Bharti Airtel recently declared its financial results for the quarter and the year ended March 31, 2012. While the operator continued to witness a decline in its quarterly profits, its operational performance exceeded industry expectations. It registered steady growth on key operational parameters such as the total minutes of usage (MoUs), subscriber additions and average revenue per minute (ARPM). Also, the margins from the company?s African operations have expanded owing to an increasing subscriber base and investments in the region.

The operator reported a decline of 28.19 per cent in its net profit, from

Rs 14.01 billion for the quarter ended March 31, 2011 to Rs 10.06 billion in the corresponding quarter in 2012. The dip in profit is on account of high interest costs and increased competition in the telecom market worldwide. While the Indian and South Asian region reported a fall in profits from Rs 18.17 billion to Rs 13.47 billion, the African region registered a decline in losses from Rs 4.16 billion to Rs 3.41 billion.

The revenues increased by 15 per cent, from Rs 162.93 billion during the quarter ended March 31, 2011 to Rs 187.29 billion during the corresponding quarter in 2012. The share of Bharti Airtel?s Indian operations in the total revenue increased from Rs 121.47 billion to Rs 134.21 billion.

The contribution of the data and non-voice service segments to the total revenue remained steady at 15.3 per cent during the period under review. However, in India, the share of non-voice services decreased from 15 per cent to 14.4 per cent. The company recently became the first operator to launch 4G services in India. However, it does not expect significant revenue contribution from these services in the near future.

Driven by a steady increase in the subscriber base across geographies, the total minutes on the company?s network stood at 265.24 billion during the quarter ended March 31, 2012 as compared to 240.25 billion during the corresponding quarter in 2011. Currently, the company has 181.3 million wireless subscribers in India, of which around 9 million are 3G subscribers, with around 30 per cent of them active at a given point of time. The monthly churn in subscribers, however, remains an area of concern, increasing from 7.6 per cent for the quarter ended March 31, 2011 to 8.8 per cent for the corresponding quarter in 2012.

The ARPM from Indian operations increased from Re 0.433 to Re 0.438 during the period under review. The ARPU declined from Rs 194 to Rs 189 and the average MoUs per user decreased from 449 minutes to 431 minutes.

On an annual basis, Bharti?s net profit declined by 29.6 per cent from Rs 60.47 billion in 2010-11 to Rs 42.59 billion in 2011-12. The decline can be attributed to factors such as higher costs on account of 3G licence fee amortisation as well as interest charges (Rs 10.41 billion), tax provisions (Rs 4.81 billion) and losses due to forex fluctuation (Rs 4.22 billion). The total revenue grew by 20 per cent from

Rs 595.38 billion to Rs 714.51 billion and the cash profit from operations increased by 11 per cent from Rs 178.91 billion to Rs 198.94 billion.

The capex for 2011-12 was $2.66 million, which included investments in 3G network roll-outs in India, Sri Lanka and Africa, and 4G network roll-outs in India. For 2012-13, Bharti Airtel has earmarked a capex of $3.2 billion, of which around $1 billion will be dedicated to its African operations. However, the company, unlike its peers, has made no provisions for expenditure on acquiring spectrum during the upcoming auctions.

Going forward

Industry analysts believe that the company will witness a sharp jump in overall earnings in the coming quarters. Moreover, the operator?s African operations are on track and the region?s cash generation capabilities will help Bharti Airtel mitigate exchange rate risks while fulfilling its dollar-denominated loan obligations.

With respect to the company?s Indian operations, regulatory uncertainty in the sector will continue to pose a challenge. While Bharti Airtel did not feature in the list of operators that will lose their licences in September 2012, it has expressed its concern regarding the Telecom Regulatory Authority of India?s proposal for auctioning 2G spectrum and the price of the same.