Bharti's Light Continent PDF Print E-mail
Thursday, 08 November 2012 00:00
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African strategy paying off. Indian policy worrying

Bharti Airtel may have reported a drop in net profits for the sixth straight quarter, but India’s biggest telco delivered an in-line set of numbers—both on top-line and ebitda margins—for the three months to September 2012. A one-time R239 crore boost to the bottom line through a regulatory win was dented because of a one-time higher tax outgo (up nearly 60% over June), but a sharp fall in consolidated other operating expenses (from 22.6% of sales in June to 20.8% in September) which drove up the ebitda to 31.3% means the telco is working smart. The firm also paid out more by way of interest—up 80 basis points as a share of sales – but there’s little it can do to pare its debt right now. While the regulatory overhang—costs of ‘extra’ spectrum and refarming primarily—could disrupt the company’s growth plans, the good news is that Bharti seems to be on the right track in Africa, although it will be a while before the business makes meaningful money. That’s critical given that the business in that continent guzzles as much capital as it does back home—cumulative investments in Africa have crossed R70,000 crore compared to around R75,000 crore for the mobile business in India. Ebitda margins for the African operations rose 140 basis points sequentially to 27.2%, and the play on elasticity seems to be paying off—the 20% rise in September quarter minutes more than offset the 14% cut in tariffs. Bharti’s well on its way to replicate its minutes-factory model.

Back home, the pressure on the voice piece hasn’t quite eased—blended ARPUs fell 4% sequentially, subscriber numbers dropped off by 1.8 million while the revenue per minute was lower by 0.7%. But there seems to be much lower churn at 8.5%, as a result of which, customer acquisition costs seem to be settling down. Although customer acquisition costs were down 100 basis points sequentially to 10.6% of revenues in September, these could rise a bit given the new rules for customer verification. Good traction in the data services space saw a 9% sequential increase in the data ARPU at R43, the result of a 19% jump in the data usage per customer.

The 800-pound gorilla continues to be regulatory uncertainty. The R6,200 crore Bharti Airtel needs to shell out for its ‘extra’ spectrum will hit the PAT and the huge refarming tab will hit the ebitda as well, considering the large number of new telecom towers that will need to be set up and run on the less efficient 1800 MHz spectrum—the per share cost of this is reckoned at around R67. Considering how sensitive PAT is to capex, this means Bharti’s results will continue to have as many downs as ups. Things could change if the government reduces spectrum charges as it is getting a lot more by way of upfront licence fee charges now (http://goo.gl/WF9ab). But that’s way in the future, if at all.


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