(Bloomberg) -- Bharti Airtel Ltd. reported a lower-than-expected quarterly profit, spurring India’s No. 2 wireless operator to make a case for higher tariffs as it rolls out 5G services across the country. Shares slipped on Tuesday.
The carrier, led by billionaire Sunil Mittal, posted a 90% jump in net income to 21.5 billion rupees ($260 million) for the quarter ended Sep. 30, according to a filing Monday, but missed the average profit of 25.44 billion rupees estimated in a Bloomberg survey.
Analysts were expecting the profit to more than double after baking in the impact of two rounds of tariff hikes -- August and November 2021 -- that were fully reflected in the latest quarter and not in the year-ago period. Higher forex losses dented its bottomline, brokerages wrote after the earnings.
Revenue rose 22% to 345.3 billion rupees while total costs advanced 17% to 169.3 billion rupees compared with the same period last year, the filing said. Bharti saw its revenue from South Asia mobile services drop 27% to 695 million rupees while capital expenditure inched up.
“We are now rolling out 5G and are confident that Airtel 5G Plus will deliver the best experience in India while being kinder to the environment,” Gopal Vittal, Bharti’s chief executive officer for India and South Asia, said in a post-earnings statement Monday. He added that Bharti management was “concerned” about the low return on capital employed due to the world’s lowest prices.
“Given the large investments required to drive digital adoption in India, we believe there is a need for tariff correction,” Vittal said in the statement.
KEY INSIGHTS
- The tepid earnings come weeks after Indian telecom carriers kicked off their speedier 5G networks that’s touted to revolutionize everything from gaming to manufacturing and health care. It may also decide who dominates the digital era in a country of billion-plus people that’s rapidly switching to smartphones.
- Bharti, which has not announced its 5G investment or tariffs, intends to offer these services in urban centers by 2023 and go pan India in 2024. While bigger rival and sector leader, Reliance Jio Infocomm Ltd. plans to invest $25 billion to roll out the world’s most affordable 5G services across India by December 2023.
- “The key thing to watch out from results would be commentary on pace of 5G rollout and any visibility on tariff hike,” Bank of America analysts Sachin Salgaonkar and Priyank Mahajan wrote in a report earlier this month.
- Analysts and investors are keen to see how Indian carriers are able to profit off 5G technology which has been available in China and South Korea for years and where operators have struggled to recoup their investment of billions of dollars. In South Korea, despite efforts to come up with killer apps, average revenue per person has only climbed slightly since the 4G era.
- Bharti, like its peers, has been boosted by two rounds of tariff hikes last year. Vittal said in February that another round of tariff hikes may happen this year and reiterated the need for it again on Monday.
- India’s telecom sector has shrunk to just three private sector players now -- Reliance Jio, Bharti and smallest of the trio, Vodafone Idea Ltd. -- after Mukesh Ambani’s upstart unleashed a bruising tariff war in 2016. The oligopolistic market structure has meant that tariff hikes by any other operator are usually followed on by others.
- Bharti, which received as much as $1 billion from Alphabet Inc. in January, spent 430.8 billion rupees in August in a government-conducted auction of airwaves to gear up for providing 5G services.
Market Reaction
- Bharti shares fell as much as 1.32% when markets opened in Mumbai on Tuesday. Earnings were announced Monday after the close of India trading hours.
- The stock jumped 16.8% in the September quarter, outpacing the 8.3% gains clocked by the S&P BSE Sensex. The carrier has surged 21% this year.
Get More
- India mobile average revenue per user was 190 rupees, +3.8% q/q
- Bharti’s total subscriber base, as of Sept. 30, was 501 million, with almost 364 million users in India where it added 3 million q/q
- Ebitda margin 51.3% vs. 49.5% y/y
- Net debt $25.61 billion, +21% q/q
- Other income 2.02 billion rupees, +84% y/y