The July-September 2011 period proved to be another lacklustre quarter for Bharti Airtel. India?s largest operator by subscribers reported a 38.17 per cent year-on-year fall in net profits, from Rs 16.61 billion for the quarter ended September 2010 to Rs 10.27 billion during the same period in 2011. This was the seventh consecutive quarter where the company registered a decline in profits.
Bharti Airtel attributed this decline to the challenging market conditions, both in India and globally. The company also stated that the third quarter of a fiscal is generally subdued in terms of consumer demand. During the period under review, the US dollar appreciated against the rupee, resulting in foreign exchange restatement losses of Rs 2.39 billion as against a gain of Rs 2.49 billion in the second quarter of the previous fiscal. Bharti Airtel?s total revenues, however, went up 13.38 per cent to Rs 172.7 billion in the quarter ended September 2011 as against Rs 152.31 billion during the corresponding quarter of the preceding year.
For the company?s African business, which it acquired for $10.7 billion in 2010, this was the first full quarter of comparable consolidated results. The company reported a strong revenue growth of 23 per cent in Africa from $838 million for the quarter ended September 2010 to $1,030 million for the corresponding quarter in 2011. Airtel launched 3G services in Congo B, and Airtel Money in Zambia and Kenya, and continues to expand its footprint across Africa, with its recent acquisition of 2G and 3G licences in Rwanda.
Segment analysis
During the quarter, Bharti Airtel successfully introduced a new organisational structure for its operations in India and South Asia. The new structure has two distinct business units with a clear focus on the business-to-customer (B2C) and business-to-business (B2B) segments. The B2C business comprises mobile services (India and South Asia), telemedia services and digital TV services, while the B2B segment includes enterprise services and passive infrastructure services.
The share of revenue from mobile services (India and South Asia) fell from 83 per cent in the quarter ended September 2010 to 72 per cent in the reporting quarter. However, the share of telemedia services increased to 7 per cent from 6 per cent in the quarter ended September 2010. Digital TV services contributed 2 per cent to revenues.
Bharti?s B2B segment witnessed growth with the tower infrastructure business constituting 19 per cent of the total revenue as compared to 14 per cent in the corresponding quarter a year ago. The enterprise segment?s contribution also rose to 9 per cent for the quarter ended September 2011 as compared to 7 per cent for the same period in the previous year.
In terms of earnings before interest, taxes, depreciation and amortisation (EBITDA), the contribution of mobile services declined to 72 per cent from 79 per cent in the quarter ended September 2010. Meanwhile, the contribution of telemedia services rose marginally to 9 per cent for the July-September 2011 quarter as against 8 per cent during the same quarter of the previous year. For the B2B segment, the EBITDA contribution of the enterprise segment remained stagnant at 5 per cent on a year-on-year basis. The passive infrastructure division witnessed a 400 basis point improvement in its EBITDA share, thereby providing some cushion to profits.
Operational performance
Bharti?s overall customer base stood at 237 million across 19 countries at the end of the reporting quarter. For its Indian operations, the company?s subscriber base witnessed a 21 per cent growth from 143.29 million as on September 30, 2010 to 172.78 million as on September 30, 2011. The monthly average revenue per user (ARPU) from its Indian operations fell to Rs 183 during the quarter under consideration from Rs 202 during the same quarter of the previous year.
The average minutes of use per user fell 7 per cent to 423 minutes per month for the quarter under review as compared to 454 minutes per month for the same quarter in the preceding year.
The African operations registered a monthly ARPU of $7.3 and an average rate per minute of $5.7 for the quarter ended September 2011, marking a 1 per cent and 12 per cent decline respectively on a year-on-year basis. Total minutes on the network saw a significant increase of 40 per cent, from 12,782 million minutes in the quarter ended September 2010 to 17,950 million minutes for the corresponding quarter of 2011.
Capex direction
For the India and South Asia regions, Bharti has earmarked a capex of about $2 billion for 2011-12, of which it has already spent around $1 billion. The company has increased its overall capex guidance for 2011-12 from $3.1 billion to $3.4 billion. However, there is no increase in the capex investment for its India and South Asia operations (which remains at $2 billion) as it has increased the budget for its African operations to $1.4 billion from $1.1 billion.
