Bharti Airtel’s Q3 Profit Plunges 55% 

Bharti Airtel’s third-quarter profit fell by more than half over the previous year as finance costs rose and the world’s fourth largest telecom operator cut tariffs to compete with an aggressive new rival in Reliance Jio Infocomm Ltd.

Billionaire Sunil Bharti Mittal-promoted company saw its revenue decline 3 percent to Rs 23,336 crore in the quarter ended December 2016 year-on-year, the first such drop since listing.

Driven by a 37 percent rise in finance costs and tariff cuts to match Jio’s predatory pricing, India’s largest mobile services provider’s net profit fell 55 percent to Rs 504 crore on a yearly basis.

The company’s net profit and revenue were also lower than the Bloomberg consensus estimates of Rs 24,029 crore and Rs 1,043 crore, respectively.

This was the first time in the last four quarters that net profit missed street expectations.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) marginally increased by 0.7 percent to Rs 8,510 crore year-on-year, while EBITDA margin rose 136 basis points to 36.4 percent, according to BloombergQuint’s calculations.

Africa Business Posts Loss

Bharti Airtel’s African business posted losses of Rs 620.4 crore along with a 14 percent fall in revenue. The company is considering mergers or stake sale options at some of its African assets to make its overseas operations profitable. Bharti Airtel operates in 15 African nations. It has sold operations in two of its African units, Sierra Leone and Burkina Faso.

Bharti Airtel has cut prices and introduced offers to counter Mukesh Ambani-backed Reliance Jio, which provides voice calls free for life and isn’t charging for data on its 4G-only network until the end of the financial year. Bharti Airtel and other smaller rivals have slashed data tariffs as much as 67 percent to counter Jio, which began commercial services in September.

The tariff cuts have weakened revenues per user. The blended average revenue per user in India weakened 10.4 percent to Rs 172. The ARPUs have also declined 8.5 percent compared to the second quarter, which is known to be a seasonally weak quarter.

Revenue from data services fell two percent compared to last year to Rs 4,049 crore, while the data average revenue per user moved down by 12.5 percent to Rs 175.

Bharti Airtel’s data realisation per megabyte decreased 24 percent to 17.97 paise while voice realisation per minute fell 13 percent to 29.42 paise quarter-on-quarter.

Airtel added 5.9 million customers in the third quarter to its mobile business, taking the total user base to 265.85 million as on December 30. Though the telecom operator holds the largest spectrum portfolio in India and has the ability to provide 4G (fourth generation) services in 22 circles with its 1,400 megahertz (MHz) of spectrum across four different bands, 4.1 percent of its customers chose to discontinue their services.

Cutting Debt

For the third quarter, India’s largest telecom operator’s consolidated net debt stood around Rs 97,395 crore, up by 20 percent compared to September ended quarter. The increase in debt was complemented by a 37 percent rise in finance cost, which stood at Rs 1,936 crore. In the same period, the company incurred capital expenditure of Rs 5,854 crore.

The company is said to evaluate options to reduce its debt levels as it needs to gear up against rising competition in the telecom industry. Along with considering mergers or stake sales at some of its Africa operations, it is also looking to sell stake in its Indian tower unit – Bharti Infratel.

A committee was formed to study whether the sale would be a minority stake or control of the tower unit and a decision could be taken in a month, Mittal had said in an interview to BloombergQuint.

The telecom operator was allotted 172 MHz of spectrum of the acquired 173.8 MHz spectrum across three bands in the October 2016 auction. The company paid Rs 7,402 crore, and opted for deferred payment for the remaining Rs 6,676 crore.

Mittal is also looking to raise funds by issuing non-convertible debentures through private placement. This fund-raising is ahead of Reliance Jio’s announcement of capital infusion to the tune of Rs 30,000 crore.

Ahead of its earnings announcement, Bharti Airtel’s shares closed at Rs 316.2, down 1.08 percent, on the National Stock Exchange (NSE), while the benchmark Nifty 50 gained 1 percent on Tuesday.