Bharti Airtel displayed a lacklustre fi-nancial performance during the quarter ended September 2015. This was primarily on account of the large investments made to set up the network for next-generation techno­logies to meet the surge in data demand in a competitive market.

The company’s consolidated net profit after tax grew by 10.1 per cent, from

Rs 13.8 billion for the quarter ended Sept­ember 2014 to Rs 15.2 billion for the quarter ended September 2015. Mean­while, its consolidated revenue grew by 24 per cent, from Rs 228.4 billion to Rs 238.3 billion. The company’s finance costs nearly doubled during this period, increasing from

Rs 9.05 billion to Rs 18.6 billion. This led to a decline in the profit before tax, from Rs 29.9 billion to Rs 23.03 billion.

Indian operations

Airtel’s Indian operations accounted for 73.2 per cent of its overall revenues for the quarter ended September 2015. During the quarter, Airtel incurred a capital expenditure of Rs 31.02 billion on enhancing its data capabilities. While this helped improve its data business, the lack of investments in the voice segment impacted revenues from voice services.

Airtel’s cumulative ARPU declined by 3 per cent, from Rs 198 in September 2014 to Rs 193 in September 2015. This decline was on account of a significant drop in voice ARPUs from Rs 158 to Rs 140. As per the Telecom Regulatory Authority of India’s assessments, poor voice quality is a key reason for reduced voice usage, which declined from 418 to 404 minutes per user during this period. In contrast, Airtel’s non-voice segment, which accounted for 27.4 per cent of its India revenues, witnessed steady growth as its 3G subscriber base grew from 15.44 million in September 2014 to 23.89 million in September 2015. The MBs on the network increased by almost 70 per cent from 67.67 billion MB to 114.96 bill­i­on MB. A hike in data tariffs led to an in­­cr­­ease in data ARPUs, from Rs 150 in Sep­tember 2014 to Rs 193 in September 2015.

Operations in Africa and South Asia

Airtel’s revenues from its African operations (in constant currency) improved by 4 per cent from $978 million in the quarter ended September 2014 to $1,017 million in the quarter ended September 2015. How­ever, the company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) declined by 7 per cent from $223 million to $206 million. This was primarily on acc­ou­nt of declining voice revenues and the non-realisation of revenues from data services.

The company’s voice ARPU declined from $3.5 in September 2014 to $3.1 in September 2015. Meanwhile, the total MBs in the network grew from 8.06 million MB to 16.48 million MB, but the realisation per MB declined from 1.21 cents to 0.8 cents, owing to low tariffs. As a result, its data ARPU increased only marginally from $3.1 to $3.4. However, Airtel Money, its mobile money service, displayed steady growth as the user base rose year on year by 59.3 per cent, from 5.3 million to 8.4 million.

In South Asia, Airtel’s total revenues increased by 4 per cent from Rs 3.89 million for the quarter ended September 2014 to Rs 4.04 million for the quarter ended September 2015. However, the company’s operations in this region witnessed a significant increase in capex, as the net loss after taxes rose from Rs 1.53 billion to Rs 2.48 billion, during the same period. Even in the South Asia region, the company’s ARPU dropped from Rs 160 to Rs 142, owing to a 14 per cent decline in voice ARPUs.

Going forward

Bharti Airtel will witness the actual impact of its investments in the next-generation network build-out in the coming months. During the quarter ended September 2015, the company was focused on a pan-Indian 4G launch. However, the real impact of the uptake of these services on the company’s data revenues will only be witnessed in the quarter ending December 2015. The In­di­an operations have been suffering from declining usage of voice services. There­fore, it is imperative to improve the quality of voice offerings for reviving voice revenues. Meanwhile, the ongoing sale and leaseback of its tower assets across Africa will positively impact Airtel’s financials by reducing debt and interest costs. It will also help reduce capex as it will allow the company to focus on its wireless services.

Although Airtel’s financial performance was not very strong in the past quarter, it is poised for steady growth in the coming qu­arters with data reve­n­ues improving across regions and the debt burden reducing.

Shambhavi Sharan