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Thursday, 31 October 2013 00:00
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Bharti picks up, regulatory environment looks up

Bharti Airtel’s numbers for the September quarter—revenues and ebitda were up 5% and 4% qoq, respectively—suggest the telco is coping reasonably well with the slowdown as also the competition. The good news is that the churn, at 3.2% for the quarter, is coming off and, given how the telco has been gradually weaning customers off freebies, the realisable tariff is gradually going up for several quarters now. Which is why despite the negative seasonal effect, Bharti’s average revenue per minute (ARPM) has seen a slight increase. Indeed, Bharti seems to have weathered the seasonal impact better than Idea Cellular—while Idea saw a fall in minutes of usage (MoU) of 6% sequentially, Bharti’s MoU fall was half of that. That helped push up Bharti’s margins by 29 basis points qoq, while Idea’s contracted. In the home market, therefore, Bharti seems to be doing better—the India wireless piece had seen a strong ebitda growth of 12% in the June quarter driven by an uptick in the revenue per minute. What is also helping the company—as others like Vodafone and Idea—regain top line growth is the consolidation in the market. Moreover, the data business is picking up—revenues in Q2FY14 grew 21% qoq.

However, the key challenge for Bharti is to ensure the Africa business—which did reasonably well in Q2FY14 and reported a rise in traffic of 7.2% qoq—is able to sustain the momentum. More so because the business has been a big disappointment for a long time—in the June quarter, for instance, constant currency revenues had dropped 5% qoq thanks to the impact of inter-connect rate cuts in a few markets there, as also some political unrest in parts of Nigeria. But one swallow does not a summer make. The Africa turnaround has already taken far longer than originally anticipated; while Bharti has reworked its initial strategy of replicating its minute factory approach which didn’t work because of lower elasticities and unfriendly regulations on interconnect rates, the business isn’t quite shaping up as it should have—the voice ARPM during the quarter was largely flat. However, coupled with the business environment in India looking up—a new M&A policy will be out soon, as will the government’s view on Trai lowering the base price for the January auctions by 60%—and telcos likely to get new spectrum soon, the sector’s outlook looks better than in a long time.

Last Updated ( Thursday, 31 October 2013 00:01 )

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