The industry continues to see a gory picture and telecom companies in India continue to bleed quarter over quarter, the only difference is, they are bleeding more with the time. This became evident once again today as country’s largest telecom operator, Bharti Airtel, announced its first quarter results. The company’s net profit, on a consolidated basis, plunged 75% in Q1 of 2017 compared to the same period a year ago.
Bharti Airtel posted a net profit of Rs 367 crore for the quarter ended 30 June, 2017 compared to Rs 1462 crore for the same period in the previous fiscal year – a dip of 75%.
In terms of of consolidated revenue, the company clocked Rs 21,958 crore in Q1, 2017 versus Rs 25,547 crore in the same quarter of the previous financial year, showing a decrease of 14%.
“The pricing disruption in the Indian telecom market caused by the entry of a new operator continued with industry revenues declining over 15% Y-o-Y, creating further stress on sector profitability, cash flows and leverage,” said Gopal Vittal, MD and CEO of the company.
If we see country specific earnings, India is its biggest market, and this is where the company is bleeding the maximum – obviously for a ‘new operator’.
Bharti Airtel, for its India market, registered revenues of Rs 17,244 crore for the first quarter in 2017 compared to Rs 19,155 crore for the corresponding period a year ago, showing a dip of 10%.
“Consequently, our revenues declined 10% and EBITDA margin eroded by 5.3% Y-o-Y. We remain committed to providing the best value & experience to our customers and continue to invest towards it. As a result, our network witnessed data and voice traffic growth of 200% & 34% Y-o-Y respectively. We also added 5.2 Mn data customers in the last quarter – our highest ever,” added Vittal who on a day back got reappointed as the company’s CEO and MD for another 5 years.
The company’s consolidated net debt has decreased to Rs 87,840 crore from Rs 91,400 crore in the previous quarter. Net debt excluding the deferred payment liabilities to the DOT and finance lease obligations has decreased by Rs 4,633 crore sequentially in the quarter. Net debt to EBITDA ratio (LTM) for the quarter has remained flat at 2.67 times (vs 2.63 times in the previous quarter). Lower EBITDA along with rising spectrum interest and amortization costs has resulted in deterioration of Return on Capital Employed (ROCE) to 5.6% from 7.6% in the corresponding quarter last year.
While Bharti Airtel or its CEO has not named the new operator, its a child’s guess to know that the operator is Reliance Jio. Since Jio’s launch of 4G services, all the telcos in India are struggling to match with the Mukesh Ambani led firm’s pricing strategy and continue to lose money.
If the Q1 earnings appear disturbing, then the future quarters would be horrific as Jio, so far has targeted the 4G customers of Airtel or similar telcos, but in coming times, and with the launch of Jio Phone, the new operator is going to tap the 2G customers as well.