The Hindu Business Line : Bharti Airtel: Mobile additions ring in growth

BL Research Bureau Bharti Airtel has delivered healthy earnings growth this quarter (especially in mobile services) amidst fears of a slowdown in mobile additions and a trend of falling tariffs across the sector.

Bharti’s overall revenues for the quarter grew by 9.5 per cent on a sequential basis to Rs 5,905 crore.

The EBITDA margin at 41.4 per cent and net profit margin at 25.6 per cent have remained flat over the quarter, although in absolute terms, these have grown by 9.2 per cent and 11.8 per cent respectively (all references are to sequential growth rates).

Mobile services

Revenues in this segment stood at Rs 4,698 crore, having grown 11 per cent sequentially. The company has added 57 lakh subscribers this quarter, reiterating its market leadership, both in terms of subscriber numbers (23.5 per cent all-India market share) as well as additions. This is despite a blip in additions in April, related to a subscriber verification deadline set by the Department of Telecom. Bharti’s average revenue per user (ARPU) at Rs 390 has fallen 4 per cent, thanks partly to the low-priced ‘lifetime recharge’ scheme launched this quarter.

The minutes of usage have increased marginally, and the per-minute realisation at Rs 0.81 has fallen 4 paise. Churn (subscribers lost) has been flat over the quarter, indicating reasonable quality of service and successful retention strategies. Over the next year, this segment is expected to be the key revenue driver for the company.

Non-mobile services

This segment did not fare as well as mobile services, with revenues (Rs 1,845 crore), declining by 1.4 per cent sequentially. The broadband and telephone division has done well with ARPU (Rs 1,121 crore) increasing 1 per cent, with volume additions driving growth. With an all-India broadband penetration of less than 1 per cent, the company appears well placed to tap a chunk of the market. However, the Enterprise Services (Carrier) segment has been a drag on the segment’s performance, witnessing a 9.2 per cent dip in revenues due to increased competition in the NLD (national long distance), ILD (international long distance) and landing station segments. This business segment is expected to experience greater strain on margins due to a possible thrust from the telecom regulator to open this market to greater competition.

Outlook and risks

With over $3 billion of orders already placed for capital expansion, Bharti appears well prepared to support its burgeoning subscriber base through a robust network backbone. In the medium-term, BSNL’s delayed network rollout plans may help Bharti make further headway in tapping the market, though other private players may still pose a challenge. Falling tariff rates (though partially offset by increased minutes of usage) could affect revenue realisations. The company would look to offset this through innovative value-added service offerings.

A possible clarity in 3G policy and subsequent rollout may also increase realisations. Overall, the company is expected to maintain its market leadership position in the medium- term.

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