Boosted by premium customer additions, higher customer spending and growth in its home broadband business, Bharti Airtel reported strong revenue and operating performance in the October-December quarter, even as its net profit fell significantly due to one-off factors and an exceptional gain in the year-ago period.
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| Airtel revenue climbs 20% in Q3 |
On Thursday, India’s second-largest telecom operator by market share reported a 55% year-on-year (y-o-y) fall in its net profit to ₹6,631 crore, about 7% lower than Bloomberg’s estimates. Sequentially, it fell 2.4% in Q3 from ₹6,791.7 crore in the preceding quarter.
Alongside, revenue in the quarter was up 19.6% y-o-y and 3.5% sequentially at ₹53,982 crore. This was largely driven by an increase in its mainstay mobile services business, its focus on premium services, upgrades from 2G to 4G/5G, postpaid subscribers, and its Africa business.
“Our balance sheet strength, reinforced by strong cash generation and sustained deleveraging, positions us well to invest in new growth opportunities,” said Gopal Vittal, executive vice chairman of Bharti Airtel in a statement. “India mobile recorded sequential growth of 1.9%, driven by our focus on winning with quality customers and a consistently improving portfolio mix.”
The drop in profit could be attributed largely to a high base in the year-ago period, when the company reported a net exceptional gain of ₹7,546 crore following the reclassification of Indus Towers from associate company to its subsidiary.
Profit was also affected by the recent implementation of the new labour code. The company said the financial implication of new labour codes resulted in increase in provision for gratuity and compensated absences amounting to ₹257 crore.
Shares of Bharti Airtel ended 1.7% lower at ₹1,992.20 on the National Stock Exchange on Thursday. The telco’s results were announced after market hours.
Tariff and Arpu
Airtel’s results arrive amid a lack of consensus among operators regarding the next industry-wide tariff hikes.
While Airtel and Vodafone Idea (Vi) have been calling for ‘tariff repairs’ in the sector to improve the return on capital employed (ROCE), market leader Reliance Jio has ruled out an immediate increase, signalling its confidence in achieving organic growth in average revenue per user (Arpu) on the back of 5G usage.
Arpu is a crucial metric that reflects the recharge plans that customers opt for.
Bharti Airtel has increased the gap on Arpu with Reliance Jio. During the quarter, Airtel’s Arpu rose 1.2% sequentially to ₹259 a month, driven by growth in data consumption and consumer upgrades. For context, Jio’s Arpu was ₹213.70 and Vodafone Idea’s Arpu was at ₹172 a month at the end of December.
According to Kawoosa, tariff hikes are inevitable given a need for network upgrades with the increase in data consumption.
“What has been working for Bharti Airtel is its focus on premium users, which is bringing the company decent profitability and also creating a path for upselling whenever the operator would want to monetize its bundled offerings such as the recent generative AI offering with Perplexity,” said Faisal Kawoosa, chief analyst at Techarc, a technology research firm.
Other numbers
Airtel’s earnings before interest, tax, depreciation and amortization (Ebitda) rose 25.2% y-o-y and 4.1% sequentially to ₹31,144 crore in Q3.
The company added 4.35 million mobile users during the quarter, taking its total mobile subscriber base in India to 368.5 million. Notably, 79.8% of the company’s mobile subscribers are on 4G/5G. Overall, the company’s India subscriber base was at 465.9 million, an increase of 16.2 million during the quarter.
In comparison, market leader Reliance Jio added 6.6 million mobile subscribers during the quarter, according to data from IIFL Capital, taking its mobile subscriber base to 490 million.
Airtel’s mainstay India mobile services business rose 9.1% y-o-y and 1.9% q-o-qto ₹28,652 crore during the quarter. The business contributes 53% to Airtel's topline.
Airtel Business, which houses the enterprise connectivity solutions including data centres, cloud and internet of things (IoT) solutions, saw a 1.5% sequential increase in revenue to ₹5,353 crore.
The revenue from the business, however, fell 5.2% y-o-y. The company said the revenue was impacted by discontinued low margin business. It said the underlying growth remains driven by both core connectivity and new age digital services.
Airtel has also approached the government seeking parity with Vodafone Idea on the recalculation of its adjusted gross revenue (AGR) dues. Investors will listen closely for updates on Airtel’s stance on tariff hikes, Arpu growth, and the AGR recalculation during the post-earnings call with analysts on Friday.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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