|More Zain & more pain|
|Friday, 06 May 2011 00:00|
A 31% fall in net earnings despite a 51% increase in quarterly turnover (March 2011 over March 2010) for India’s top telecom operator can’t augur too well for the telco results that are to follow. It is true Bharti Airtel’s numbers look worse because its African Zain operations are yet to yield results (the company’s presser hopefully describes the position as “successful African acquisition and integration of operations”). While consolidated net incomes fell to R1,401 crore in the March 2011 quarter from R2,044 crore in the March 2010 quarter, the fall was a lower 13% for the Indian operations—to R1,817 crore in March 2011 from R2,095 crore in March 2010. One of the reasons for the sharp decline in net incomes has been a sharp hike in access and interconnection charges, which rose 85% to touch R2,138 crore in March 2011, largely due to Africa (Indian access and interconnection charges rose just 13.5%) where the ratio of access and interconnection charges to total revenues is double that of the Indian operations. Indeed, Bharti explains most of the fall in net income for the full year as a hike in interest outgo (50%), forex losses (23%), rebranding (12%) and rise in Indian spectrum charges (9%).
Much of this, however, is missing the woods for the trees. If it is re-branding and interest costs this time around, the next time around it will be the one-time charge of R4,000 crore or so that Bharti Airtel will likely have to pay for the ‘extra’ spectrum it has beyond 6.2 MHz. Leave the financials aside, and come to the core of the telecom business, the talk-time of each customer and what she paid for it. On a year-on-year basis, the minutes of usage have fallen to 449 minutes in March 2011—this is a 4% fall over a year ago and flat over the last quarter. The average revenue per user has fallen to R194—a 12% fall over a year ago and a 2% fall over the last quarter. Monthly churn rate, or the proportion of customers leaving Bharti Airtel, is up to 7.6% in March 2011, from 5.7% a year ago—this is the reason why the telco is spending more on branding and selling expenses. The good news here is that non-voice revenues are up to 15% of mobile revenues, up from under 12% a year ago. Cutting costs is going to be difficult going forward—they’re down as a proportion of total revenue over the last quarter, but up over the year. So the hope has to lie in customers talking and paying more, in both India and Africa. Right now, that’s not happening.