News Analysis

Why Bharti Airtel rallied post Q4 results, despite reporting a loss

Bavadharini K S | Updated on May 20, 2020 Published on May 20, 2020

High revenue growth, rise in ARPU and steady demand amidst Covid are positives. But the telco’s high debt remains a concern

The stock of Bharti Airtel, one of the largest telecom service providers in the country, has rallied 9 per cent post its March quarter results, despite reporting a loss of ₹4,977 crore during the quarter. The higher losses were due to exceptional items which includes charges on license fees and spectrum usage charges, interest on the recent AGR dues and operational costs such as network re-farming and upgradation programmes.

But the company registered a healthy revenue growth of 15 per cent y-o-y to ₹23,722.7 crore, thanks to its tariff hikes taken last year. Further, the company’s focus on fewer and better-paying customers has also helped the top-line growth. Operating margin (EBITDA) expanded to 44 per cent during March FY20 from 33 per cent in the same period last year. This is thanks to the rise in tariffs in December last year.

While Covid-19 has taken a toll on various businesses, telecom companies appear relatively resilient. This could be attributed to the higher usage of telecommunication and Internet services from customers since the outbreak of the virus. In the last six months, the stock of Bharti Airtel has surged 34 per cent.

While the demand for Airtel’s services is likely to remain high, debt remains a cause for concern. The company’s debt is still high at ₹1,18,859 crore and the debt-equity ratio is around 1.5x. Though the Airtel’s balance sheet is better than that of Vodafone Idea, and the company is taking measures to reduce its debt, pricing onslaught from Reliance Jio can continue to add pressure.

ARPU on the rise

In the last 2-3 quarters, Bharti Airtel’s strategy to retain customers, drive up data usage and increase its average revenue per user (ARPU) appears to have paid off. It reported an ARPU increase of 25 per cent y-o-y to ₹154 (14 per cent q-o-y). Data usage per customer, too, has risen 35 per cent y-o-y in the recent March quarter, thanks to content partnership with platforms such as Netflix and Hotstar.

The company had introduced minimum recharge plans to wean out the non-paying customers to improve its ARPU and provided attractive offers to retain quality customers. This strategy has worked well. Airtel sawnew customer addition of 75,48,000 during FY20, an increase of 2 per cent compared to the previous fiscal.

But despite a 14-51 per cent rise in tariff across plans, and loyalty programmes such as the Airtel Thanks, there could be some more volatility in tariffs. Also, competitive pressure from RJio could continue. With TRAI yet to address the floor price issue, ARPU could be under pressure.

To meet the need of faster data connectivity and speed, the company will continue to expand and invest in its 4G network in the coming quarters. It has also started investing in 5G connectivity.

Further, with many companies adopting work from home, home broadband, which registered a growth of 3 per cent y-o-y in the recent quarter, is set to increase further.

Published on May 20, 2020

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
Quarterly Results
telecommunication service
Bharti Airtel Ltd
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.
Why the ₹20-lakh crore stimulus adds up to just ₹2-lakh crore direct impact
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.