Bharti Airtel: Holding steady

But operating metrics for the India business were marginally below expectations in December quarter

Bharti Airtel’s results were a tad below expectations due to sub-par operating metrics in India mobile services. In a seasonally strong quarter, the company reported a 1.5 per cent increase in voice volumes and 0.5 per cent rise in average revenue per user (Arpu) on a sequential basis.

Although realisations or revenue per minute (RPM) for the India business swelled marginally to 37 paise and have been trending up over the past few quarters, minutes of usage (MoU) per customer down 0.5 per cent was the lowest in the last few quarters. So, even though RPMs are higher, there is a drop in minutes of usage.

The company says there is room for growth in RPM. Gopal Vittal, Bharti Airtel’s newly-appointed managing director for India and South Asia, said the firm was looking to optimise trade-off between volumes and call rates. Thus, while it continues to cut on discounted minutes, it is keeping an eye on prices lest minutes of usage or voice volumes moderate sharply. Idea, too, had disappointed on the volume growth front, with the telco’s management putting out a cautious note on the sector’s voice traffic growth as well as the potential for RPM uptick in the near-term. Consolidated revenue growth of 2.9 per cent (sequentially) at Rs 21,939 crore was driven by Bharti’s African business. India revenues were up 2.6 per cent driven by 2.6 per cent growth in customers and Arpu growth of 1.6 per cent. Consolidated Ebitda margins were up 30 basis points to 32.3 per cent, largely led by India business which saw margin growth of 120 bps to 36 per cent.

Africa business, however, surprised with a 4 per cent revenue growth driven by subscriber growth as well as higher Arpu with data aiding the increase in per user revenues. While data growth continues to be good, voice metrics (Arpu, MoU) is lower due to higher prices. The management has indicated pricing will be stable in Africa. The key concern in Africa has been the stagnant Ebidta, which has been at $280-300 million over the past few quarters. The management said investments in network and marketing and push on data and Airtel Money will pay off in the long run.

The near-term stock movement will be decided by the outcome of the spectrum auctions. Any aggressive bidding could prove to be an overhang. Thereafter, the improvement in its operational performance will be the key driver of the scrip.