The balance sheets of not all major telecom operators have kept pace with the phenomenal growth of the Indian telecom sector. While private telecom majors like Bharti Airtel, Idea Cellular and Reliance Communications (RCOM) have continued to ring in profits, state-owned operators like Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) seem to have buckled under the pressure of competition. BSNL, which recently announced its financial results for 2008-09, posted a decline of 81 per cent in net profits and 6 per cent in revenues. It also lost its number one operator status in terms of revenue to Bharti Airtel.

Meanwhile, some private operators like Tata Communications and Tata Teleservices (Maharashtra) Limited (TTML) are also facing shrinking sales and profits.

tele.net takes a look at the financial performance of some telecom firms that announced their financial results for the April-June 2009 quarter…

Bharti Airtel

Driven by a record number of subscriber additions, foreign exchange gains and a tax write-back, Bharti Airtel reported a 24 per cent year-on-year increase in net profit for the quarter ended June 2009.Net profit stood at Rs 25.17 billion compared to Rs 20.25 billion in the corresponding period in 2008-09.

Due to a 6 per cent gain in the rupee against the dollar in the quarter ended June 2009, the company registered a foreign exchange gain of Rs 2.5 billion against a loss of Rs 1.68 billion last year. A deferred tax income of Rs 2.38 billion also helped boost the company’s quarterly net profit. Bharti Airtel added a total of 8.55 million customers, the highest ever for any quarter to date on a net basis.

The company’s revenues grew by 17 per cent, from Rs 84.83 billion in the quarter ended June 2008 to Rs 99.42 billion in the quarter ended June 2009.

However, the company’s average revenue per user (ARPU) and minutes of usage (MoUs) continue to slide. Its ARPU for cellular services slipped from Rs 350 in June 2008 to Rs 278 in the reporting quarter. Average MoUs also decreased from 534 to 478.

RCOM

Contrary to market expectations, RCOM reported an 8.3 per cent increase in net profit, backed by impressive growth in revenues from its mobile and broadband operations. The company posted a net profit of Rs 16.37 billion as against Rs 15.12 billion in the quarter ended June 2008. Total income surged 15.5 per cent from Rs 53.22 billion to Rs 61.45 billion.Earnings before interest, tax, depreciation and amortisation (EBITDA), however, declined 2.4 per cent.

“Successful commercial launch of nationwide GSM services and other new initiatives across all our businesses have helped drive profitable and sustainable growth at RCOM,” says company chairman Anil Ambani.

RCOM, which started services on its GSM network in January 2009, increased its market share from 17.7 per cent in December 2008 to 18.6 per cent in May 2009.

As with Airtel, the appreciation of the rupee also worked to RCOM’s advantage.The company reported a net interest income of Rs 6.2 billion despite having a net debt of Rs 221.63 billion, hence increasing overall profits.

The total minutes carried on the company’s wireless network increased by at least 11 per cent quarter-on-quarter compared to rival Airtel, which reported a 7.7 per cent increase in minutes carried on its mobile network despite adding more customers last quarter.

RCOM’s overall capital expenditure guidance for the fiscal year continues to be Rs 100 billion. It has spent around 10 per cent of this in the first quarter.

Idea Cellular

Backed by improved profitability of its tower subsidiary, Idea Cellular reported a better-than-expected bottom line during the quarter ended June 2009. During the quarter, consolidated revenues rose by 36.6 per cent year-on-year to Rs 29.76 billion. Net profit stood at Rs 2.97 billion compared to Rs 2.63 billion in the quarter ended June 2008.

The company witnessed a significant improvement in the performance of its tower subsidiary, Indus Towers, in which it holds a 16 per cent stake. Idea’s share of revenue in Indus grew by 6.4 per cent sequentially to Rs 19.9 billion (before eliminations).

Revenues, however, have been impacted due to a sharp fall in ARPU and slower growth in revenue from its subsidiary, Spice Communications. The company’s ARPU decreased by 17 per cent year-on-year to Rs 232 during the June quarter. MoUs fell marginally from 431 minutes to 399 minutes.

The performance of Spice Communications, which Idea had acquired in 200708, put pressure on the overall performance of the latter. Spice’s revenue remained more or less flat at Rs 13.59 billion. Its EBITDAcontribution too was just 3.4 per cent at Rs 2.94 billion. On a positive note though, Spice’s net loss came down to Rs 1.43 billion in the April-June 2009 quarter.

Meanwhile, due to its expansion from 11 circles to 17, through both organic and inorganic means, Idea has had a substantial increase in capital expenditure, which has affected its margins. However, going forward, capital expenditure is expected to be moderate even as payoffs from these investments begin to come in.In fact, the capital expenditure for 200910 has been scaled down from Rs 60 billion to Rs 55 billion.

TTML

TTML reported a loss of Rs 343 million, marginally less than the Rs 347.2 million loss reported in the April-June 2008 quarter. Revenues rose by 1.7 per cent to Rs 5.13 billion. EBITDA grew by 1.9 per cent to Rs 1.58 billion while the EBITDA margin was 31 per cent.

The company’s focus on value-added services (VAS) and high speed internet is paying off, with income from VAS and data services contributing 15.4 per cent to overall revenues. This is higher than the industry average of around 9 per cent. Revenues from telecom services stood at Rs 5.09 billion while revenues from passive infrastructure support services were Rs 164 million.

MTNL

While most of the private operators continue to book high margins, MTNL reported revenues of Rs 10.85 billion, down from Rs 12.75 billion in the AprilJune 2008 quarter. The company’s net loss stood at Rs 468.4 million compared to a loss of Rs 1.15 billion in the June 2008 quarter. Expenditure, meanwhile, increased from Rs 1.12 billion to Rs 1.15 billion during this period.

In the Union Budget 2009-10, the government has earmarked Rs 157.4 billion for the two state-run telecom majors.While BSNL has been allocated Rs 140.15 billion, MTNL will be given Rs 17.25 billion to fund its expenses.

The operator is currently trying to capitalise on its early entry into 3G mobile services by seeking an international partner to help it operate its network.

Tata Communications

Tata Communications, which provides national and international voice and data services to other carriers and enterprise users, is also facing a decline in sales and profits. In the three months ended June 2009, it reported a 3.2 per cent year-onyear decline in revenues to Rs 8.43 billion, and a 67 per cent decrease in net income to Rs 320 million.

The company’s capex plans are also under strain as there is not much room to increase its debt exposure. Its capex guidance for 2009-10 is $2 billion.

GTL Infrastructure

GTL Infrastructure, the tower subsidiary of GTL, reported a 57 per cent growth in revenues from Rs 457.7 million in the quarter ended June 2008 to Rs 719.7 million in the quarter ended June 2009. Its operating profit stood at Rs 385 million as against Rs 227.1 million in the AprilJune 2008 quarter.

The company is currently operational in 20 telecom circles and has a portfolio of 9,951 towers.

Spice Mobiles

Spice Mobiles witnessed substantial growth during the quarter with an increased distribution and retail presence and successful product launches under the BIG series of products. The company registered a 43 per cent growth in turnover from Rs 1.27 billion to Rs 1.82 billion in the corresponding quarter in 2007-08.Profit after tax increased 17 times.

As part of its objective to globalise its business, the company accessed the international market with an entry into Nepal, Africa, Bangladesh, Indonesia and Malaysia. The company is concurrently focusing on entering newer global markets in the I-2-I (Israel-to-Indonesia) region.