Declining revenues and poor profitability continued to beleaguer telecom operators during the first quarter of 2017-18. Even as the minutes of usage and data traffic on telecom networks grew substantially, these metrics failed to make any immediate positive impact on operator earnings. Voice as well as data ARPUs continued to fall on an annual basis, as incumbents slashed tariffs and offered free voice minutes to reduce customer churn. This is the third consecutive quarter post the entry of Reliance Jio Infocomm Limited when the industry has reported disappointing results. The price disruption caused by the new entrant has put severe stress on operators’ profitab­ility, cash flows and leverage, and the in­cum­bents may take another six to eight months to recover fully. SIM consolidation in the low-value segment and growing data usage are likely to result in stable revenue flows in the coming quarters. Fur­ther, suggestions from the inter-ministerial group set up to revive the sector’s financial health are likely to help unburden operators’ books to some extent.

A look at the financial results of select telecom companies during the quarter ended June 2017…

Bharti Airtel

Bharti Airtel reported a 75 per cent decline in its net income from Rs 14.62 billion during the quarter ended June 2016 to Rs 3.67 billion during the corresponding quarter in 2017. This is the lowest consolidated net profit reported by the operator since the quarter ended Decem­ber 2012. Further, Airtel reported a 14 per cent decline in its total revenue (for India, Southeast Asia and Africa), which dec­rea­sed from Rs 255.46 billion during the quarter ended June 2016 to Rs 219.58 billion during the quarter ended June 2017. The operator’s total revenue from its India operations declined by 10 per cent, from Rs 191.54 billion to Rs 172.46, billion during the same period.

On the operations’ side, the total minutes of voice usage on Airtel’s network in India grew from 314.83 billion to 421.91 billion during the period under consideration. The total data traffic more than doubled, from 158 billion MB during the quarter ended June 2016 to 472 billion MB during the quarter ended June 2017. The average voice usage per subscriber increased from 414 minutes to 507 minutes during the same period. Meanwhile, voice ARPUs declined by 19.7 per cent from Rs 139 to Rs 111 and blended ARPUs declined from Rs 196 to Rs 154.

Idea Cellular

Idea Cellular reported a consolidated loss of Rs 8.15 billion during the quarter ended June 2017 as against a net profit of Rs 2.2 billion during the quarter ended June 2016. This is the third consecutive quarter for which the operator has posted losses. Further, the revenues declined by around 14 per cent from Rs 94.86 billion during the quarter ended June 2016 to Rs 81.66 billion during the corresponding quarter in 2017. The earnings before interest, taxes, depreciation and amortisation (EBITDA) margin came down from 32.6 per cent to 23 per cent during the same period.

On the operations front, total data traffic on the operator’s network increased 1.71 times from 93 billion MB during the quarter ended June 2016 to 253 billion MB during the corresponding quarter in 2017. This can be largely attributed to a sharp increase in the average data usage per subscriber, which increased significantly from 674 MB in the quarter ended June 2016 to 2.2 GB during the quarter ended June 2017. Meanwhile, the total minutes of us­age on the operator’s network increased from about 200 billion to over 250 billion during the same period. The average voice usage per subscriber increased from 379 minutes to 441 minutes. Voice ARPUs dec­lined by 16.9 per cent from Rs 130 during the quarter ended June 2016 to Rs 108 during the quarter ended June 2017 and blended ARPUs declined by 22 per cent from Rs 181 to Rs 141.

Vodafone India

Vodafone India reported an 8.7 per cent decline in revenue from £1,519 million during the quarter ended June 2016 to £1,387 million during the quarter ended June 2017. The operator’s data browsing revenue declined by 15.2 per cent, from £303 million to £257 million, while voice revenue declined by 8.6 per cent, from £1,011 million to £924 million, during the same period.

On the operations’ front, Vodafone’s active data customer base reached 69.2 million during the quarter ended June 2017, of which 41.1 million were 3G/4G users. Data usage increased from 100,541 TB to 237,855 TB while ARPUs fell from Rs 176 during the quarter ended June 2016 to Rs 141 during the quarter ended June 2017.

Meanwhile, the merger deal between Idea Cellular and Vodafone India has received a go-ahead from the Competition Commission of India (CCI). In March 2017, the boards of both the companies had approved a $23 billion merger, excluding Vodafone’s 42 per cent stake in Indus To­wers. The merger, expected to be completed in 2018, will result in the creation of India’s largest telecom company in terms of subscriber base as well as revenue market share. It is proposed that initially, Vodafone will operate as a dominant partner in the merged entity with a 45.1 per cent stake. Meanwhile, Idea Cellular is expected to own a 26 per cent stake, with the right to ac­quire up to a 9.5 per cent stake from Voda­­fone Group Plc at a later stage.

Telenor India

Telenor India reported an 18 per cent decline in its revenue, from NOK 1,551 million during the quarter ended June 2016 to NOK 1,267 million during the quarter ended June 2017. Its EBITDA dec­lined from NOK 175 million to NOK 14 million during the same period. How­ever, the company reported an operating profit of NOK 12 million during the quarter ended June 2017 as against a net loss of NOK 109 million during the quarter ended June 2016.

Meanwhile, the merger between Tele­nor India and Bharti Airtel has received a green signal from the National Company Law Tribunal. The companies have been instructed by the tribunal to hold a meeting of equity shareholders and unsecured creditors. The two companies have received approvals from the CCI, the Securities and Ex­change Board of India, the Bombay Sto­ck Exchange and the National Stock Ex­­­change of India for the merger.

The merger will help Airtel acquire Telenor India’s spectrum in the 1800 MHz band, which, in turn, will help the former expand its 4G reach. As a part of the mer­ger, Airtel will take over Telenor India’s outstanding spectrum payments aggregating Rs 16.5 billion, its operational contracts including tower leases with Bharti Infratel and Indus Towers, its employees and 44 million customers in India.

Bharti Infratel

Bharti Infratel has reported a 12 per cent decline in its consolidated net profit from Rs 7.56 billion during the quarter ended June 2016 to Rs 6.63 billion during the corresponding quarter in 2017. Moreover, the company’s total net income increased by 9.75 per cent, from Rs 32.1 billion to Rs 35.23 billion. In addition, its EBITDA in­creased from Rs 14.08 billion to Rs 15.75 billion. Meanwhile, the total number of towers operated by the company increased from 89,352 during the quarter ended June 2016 to 90,837 during the quarter ended June 2017. The company’s sharing revenue per tower also increased from Rs 76,987 to Rs 83,001 on a year-on-year basis.

Conclusion

Looking at the financial performance of key telecom companies during the quarter ended June 2017, it is evident that there is a long way to go for an improvement in their  bottom lines and top lines. The only ray of hope at present for operators is the growing data usage, which can be monetised over time once the tariff wars end and the industry returns to healthy competition.

Akanksha Mahajan Marwah