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Airtel Profits Drop 31% On Accounting Change, Data ARPU Up To 202: Result Analysis


Airtel LogoIndia’s largest telecom service provider by subscriber base, Bharti Airtel reported a 30.83% drop in Net Profits from Rs. 2,113 crore to Rs. 1,462 crore. Much of this is due to an exceptional income that had to be included in last year’s income due to hedging costs being added.
If you ignore that, the profits before exceptional items was up 13.6% from the previous year. EBITDA growth has been at an impressive 16%, but do recall that in the telecom sector we have a lot of variables that go into interest, depreciation and amortization, so we should be careful of a higher weightage to this metric.

Result Analysis: Bharti Airtel

The company registered a timid growth in Net Income from operations, which grew about 8% from last year. All the segments reported a better number than the same period of the previous year totaling at Rs. 25,546 crore against Rs. 23,670 crore the last time.
Profits before tax and finance costs from Airtel Africa unit grew more than 100% from Rs. 76.1 crore to Rs. 197.5 crore. The Airtel Digital TV services witnessed similar growth from Rs. 41.5 crore to Rs. 121.9 crore – almost a three fold rise.

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  • Total Income from Operations increased by 7.99% to Rs. 25,572 crore.
  • Profit After tax fell by 30.82% to Rs. 1,462 crore.
  • EPS fell by a similar number to Rs. 3.66 per share.
  • PAT pre-exceptional items and tax grew 13.6%
  • Airtel’s P/E ratio is at 27.

Other notable points were:

  • Airtel is looking forward to use the 1800 Mhz band for the six circles it acquired from Videocon Telecommunications and another 2300 Mhz band for eight circles for which an agreement has been entered into with Aircel.
  • Adverse foreign exchange has impacted the company’s growth in Nigeria. The Nigerian Naira fell by 42% and they recognized a 946 cr. loss due to that move.
  • Further, they had sold the tower business in parts of Africa, which gave them a 1000 cr. exceptional income – and this sort of offset the loss in Nigeria.
  • There’s a cash flow hedge of about 542 cr that added significantly to the previous year’s profit (it had to be re-reported due to the move to Ind-AS)
  • Even net of all these exceptional items, the profit growth isn’t much, at just about 10-13%. 
  • Airtel has witnessed significant growth in the sign up by new customers for its 3G and 4G data services inspite of the competition brewing from India’s second richest man Mukesh Ambani’s Reliance Jio.
  • Airtel will need to bid for more spectrum later this year. Jio’s launch will probably crimp data growth in terms of revenues, so we should expect both costs to increase and revenues to take a hit.
  • Lowered borrowing rates will help the India business. Total debt for Airtel is now over 88,000 cr. but much of it is denominated in foreign currency.
  • For India: Average revenue per user (ARPU) of data increased 10% to Rs. 202 during the quarter. Overall Mobile ARPU fell to 196 from 198 rupees last year.

Bharti Airtel Q12017 Results Analysis
Disclosure: Analyst or Family do not hold the stock
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