Bharti Airtel nets a record number of Subscribers

Bharti Airtel, India’s largest wireless operator, beat Street forecasts on Thursday with a 34% jump in net profit to Rs 2,025 crore for the quarter ended June 30, 2008, compared to Rs 1,512 crore in the corresponding period last year. Robust subscriber growth, coupled with expansion of network to remote areas and lower tariffs, saw the company’s revenues surge 44% to Rs 8,483 crore. With India’s mobile boom continuing to witness healthy growth, Bharti Airtel added a record 7.5 million subscribers during the period — the highest by any telco in any quarter. This resulted in the company improving its market share in the country’s fiercely competitive wireless subscriber space to 24.2% as on June 30, 2008, compared with 23.1% in the year-ago period. Bharti manages to limit fall in per-user revenue to 2% Bharti also accounted for close to 30% of the country’s wireless subscriber additions during this period. EBITDA climbed 44% to Rs 3,522 crore. The first quarter net profit also factors in a forex loss of Rs 148 crore. But there are some blips too. Bharti’s net income margin dropped to 23.9% in the June quarter when compared to 25.6% in the same period last year, the result of the telco’s move to cut tariffs. The margins for the mobile business declined to 30.7% from 35.4% in March quarter. The average revenue per user (ARPU), too, has declined 2% (Q-o-Q) to Rs 350 as against Rs 357 in the January-March 2008 period. On a year-on-year basis, the company’s ARPUs declined 10%. After soaring to an intra-day high of Rs 861, the Bharti scrip closed at Rs 797.95 on BSE, down 2.21% from Wednesday’s close. The Bharti management remained upbeat about the company’s Q1 performance and was confident that the company could sustain the growth momentum. “The slowdown in some sectors has had no impact on us — telecom is immune to this. We only see the situation improving as we expand our operations. We are close to rolling out our DTH operations. The launch of our services (GSM) in Sri Lanka will also happen before the year-end,” the company’s joint MD Akhil Gupta said. He added that the company was maintaining its guidance for stand-alone capex of $2.5 billion for the full year to March 2009. On a sequential basis, too, growth was impressive, even as the company arrested the slide in its EBITA margins. Net Q1 profit was up 9.3% compared with Q4 of FY08, while revenues grew 8.5%. The market was expecting lower net profit and total sales, especially after the operator had lowered STD tariffs by over 40% during the quarter. “It has been a particularly strong quarter with monthly customer adds crossing the 2.5-million mark. This clearly demonstrates that the Indian telecom growth story is intact and the rural markets are witnessing strong uptake,” the company’s chairman and managing director Sunil Mittal said in a statement. According to Mr Gupta, the mobile margins have declined because ‘profitability on this segment had been bifurcated into different segments’. “The tower business — both Infratel and Indus — are now separate entities. So, the margins are divided between segments such as passive infrastructure business and national long distance amongst others. Besides, companies can convert capex to opex and viceversa depending on the business model and so mobile margins can no longer be compared across quarters. If you look at an overall basis, our EBITDA margins have remained stable,” he added. The company’s president and CEO Manoj Kohli said the telco was not focused on ARPUs alone. Mr Kohli said ARPU decline was offset by the increase in the minutes of usage, which has gone up by 5% to 534 minutes for the quarter ended June 2008 against 507 minutes in the March quarter. “The lowering of tariffs has resulted in increased usage. This implies that even the new customers, most of whom are from rural India, are talking more. The rural traffic, too, has picked up well and is increasing. We had extended our networks to 25 new census towns during the previous quarter and we now cover all the 5,060 census towns in the country. We also added 22,000 new villages to our network. Bharti Airtel now reaches 3.65 lakh villages and covers 76% of the Indian population,” Mr Kohli said. Industry analysts, too, were upbeat about Bharti’s performance. “We were expecting a decline of 5% in the ARPU, whereas the fall of 2% was much lower than expectations. Even the minutes of usage are one of the best in recent quarters. We expect the company to report a growth of 30% and 35% in top-line and bottom-line for 2008-09,” said Anurag Purohit of Religare Securities. With regard to the decline in the per minute revenues, Bharti executives said this was on account of the company passing on to its customers the access deficit charges (ADC) levy cut from April 1.

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