Bharti Airtel’s quarterly results hit hard by Reliance Jio

Bharti Airtel, India’s largest telecom company, reported disappointing results for the third quarter due to the impact of Reliance Jio’s 4G offering.

The company reported net profit of 504 cr, which is about half of the consensus estimate on the Street.

The revenue was 23,364 cr, which was also below average estimate of 24,000 cr.

Operating margin was around 36%, largely in line with analyst estimates.

The consolidated revenues for the quarter was at Rs 23,336 crore, flat on a year on year basis when adjusted for Africa divested operating units, tower assets sale and merger of Bangladesh operations.

Consolidated revenue growth muted by 3.2% on account of Nigeria currency devaluation on Y-o-Y basis. Consolidated mobile data revenues for the quarter at Rs 4,049 crore, year on year flat on an underlying basis.

India revenues for Q3’17 at Rs 18,013 crore grew by 1.8% Y-o-Y. Slowdown in Mobile revenue growth primarily due to free voice and data offering by a new operator.

India other businesses have witnessed healthy growth e.g. 17.7% in Digital TV, 12.5% in Airtel Business and 10.8% in Homes on Y-o-Y basis.

Mobile Data revenues at Rs 3,087 crore de-grew by 3.0% Y-o-Y.

Mobile Broadband customers increased by 22.0% to 37.7 Mn from 30.9 Mn in the corresponding quarter last year.

Mobile Data revenues now contribute to 22.8% of Mobile India revenues vis-à-vis 23.1% in the corresponding quarter last year.

In constant currency (1st Mar’16) terms, Africa business performance has improved and underlying revenues grew by 6.0% Y-o-Y (5.4% reported constant currency Y-o-Y), the highest in last nine quarters. Data revenues at $ 153 million grew by 24.0% Y-o-Y, led by increase in Data customer base by 21.3% and traffic by 91.0%.

Umesh Mehta of Samco Securities said the numbers are disappointing, but he sees it as an exceptional quarter and it wouldn’t be justified to judge the company on the basis of these numbers.

Reliance Jio was giving free services for 4G subscribers during the quarter.

“I think the data de-growth was more than what analysts were anticipating,” said Bhupendra Tiwari, adding that it’s a miss, but not a big one.

“These factors were known.. for us, from these levels, it’s going to be buying opportunities,” said Naveen Kulkarni of Phillip Capital.

He added that the industry is going to consolidate and competitive intensity will come down.

Nitin Soni of Fitch Ratings, on the other hand, said he expects competitive intensity to increase rather than decrease. Fitch has a negative rating on the entire telecom sector, he added.