Despite drop in bottomline performance the stock of Bharti Airtel received a thumbs-up mainly on account of improved user parameters in the domestic business operations and decent performance by the African operations on the profitability front.
India’s largest telecom services provider, both in terms of subscriber base and revenues has reported its ninth consecutive decline in quarterly net profits, which stood at Rs 1005.9 crore in March quarter of 2012 as against Rs 1400.7 crore in the same quarter of the previous year, registering a fall of 28 per cent.
Despite this recent drop in bottomline performance owing to higher costs on account of 3G license fee amortization (Rs 106 crore), 3G interest cost (Rs 84 crore), forex fluctuation losses (Rs 132 crore) and tax provisions (Rs 198 crore), the stock was up by nearly 2 per cent yesterday on the bourses. This thumbs-up by the streets was mainly on account of improved user parameters in the domestic business operations and decent performance by the African operations on the profitability front.
On the operation parameter front, the subscriber base of Bharti in Jan-March quarter of 2012 increased by 3 per cent (QoQ) to 181.28 million subscribers. The average Minutes of Usage (MOU) rose also rose in line with the subscriber additions as it stood at 431 minutes this quarter as against 419 in Dec quarter of 2011. While average revenue per user (ARPU) improved by 1 per cent to Rs 189 per user, it was disappointing to see the average rate per minute (RPM) drop by 2 per cent to Rs 0.438 paisa from Rs 0.446 paisa in the previous quarter.
This sudden drop in RPM after reporting a steady in rise in the previous two quarter of FY12 is a serious concern for Bharti Airtel as it shows that a mere growth subscriber addition would not help in boosting the topline performance. Moreover, the woes on the regulatory front continue to threaten the company and mar the overall telecom sector’s future growth prospects.
The recent development regarding the recommendations of the Telecom Regulatory Authority of India (TRAI) with respect to the reallocation of 2G spectrum licenses would not only increase the cost of operations for a telecom incumbent like Bharti Airtel, but would also further stretch its balance sheet as the company may be forced to borrow funds to meet the spectrum fee requirements. However, given Bharti Airtel’s leadership position, well diversified geographical revenue distribution wherein it derives nearly 29 per cent of its revenues from the African businesses, Bharti Airtel looks better placed to withstand the impact or regulatory pressures.