Reliance Jio effect: Bharti Airtel's net profit down 76% to Rs 343 crore

Bharti Airtel
Thanks to hyper competition unleashed by Reliance Jio, the country's top operator Bharti Airtel suffered a consolidated net profit drop of 76.5 per cent to Rs 343 crore from Rs 1,462 crore last year.

The consolidated revenues of the company spanning 17 countries — India, Sri Lanka and 15 in Africa — declined 11.7 per cent to Rs 21,777 crore for the reported period as compared to Rs 24,652 crore last year. 

For India, Bharti Airtel showed a drop of over 90 per cent in its net profit to Rs 121.1 crore (before exceptional items) for the quarter ended September 30, over Rs 2,095.9 crore in the same period last year.

Due to financial stress and declining profitability, India net profit has been lagging that of Africa for two consecutive quarters. The net profit for Africa (before exceptional items) for the September quarter stood at Rs 306.7 crore. In the preceding quarter that ended June 2017, Africa net profit was 335.6 crore whereas that of India was Rs 208.9 crore. A year ago, Airtel had reported a September quarter net loss of Rs 622.7 crore for its Africa operations.

Ever since Reliance Jio entered the market in September last year, Airtel as well as others have seen their profits slide. 

The Sunil Bharti Mittal-led company Airtel feels that the market continues to see value erosion and financial stress led by competitive pressure, likely to increase further as the regulator has reduced interconnect charges from 14 paise to 6 paise.

According to analysts, interconnect charges currently account for 12 per cent of Airtel's operating profit. 

India revenues for September quarter at Rs 16,728 crore declined 13 per cent year-on-year, caused primarily by mobile revenue drop of 16.8 per cent. However, mobile data traffic grew fourfold to 784 billion MB in the quarter as compared to 178 billion MB in the corresponding quarter last year. Mobile broadband customers jumped 33.6 per cent to 55.2 million from 41.3 million in the corresponding quarter last year.

The average revenue per user for India, a key metric to check profitability, was also down 23 per cent to Rs 145 as compared to Rs 188 last year. 

The monthly churn or attrition rate for customers stood at 3.9 per cent. 

"The financial stress in the industry continues due to double-digit revenue decline and will be further accentuated by the reduction in interconnect rates in the next quarter. This will eventually force operator consolidation and exits as we have witnessed in the recent past," Gopal Vittal, managing director and chief executive, India and South Asia, Airtel, said.

Africa revenues for the quarter stood at Rs 5,203 crore as against Rs 5,272.6 crore in the corresponding quarter last year. 

Consolidated Ebitda (earnings before interest, taxes, depreciation and amortisation) at Rs 8,004 crore declined 15.4 per cent year-over-year and Ebitda margin dropped 1.6 per cent to 36.8 per cent over the same period. Consolidated Ebit dropped 27 per cent to Rs 3,290 crore over the same period. 

Net interest costs of the company have risen to Rs 1,905 crore from Rs 1,603 crore in the corresponding quarter last year, largely due to lower investment income. Foreign exchange and derivative loss for the quarter was Rs 422 crore compared to loss of Rs 302 crore in the corresponding quarter last year. 

The company's consolidated net debt increased to Rs 91,480 crore from Rs 87,840 crore in the same quarter last year.

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