Stocks

Bharti Airtel: Market shrugs off weak result

Bavadharini KS BL Research Bureau | Updated on January 09, 2018 Published on November 01, 2017

Optimism of company emerging stronger after sector consolidation

Despite a sharp 76 per cent y-o-y dip in its September 2017 quarter profit, the stock of Bharti Airtel has rallied about 9 per cent today.

The stock has been on an uptrend for the past few weeks, with the market likely taking a view that the ongoing consolidation in the industry, triggered by RJio’s disruptive strategies, will eventually be to the benefit of the remaining few players including Bharti Airtel - a view that has been bolstered by Airtel’s acquisition of Tata Communications’ business on attractive terms.

The company’s investment in its spectrum portfolio, growing data customer base and usage, plans to launch VoLTE and initiatives to tap both the higher and lower end of the market have aided the positive sentiment.

The company’s plans to consider the sale of stake in Bharti Infratel if favourable offers come up seem to have been well received in the market. Besides, the September quarter results, while weak, also seem to have been better than what the market expected.

Bharti Airtel reported 76.5 per cent y-o-y decline in profit at Rs 343 crore in the September quarter and its revenues declined about 12 per cent y-o-y to Rs 21,777 crore. This was due to the continued intense competition and resulting distress in the telecom sector.

Though Airtel’s customer base increased 8.5 per cent y-o-y in the September quarter, its ARPU (Average Revenue Per User) continued to fall - declining 23 per cent y-o-y to Rs 145. The mobile services business is the major revenue contributor (73 per cent) for the company.

In the home services and Airtel business (corporate fixed line with data and voice services) segments, the company reported a revenue decline of 10 and 5 per cent y-o-y respectively in September quarter 2017.

Other segments such as digital TV services, tower infrastructure and Airtel payments bank registered a revenue growth of 10, 11 and 8 per cent y-o-y respectively in the September quarter. The tower infrastructure services reported a revenue increase of 11 per cent in the quarter.

Data customer base

Bharti Airtel’s data customer base increased about 5 per cent y-o-y in the September quarter along with 300 per cent increase in data usage per customer. This was thanks to the company’s investment in its spectrum portfolio.

The company has launched attractive offers to lure new customers. It has launched VoLTE (voice over long term evolution) services to retain and add more customers.

To hold its own in the intensely competitive environment, Airtel is targeting customers across the spectrum. Recently, it has opened an online store for selling premium mobile phones that come bundled with data services.

For instance, for the purchase of iPhone 7 and iPhone 7 plus, the company provides 30 GB mobile data per month with unlimited voice services.

To improve 4G penetration, recently Airtel has partnered with Celkon, a mobile manufacturer, to offer 4G smartphones Rs 1,349. This phone comes with a monthly pack of Rs 169 with 0.5 GB data per day and unlimited voice services.

Outlook

With Airtel looking to launch VoLTE services across India, the company would be able to improve the quality of services and remain competitive. Also, in the long run, with advancement of technology, the costs, particularly related to infrastructure, could come down.

The reduction of Interconnection Usage Charge (IUC) though would have its impact on its financials and the pain is likely to continue in the coming quarter also. But with the company digging in its heels and making good use of the consolidation in the sector, it will likely emerge stronger in the long run.

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Published on November 01, 2017
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