Bharti exploits free cash for first dividend

Bharti Airtel, the largest mobile operator in the country, posted slightly better than expected results showing a 21 per cent increase in net profit in the quarter ended March 31, 2009, at Rs 2239.3 crore.

The availability of cash flow — cash profits at Rs 14,006 crore grew 26 per cent — for the full financial year, after the passive infrastructure (towers) business was spun off into a separate company, has helped Bharti Airtel declare its maiden dividend of 20 per cent.

Also, to make Bharti shares more affordable for investors, the board also approved a 2:1 stock split, under which shares with a face value of Rs 10 will be converted into two shares of Rs 5 each.

The dividend will make the Indian promoters richer by Rs 172 crore. The promoters hold 45.30 per cent in Bharti Airtel through Bharti Telecom. Bharti Airtel’s share prices closed at Rs 749.30 on BSE, up 3.25 per cent from the previous close of Rs 725.70 a share.

Speaking at a press conference, Akhil Gupta, deputy group CEO and managing director of Bharti Enterprises, said, for the current financial year, the company would invest another $2.2 billion, excluding investments in 3G services (if Bharti gets a licence) or towers. For the latter, Bharti has earmarked $1 billion. Gupta also said that the new focus for the company would be to get a larger share of total mobile revenues rather than the subscriber market share — which has increased to over 32 per cent in this quarter, against 31.7 per cent in the December 2008 quarter.

The impressive growth in net profit is primarily on account of the relentless growth in subscriber base as well as usage time, which is key to pushing up revenues, providing economies of scale and improving profitability. Until March 31, Bharti saw its subscriber base rise 52 per cent to 93.92 million, against 61.98 million on March 31, 2008.

The company added a record 8.37 million subscribers in Q4, a 10 per cent growth over the previous quarter. Meanwhile, minutes of usage grew 5 per cent for the reporting quarter over the trailing quarter (ended December 2008) and 43 per cent over the financial year. “What we are seeing is 1.45 billion minutes of usage per day, which is giving us huge economies of scale in the mobile business,” said Sanjay Kapoor, deputy CEO, Bharti Airtel.

Consolidated revenues for the reporting quarter grew 26 per cent and cash profit for the same period was also up 25 per cent over the same period a year ago.
 

A STRONG CALL
	Quarter Ended			Year Ended
	Mar ’08	Mar ’09	Y-on-Y Growth	Mar ’08	Mar ’09	Y-on-Y Growth
Total revenues	7819.1	9824.5	26%	27,025.0	36,961.5	37%
Net income	1852.9	2239.3	21%	6,700.8	8,469.9	26%
Amount in Rs. crore

“Our focus on rural penetration and customer affordability has been instrumental in delivering this strong growth,” Bharti Chairman Sunil Mittal said in a statement, adding: “The India growth story continues and we expect a revival of the economy in the second half of this fiscal.”

Despite growing competition in telecom, Bharti has been able to keep its EBIDTA margins stable for the quarter at 40.7 per cent. Margins have improved primarily because of an increase in profit margins in long-distance services and enterprise services for corporations and international long-distance businesses.

However, competition on tariffs has pushed down average revenue per user in the quarter 6 per cent, while minutes of usage per user also fell 4 per cent (to 485 minutes) over the previous quarter.

The company has also suffered a foreign exchange loss of Rs 200 crore, owing to a weaker rupee. The net payout on foreign currency denominated loans fell 4 per cent against the dollar in the January to March period.

A Mumbai-based telecom analyst, however, said: “Bharti Airtel’s revenue growth of 2 per cent on a quarter-on-quarter basis is not encouraging, as it should have been 5-6 per cent. The company has been adding to its subscriber base at around 10 per cent of the total industry addition, and revenues should have been at least 60 to 70 per cent of the total subscriber additions. But, overall, the company has had decent results for the quarter.