Reliance Jio effect: Bharti Airtel posts Rs 9.4-bn loss in India operations

Bruised by an intense tariff war in the telecom sector, Bharti Airtel has reported a net loss of Rs 9.4 billion in its India operations during the quarter ended June. The Sunil Bharti Mittal-led firm, set to be dethroned by Vodafone Idea as the country’s largest telecom operator, had reported a net profit of Rs 8.3 billion for India in the same period last year.

However, helped by an exceptional gain of Rs 5.15 billion, the telco has reported a consolidated net profit of Rs 970 million for the June quarter. Without this gain, Airtel would have reported a net loss on a consolidated basis. The exceptional gain relates largely to creation of deferred tax asset in Nigeria. This was partially offset by network refarming programme and costs pertaining to the business combinations completed during the quarter. The consolidated net profit was down 73.5 per cent for the reported period to touch Rs 970 million against Rs 3.67 billion last year. 

Total revenues were also down by 8.6 per cent to Rs 200 billion for the June 2018 quarter, compared to Rs 219 billion last year. The net debt of rose to Rs 1.02 trillion at the end of June 30.  Incumbent operators have maintained that Reliance Jio’s “predatory pricing” was responsible for their margins crashing. 

The high-decibel tariff war is not likely to end anytime soon as Jio continues to disrupt the market. Mukesh Ambani-owned Jio has touched a customer base of 200 million within two years of starting its commercial operations, making the company the fastest to achieve the milestone.

“Industry pricing continues to remain untenable,” said Gopal Vittal, managing director and chief executive officer, India & South Asia, Airtel. On an optimistic note, he said the company’s mobile data traffic surged 355 per cent in India on a year-on-year basis, led by successful bundles, content partnerships and handset upgrade plans.

“Q1 FY19 has seen our highest quarterly capex spends of Rs 78.87 billion. Our investments have led to some opex headwinds in this quarter, but we remain focused on structural cost containment through our war on waste programme,” Vittal said. 

Low tariffs continue to take a toll and the company’s average revenue per user (ARPU) in India, a key metric to gauge the profitability of any telecom operator, decreased to Rs 105 a month. The ARPU for the March quarter was Rs 116. During the last quarter, Airtel completed the acquisition of Telenor because of which its customer base in the country rose to 344 million.   The consolidated Ebitda margin fell to 34 per cent in the last quarter compared with 35.6 per cent in the corresponding quarter last year. Consolidated Ebit also dropped by 43.8 per cent year-on-year to Rs 16.80 billion. 

The firm had made some accounting changes in reporting the numbers for the June quarter. “Effective April 1, 2018, the group has moved the reporting of its certain strategic investments in joint venture/associate to others segment from Africa/India, South Asia. Accordingly, the historical periods have been restated for the said segmental changes to make them comparable,” Airtel said.