Bharti Airtel Q4 net plunges 72% as Jio impact continues to churn telecom industry
10 May 2017
Indian telecom market leader Bharti Airtel has reported a 72-per cent year-on-year drop in its fiscal fourth quarter net profit to Rs373 crore - the lowest in four years - against Rs504 crore in the immediate preceding quarter.
Revenue for the January-March 2017 quarter fell over 12 per cent to Rs21,935 crore from a year earlier as data and voice rates fell, pulled down by the adverse impact of Reliance Jio's competitively priced products. Earnings before interest, tax, depreciation and amortisation (EBITDA) declined 13 per cent to Rs7,992.8 crore from Rs9,188.1 crore a year ago.
Bharti Airtel's average monthly revenue per user (ARPU) fell to Rs158 in the January-March 2017 quarter from Rs194 a year ago. Average data revenue per user also declined to Rs162 from Rs196.
"The sustained predatory pricing by the new operator has led to a decline in revenue growth for the second quarter in a row. The telecom industry as a whole also witnessed a revenue decline for the first time ever on a full year basis," said Gopal Vittal, MD and CEO, India and South Asia, Bharti Airtel, said in a statement.
"The deteriorating health of the industry was compounded by the tsunami of incoming voice traffic from the new operator as a result of which significant investments had to be made just to carry the incoming traffic on our network," he added.
"Our long-term commitment to provide the best experience to our customers continues to drive all our actions in every single aspect of the business. This belief coupled with brilliant execution of our people has led to acceleration in market share in an industry that is now rapidly consolidating," Vittal said.
However, the company saw an expansion of its subscriber base, which is encouraging in a market where telecom service providers are finding it hard to retain subscribers.
While this is the second straight quarterly decline in profitability for Bharti and with no near-term chances of recovery, some analysts say the RJio scare could already have begun to abate.
However, incumbents Bharti Airtel, Vodafone India and Idea remain wary of further competitive reactions as RJio starts differently charging for services, extending RJio's disruptive effect.
A Crisil report noted that sharp price cuts and free services offered by RJio for nearly 6 months, which accounted for over 55 per cent of total wireless data consumption in the country, resulted in flat adjusted (excluding inter connect charges and service tax) gross revenue growth for telecoms.
While overall data traffic has grown 5 times in the past one year, 60 per cent fall in 4G data prices since launch of RJio in September has resulted in muted 2 per cent growth in adjusted gross revenue last fiscal.
In a note to clients, Crisil analysts have pointed towards the financials and business dynamics of leading global telcos in key, high data consuming markets, such as Verizon, to say there is a premium in market leadership. While Verizon is the largest US wireless telecom player, which boasts of a sustained high market share and best-in-class network coverage in the price-competitive and mature market, ''Its strong cash flows have enabled it to invest in network quality, which, in turn, has ensured the lowest postpaid churn (less than 1 per cent) for the company,'' the Crisil report points out.
Bharti Airtel's India operations had average returns closer to 10 per cent compared with 6-8 per cent for the next two players. So Bharti is expected to let itself bleed rather than lose out on market leadership in the long run.