|It's time for Africa|
|Thursday, 03 May 2012 00:00|
Bharti’s India ops stabilize a bit, Africa holds the key
Though Bharti Airtel’s fourth quarter net profits fell marginally on a sequential basis to Rs 1,006 crore in Q4 FY12 and nearly 30% on a y-o-y basis (profits were Rs 1,401 crore in March FY11), this was largely due to a sharp hike in depreciation/amortisation and financing costs of capital investments in the past, and hid the improvement in Bharti’s consumer metrics. While depreciation and amortisation costs fell marginally to Rs 3,468 crore in Q4 FY12 in comparison with the previous quarter (they were Rs 2,970 crore in March FY11), financing costs rose to Rs 1,230 crore in Q4 from Rs 880 crore in Q3 (they were Rs 725 crore in March FY11) – this means around 40% of the increased revenue in the last one year (92% in the March quarter) was taken up by an increase in costs related to capital investments by Bharti Airtel. Bharti Airtel’s stock, however, rose 2.5% by end of trade due to its EBITDA margins rising by over one percentage point, from 32.2% in December to 33.3% in March.
In contrast to the falling profits, average revenues per user rose (at Rs 189, ARPUs were up for the second straight quarter), as did minutes of use (at 431 minutes, MoU were up after several quarters of decline) and net consumer additions nearly doubled (at 5.6 million in the March quarter as compared to 2.9 million for the December quarter). But since there will always be some unusual expenditure in each quarter (the telco’s management blamed higher one-time costs on the Grand Prix and the Half Marathon in the December quarter), it’s important to note this was the fourth straight quarter of Bharti Airtel reporting lower profits. If you leave out the March FY11 quarter, this was the 10th straight quarter of a fall in net incomes. Indeed, in comparison with Idea which has much lower revenues and profitability (Bharti’s EBITDA margins of 33.3% contrast with Idea’s 22.3%), Bharti’s growth is positively sluggish. While Bharti Airtel’s net profits fell marginally on a sequential basis, Idea’s rose 20% -- on a y-o-y basis, while Bharti’s net profits fell 28%, Idea’s fell 22%.
While Bharti’s future is obviously conditional on whether or not the government accepts Trai’s recommendations that will jack up spectrum costs 11 times and extract a huge burden in terms of re-farming costs, the real game-changer in operational terms will be the telco’s Africa investments. Of Bharti’s cumulative investments of Rs 177,656 crore, around 39% is invested in buying and developing Zain’s Africa operations. Bharti Airtel expects Africa to deliver net profits in FY13 as compared to losses of Rs 1,329 crore in FY12. The reason for this is lower capex ($1 bn in FY13 as compared to $1.5 bn in FY12) and an increased customer base (this rose 20% y-o-y compared to 12% for India) and a slight improvement in ARPUs (these fell 5% over FY12). As a result of restructuring operations significantly, African operations generated a free cash flow for the second quarter running – at Rs 218 crore in March and Rs 93 crore in December 2011, these compared with minus Rs 1,425 crore in September and Rs 707 crore in the June quarter. To paraphrase Shakira, it’s time for Africa.
|Last Updated ( Wednesday, 02 May 2012 12:23 )|