network increased by 139 per cent from 10 million MB during January-March 2012 to 23.93 million MB during the corresponding quarter in 2013. This resulted in a 25 per cent growth in data ARPUs from Rs 44 to Rs 55. However, a reduction in data tariffs impacted the operator’s realisation per MB, which dropped to Re 0.29 in January-March 2013 from Re 0.40 in January-March 2012.

African business

Despite adding a large number of subscribers during the one-year period ended March 2013, Bharti Airtel failed to monetise its mobile offerings. The operator’s total loss increased to Rs 4.85 billion for the quarter ended March 2013 from Rs 3.4 billion in the corresponding quarter in 2012. The increase in net loss has been attributed to macroeconomic headwinds in countries with strong trade links with the Eurozone. A reduction in tariffs across Africa also led to a decrease in voice ARPUs from $6.1 for January-March 2012 to $4.9 for the same quarter in 2013.

The way forward

Going forward, the operator faces major challenges on the regulatory front in the domestic market. The Department of Telecommunications (DoT) has imposed a penalty of Rs 3.5 billion on the company for providing 3G services through intra-circle roaming agreements and has asked it to stop offering these services. The operator stands to lose a large 3G user base if the Supreme Court supports DoT’s directive. Also, the department has asked the operator to pay one-time spectrum charges of Rs 52 billion for airwaves beyond 4.4 MHz in the 1800 MHz band, which could result in a huge outgo in the near term. Moreover, the mandate to use renewable energy for tower operations would result in an increase in energy costs.

Despite these challenges, the Indian market offers strong growth prospects, especially in the data services segment. An expected hike in voice tariffs will, moreover, result in an increase in ARPM and ARPU, thereby leading to improved margins. However, Bharti Airtel’s future will depend largely on its ability to turn around its African business.