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Jio woes: Airtel Q1 net profit tanks 75% to Rs 367 cr

The net profit for the first quarter of 2017-18, at Rs 367 crore, was 74.9 % lower than the year-ago period, and the company blamed the disruptive pricing of the new entrant for continued “turbulence” and stress in the market.

business Updated: Jul 26, 2017 10:35 IST
Bharti Airtel,Reliance Jio,Sunil Mittal
Men make phone calls as they sit on a railing with Bharti Airtel billboards installed on it, along a sidewalk in Kolkata. With disruption caused by Mukesh Ambani’s Jio, Bharti Airtel, India’s largest telecom company, today reported its smallest profit in 18 quarters. (REUTERS)

Bharti Airtel, India’s largest telecom company, today reported its smallest profit in 18 quarters as the price war triggered by newcomer Reliance Jio led to a massive 75 % fall in its April-June earnings.

The net profit for the first quarter of 2017-18, at Rs 367 crore, was 74.9 % lower than the year-ago period, and the company blamed the disruptive pricing of the new entrant for continued “turbulence” and stress in the market.

The net income for the Sunil Mittal company stood at Rs 1,462 crore in the first quarter of 2016-17.

The June quarter net profit is the lowest since December 2012 for Bharti Airtel which along with other established telecom firms has been engaged in a fierce tariff war with Mukesh Ambani controlled Reliance Jio.

“The pricing disruption in the Indian telecom market caused by the entry of a new operator continued with industry revenues declining over 15 % year-on-year, creating further stress on sector profitability, cash flows and leverage,” Gopal Vittal, MD and CEO, India and South Asia, Bharti Airtel said in a statement.

Vittal stopped short of directly naming the new entrant.

The company’s total revenue fell by 14 % to Rs 21,958 crore during the quarter under review, from Rs 25,546 crore in the corresponding period of last year.

Bharti Airtel has been able to control to an extent the drastic sequential slide in its net income that had set in after the launch of Reliance Jio’s 4G services in September 2016.

The quarter-on-quarter fall in net income stood at 1.7 % when compared to Rs 373.4 crore in the March quarter.

On a sequential basis, the net profit had slumped as much as 65.5 % between the second and the third quarter of last financial year ended March 31.

The earnings numbers of the first quarter of this fiscal came in after the market hours.

Incidentally, April-June was the first quarter of charged 4G services by rival Reliance Jio. The newcomer has recently raised the competitive intensity in the sector with the launch of its bundled “zero cost” Jio phone.

Bharti Airtel’s consolidated net debt has decreased to Rs 87,840 crore from Rs 91,400 crore in the previous quarter.

The operating free cash flow of Bharti Airtel also declined by 73.5 % to Rs 1,237 crore in the reported quarter from Rs 4,666 crore in the same quarter of 2016-17.

“Lower EBITDA along with rising spectrum interest and amortisation costs has resulted in deterioration of Return on Capital Employed (ROCE) to 5.6 % from 7.6 % in the corresponding quarter last year,” the statement said.

Net interest costs of Rs 1,789 crore have risen from Rs 1,631 crore in the corresponding quarter last year – largely due to increased spectrum related interest costs. The forex and derivative loss for June quarter was at Rs 39 crore compared to loss of Rs 309 crore in the same period last year.

Airtel’s India revenues declined by 10 % in the June quarter to Rs 17,244 crore, hurt by the performance of the mobile services segment.

The total customer base of Airtel in India increased by 9.7 % to over 28 crore but its average revenue per user declined by 21.1 % to Rs 154 from Rs 196 on YoY basis.

Average Data usage on Airtel India network grew about three fold to 2611 megabyte (about 2.5 GB) per customer from 904 MB on YoY basis. But the average revenue from the data services per customer declined by 22.7 % during the period.

“Mobile market remains turbulent in the current quarter as well, due to disruptive pricing by a new operator,” the statement said.

Raghunath Mandava, MD and CEO, Africa, said, “Airtel Africa organic revenue growth for the quarter was 1.5 % year on year...New KYC norms impacted customer additions and consequently revenue growth in the quarter”.

Airtel said Qatar Foundation for Education, Science and Community Development, CEO, Rashed Fahad Al-Noaimi has joined as an additional director on the company’s board.

Ahead of the results, the company’s shares ended 1.76 % higher to close at Rs 427.6 on BSE.

First Published: Jul 26, 2017 10:34 IST