Bharti Airtel Ltd., Vodafone India Ltd. and Idea Cellular Ltd. sim card packs are arranged for photograph in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg) 

Q1 Results: Bharti Airtel’s One-Off Tax Gain Masks India Business Pain

Bharti Airtel Ltd. reported a surprise profit in the April-June quarter even as its Indian business remains under pressure because of an aggressive pricing war in the world’s second-biggest telecom market.

The nation’s largest telecom operator’s net profit rose 17 percent quarter-on-quarter to Rs 97.3 crore, according to its stock exchange filing. Analysts polled by BloombergQuint had forecast a loss of Rs 277 crore. A deferred tax gain of Rs 1,844.3 crore helped, without which the company would’ve been in a loss.

  • Revenue rose 2.3 percent over the previous quarter to Rs 20,080 crore.
  • Operating profit fell 2.9 percent to Rs 6,725.8 crore.
  • Operating margin contracted 180 basis points to 33.5 percent.

To counter Mukesh Ambani-led Reliance Jio Infocomm Ltd.’s cheap data onslaught, Bharti Airtel has been lowering its tariffs to protect its market share. That, coupled with a reduction in the fee it earned from cross-network calls, caused a steep decline in its average revenue per user.

While the Indian business suffered, Bharti Airtel continues to gain footing in Africa. Revenue from the region rose 13.9 percent over the year-ago period to Rs 5,284 crore during the quarter. It also earned a better profit margin from Africa at 36.4 percent. The average revenue per user in Africa at $2.9 (roughly Rs 200) was nearly twice the India number.

Amid the Reliance Jio’s data push, Bharti Airtel invested heavily in expanding its 4G footprint and improving speeds. It’s capital expenditure during the quarter was at a record Rs 8,217 crore. “Our investments have led to some operational expenditure headwinds in this quarter but we remain focused on structural cost containment,” Gopal Vittal, managing director and chief executive officer of the India business, said in a media statement.

Other Highlights

  • Acquisition of Telenor India completed.
  • Overal customer base at 457 million, 21.2 percent higher than last year.
  • Mobile data traffic rose 328 percent over last year to 2,236 billion megabytes.

Shares of Bharti Airtel closed 1.5 percent higher at Rs 357 apiece ahead of the earnings announcement.

Also read: Bharti Airtel’s Liabilities For This Fiscal Is Thrice The Cash It Generates