Call drop for Bharti Airtel, as Q3 earnings disappoint

Bharti Airtel India’s largest telecom service provider announced its Q3FY16 results on Thursday after market hours. Bharti Airtel missed street estimates while posting a 26.65 per cent drop in consolidated profits on a sequential basis. However, data volumes grew 80.2 per cent on a yearly basis.  Total subscriber base at the end of December quarter stood at 35.09 crore across geographies, an increase of 12.1 per cent Y-O-Y.

Bharti Airtel’s third quarter revenue increased marginally by 1.05 per cent sequentially to Rs 24103 crore compared to Rs 23,852 crore achieved in last quarter of the same fiscal year. Revenues drawn were lower due to reduction in termination rates for India, and pricing pressure on both voice and data realisations. On the operational front EBITDA increased by 2.56 per cent to Rs 8,461.2 crore Q-O-Q (quarter on quarter) compared to Rs 8,250.2 crore in the September quarter. Sales and marketing expenses for the quarter in review increased by 3.1 per cent to Rs 243.02 crore from Rs 235.59 crore in the previous quarter of the same fiscal year as company spent on 4G related advertisement. Sequentially margins remained flat at 35 per cent. Profits after tax saw a decline of 26.65 per cent to Rs 1,116.9 crore, as against Rs 1,522.7 crore realized in the preceding quarter of Q3FY16. Profits saw a slump due to exceptional loss of Rs 340.5 crore against a gain of Rs 659.6 crore in the preceding quarter. Interest expenses as a percentage to revenue decreased by 200 basis points for the quarter. Net Debt for the quarter ending December stood at Rs 78,816 crore. Interest coverage ratio decreased slightly to 6.75 times, due to additional capex undertaken by the company.

On a yearly basis revenue increased by 3.77 per cent due to strong growth in data revenues and net customer additions. EBITDA grew by 8.68 per cent Y-O-Y. Margins too expanded by 100 basis points. PAT decreased by 22.25 per cent. However, finance cost rose significantly by 32.77 per cent Y-O-Y as company undertook capex and payment of spectrum fees.

Indian operations continued to show good momentum as revenues for Q3FY16 at Rs 17,694 crore grew by 11.6 per cent Y-O-Y, led by growth of 10.1 per cent in Mobile; 19.1 per cent in Airtel business i.e. (B2B); and 19.1 per cent in Digital TV. Mobile Data revenues at Rs 3,184 crore, registered a growth of 50.6 per cent Y-O-Y in India, led by increase in the data customer base by 29.9 per cent;and traffic by 73.3 per cent. Data ARPU (Average Revenue Per User) moved up by Rs 30 (Y-o-Y) to Rs 200 in Q3FY16, led by 35.5 per cent increase in data usage per customer. Mobile Data revenues now contribute to 23.1 per cent of Mobile India revenues compared to 16.2 per cent in the corresponding quarter last year. However, data realisation per MB decreased to 23.77 paisa vs 25.17 paisa in Q2 due to intense pricing pressure.

In constant currency terms, African operations adjusted for the impact of divestment of tower asset, grew by 4.6 per cent yearly. Data revenue saw a significant jump of 40.8 per cent Y-O-Y, due to an increase in data customer base of 37 per cent. EBITDA margins for Africa business saw an uptick of 1.3 per cent to 22.9 per cent. Africa Q3 net loss narrowed to USD 74 million vs USD 136 million a year ago.

Reacting to its below par Q3 results, Bharti Airtel scrip fell more than 3 per cent in trade to hit a fresh 52-week low of Rs 282.30 on NSE.