The three large operators posted mixed financial results for the quarter ended December 2018. The quarter was Reliance Jio Infocomm Limited’s fifth straight profitable quarter. In fact, its profits grew in comparison to the previous quarter. Bharti Airtel, on the other hand, witnessed a decline in profits. Vodafone Idea Limited (VIL) continued to remain in the red with an increase in losses.
Revenues continued to remain subdued during the quarter. However, Reliance Jio was able to counter the decline in ARPUs through healthy net subscriber additions during the quarter. While Bharti Airtel’s revenue declined during the quarter, it managed to offset the impact of revenue churn from its India operations with growth in its Africa operations. VIL also managed to slow down its revenue erosion during the quarter as compared to the previous quarter.
The following are the key highlights of select operators’ financial results during the quarter ended December 2018…
Vodafone Idea Limited
The quarter ended December 2018 saw VIL releasing its first-ever results operating throughout the quarter as a combined entity. These results will serve as a benchmark for future comparison.
VIL registered a loss of Rs 50.04 billion during the quarter, up marginally from Rs 49.73 billion in the previous quarter. (Since the merger of the two operators was completed on August 31, 2018, the results for the quarter ended September 2018 included the results for Idea Cellular up to August 30, 2018 and the results for Vodafone Idea from August 31, 2018 to September 30, 2018.)
During the quarter under consideration, the company managed to slow down the erosion in revenues, from 7.1 per cent in the quarter ended September 2018 to 2.2 per cent during the current quarter. The revenue for the quarter stood at Rs 117.64 billion, down from Rs 120.23 billion in the previous quarter. Although customers continued to migrate to lower-ARPU plans, the company implemented various initiatives to improve revenue and profitability, which helped in controlling the rate of decline in revenue.
Moreover, VIL was able to grow its daily revenue on a month-on-month basis during December 2018 and January 2019. The company’s capex decreased significantly, from Rs 32.95 billion during the quarter ended September 2018 to Rs 11.69 billion in the following quarter. ARPUs during the quarter increased marginally, from Rs 88 to Rs 89.
The realisation of synergies from the merger lowered the overall operating expenses for the telco during the quarter. As a result, operating expenses for the quarter stood at Rs 81.5 billion, which was Rs 7.5 billion lower than in the quarter ended June 2018 (amounting to total annual savings of around Rs 30 billion). Therefore, even in the face of declining revenues, the earnings before interest, taxes, depreciation and amortisation (EBITDA) increased to Rs 11.4 billion, a 16.3 per cent improvement quarter over quarter.
Data volumes increased by 11.5 per cent quarter over quarter, from 2,426 petabytes to 2,705 petabytes. Consequently, the average monthly data usage per data subscriber increased from 5.6 GB to 6.2 GB. The introduction of service validity vouchers led to a loss of 35.1 million customers in the quarter as they consolidated their spending from multiple SIMs to single SIMs. The total minutes on the network declined by 2.6 per cent during the quarter, largely due to the introduction of service validity vouchers.
Operators will be seen diversifying and taking advantage of new digital initiatives to boost revenues.
Bharti Airtel
Bharti Airtel posted a consolidated net profit of Rs 860 million during the quarter ended December 2018, significantly lower than the Rs 3.06 billion profit posted in the corresponding quarter in 2017, a 71.8 per cent decline. When compared to the previous quarter, net profit fell by 27.7 per cent from Rs 1.19 billion. The consolidated EBITDA for the quarter ended December 2018 stood at Rs 63.07 billion, down from Rs 75.87 billion in the corresponding quarter of the previous year, a decrease of 16.9 per cent year on year. Meanwhile, the consolidated EBITDA margin fell to 30.7 per cent during the quarter from 37.3 per cent in the corresponding quarter of the previous year. The consolidated EBIT dropped by 69.9 per cent year on year to Rs 8.13 billion. Further, the company’s total capex investment stood at Rs 65.68 billion, with a total capex spend of Rs 224.69 billion year-to-date.
The telco’s consolidated revenue increased marginally by 1.0 per cent year on year from Rs 203.19 billion to Rs 205.19 billion in the quarter ended December 2018, primarily on account of sustained pricing pressure in the Indian mobile market. Revenues from the company’s India operations stood at Rs 147.68 billion, a decline of 2.3 per cent year on year on an underlying basis. Mobile revenues decreased by 4 per cent year on year on an underlying basis while the revenue of Digital TV and Airtel Business shot up by 7.1 per cent and 10.9 per cent respectively, year on year, on an underlying basis. Mobile data traffic almost tripled to 3,217 billion MB in the quarter ended December 2018, as compared to 1,106 billion MB in the corresponding quarter of the previous year. 4G data subscribers grew by 112 per cent to reach 77.1 million from 36.4 million in the corresponding quarter of the previous year.
While Airtel’s India operations continued to languish, its Africa business registered growth. Revenues from Africa grew 11.2 per cent year on year during the quarter, mainly on account of strong growth in data and Airtel Money transaction value. Mobile data traffic grew by 61 per cent to 105 billion MB from 66 billion MB in the same quarter of the previous year. Data customers increased by 25.5 per cent to 29.3 million from 23.3 million during the same period. Further, the active Airtel Money customer base increased to 13.8 million, in turn boosting the total transaction value on the Airtel Money platform by 29 per cent to $6.9 billion. The EBITDA margin for Africa stood at 37.2 per cent, an improvement of 1.7 per cent year on year. Recently, Airtel Networks Kenya Limited signed an agreement with Telkom Kenya Limited to merge their mobile, enterprise and carrier service businesses in Kenya and establish Airtel-Telkom with enhanced scale, operational efficiency and strategic brand presence.
Reliance Jio
Reliance Jio continued to improve its performance during October-December 2018, making this its fifth straight profitable quarter. Its stand-alone net profit stood at Rs 8.31 billion during the quarter ended December 2018, an increase of 22.1 per cent quarter on quarter and 65 per cent year on year. Stand-alone revenue from operations stood at Rs 103.83 billion, a year-on-year growth of 50.9 per cent from Rs 68.79 billion during the corresponding quarter of the previous year. The operator’s stand-alone EBITDA for the quarter stood at Rs 40.53 billion, a significant increase when compared to the Rs 26.28 billion registered in the corresponding quarter of the previous year. The EBITDA margin stood at 39 per cent, up from 38.2 per cent.
Reliance Jio’s subscriber base continued to grow with a net addition of 27.9 million during the quarter, as against the previous four-quarter average of 28.4 million. Its total subscriber base stood at 280.1 million as on December 31, 2018. The average data consumption per user per month stood at 10.8 GB and average voice consumption stood at 794 minutes per user per month. The majority of the data consumption was driven by video, which totalled 4.6 billion hours per month. Total wireless data traffic during the quarter stood at 8.64 billion GB and total voice traffic stood at 634.06 billion minutes. However, the downward pressure on ARPUs continued to mount, with ARPUs sliding marginally from Rs 131.70 to Rs 130 per subscriber per month.
Outlook
With the sector stabilising post consolidation, operators will vie to increase market share, revenue and, eventually, profits. The effects of the introduction of service validity vouchers are already being seen as customers are cancelling multiple connections in favour of one. However, the longer-term impact of this is yet to be seen.
With the pace of growth of core telecom business becoming sluggish, operators will be seen diversifying and taking advantage of new digital initiatives to boost revenues. Further, the ever-increasing demand for video in social media and the popularisation of over-the-top platforms will continue to be the largest growth drivers for operators. This will most likely result in operators bolstering infrastructure and networks to improve user experience.
Going forward, with stressed ARPUs and pricing power unlikely to return any time soon, operators will look to diversify their revenue streams and reduce subscriber churn. s
Aditya Kumar
