AGR provisioning: Bharti Airtel posts pre-tax loss of Rs 31,334 crore in Q2

Operating performance improved sharply but net loss at Rs 23,045 is the third highest by an Indian corporate in a quarter

Bharti Airtel on Thursday reported a pre-tax loss of Rs 31,334 crore for the September quarter (Q2), after the company provided for outstanding payments to the central government on account of the Supreme Court judgment on adjusted gross revenues (AGR). The pre-tax loss in the year-ago quarter stood at Rs 1,998 crore.

Given the jump in deferred taxes (tax reversal), the reported loss at the net level came in at Rs 23,045 crore in Q2, as against a profit of Rs 118.8 crore in the September quarter last year. Before provisioning for the exceptional item, the company’s net loss stood at Rs 1,123 crore for the recently concluded quarter.

“The company is hopeful of relief and in the absence of the same, has provided for an additional amount aggregating Rs 28,450 crore as a charge for the quarter,” Airtel said. 

Liabilities and provisions as of September 30 aggregated to Rs 34,260 crore (comprising principal of Rs 8,747 crore, interest of Rs 15,446 crore, penalty of  Rs 3,760 crore, and interest on penalty of Rs 6,307 crore. On October 24, the Supreme Court delivered a judgment in relation to a long-outstanding industry-wide case, upholding the view considered by the Department of Telecom (DoT) in respect of the definition of AGR. The SC has allowed three months to the affected parties to pay amounts due to the DoT.

Gopal Vittal, managing director and chief executive officer (India & South Asia) of Airtel, said: “On the AGR verdict, we continue to engage with the government and are evaluating various options available to us. We are hopeful that the government will take a considerate view in this matter given the fragile state of the industry.”

On the taxes front, the government has now allowed domestic companies an option to pay income tax at an effective tax rate (ETR) of 25.17 per cent instead of the earlier 34.94 per cent. After the government reduced tax for companies, the effective MAT (minimum alternate tax) rate for the current quarter was 21 per cent, which in the previous quarter was at 25 per cent. This has led to the tax reversal as reported in Airtel’s September quarter results.

Prior to exceptional item such as AGR and taxes, the loss came in at Rs 623 crore in the July-September quarter, much lower than the year ago loss of Rs 1,854 crore.  This reduced loss is consequent to the improvement in the its operational performance. 

The company’s India revenues increased by 3 per cent, on year-on-year basis to Rs 15,361 crore. Average revenue per user (ARPU) jumped 28 per cent at Rs 128 for the September quarter, driven mainly by the increased data customer base. ARPU is the total revenue of the operator divided by the number of users. ARPU stood at Rs 100 in the same period a year ago. However, on a sequential basis, the ARPU remained flat, as against Rs 129 in June quarter.

Led by lower costs especially network operating expenses, selling & marketing as well as other expenses, the company’s operating profit was up 41 per cent to Rs 8,928 crore, which was better than the Bloomberg consensus estimate of Rs 8,388 crore. Consolidated operating profit margins too saw a jump from 31.5 per cent in year ago quarter to 42.3 per cent in Q2. 

The consolidated revenue of Airtel was up by 4.7 per cent at Rs 21,199 crore in the just concluded quarter. Airtel’s data customer base grew 27.2 per cent, on-year 124.24 million in the reporting period as against 9.77 million in the year-ago period. Data usage per customer rose 42.2 per cent YoY to 13,116 megabytes.  The company’s revenue from India mobile services was Rs 10,812 crore in Q2, up 7.4 per cent from Rs 10,070 crore in the same period, last financial year. The company’s mobile subscriber base grew to 279.43 million in the September quarter from 276.81 million in the preceding quarter.