The Right Calls

Bharti Airtel, India’s largest telecom service provider, is the only service company to make it to the Top 10 in the BW Real 500 ranking. But, even as the company has seen its income rise 12.75 per cent over FY12, profits have been on the slide. It recorded a net profit 46 per cent lower than the Rs 4,265 crore in FY12.

Despite a fall in profits, Bharti has maintained its leadership in the telecom business with a revenue marketshare of 30 per cent. Says Sunil Bharti Mittal, chairman, Bharti Airtel: “We have consolidated our leadership position in India despite the hyper-competitive environment and strengthened our Africa operations. The Africa business is already generating free cash and we are gaining share in all key markets. We are on track to becoming profitable in a couple of years.” Three years after it entered Africa, it has notched up revenues of $4.4 billion and an Ebitda (earnings before interest, taxes, depreciation, and amortisation) of $1.2 billion.

However, the company’s debt has risen 5.8 per cent from Rs 73,640 crore in FY12 to Rs 77,886 crore in FY13. The debt burden rose dramatically in 2010 after the $10.7 billion acquisition of the African operations of Kuwait-based Zain Telecom. Adding to the debt was the Rs 15,610 crore that Bharti Airtel paid for acquiring 3G and broadband wireless spectrum during 2010.

But debt is not a major cause of worry as the net debt to Ebitda ratio of the company has come down to 2.2. For most other telecom service providers, it is close to 3. In recent months, the company has started the process of retiring high-cost debt.

With the Supreme Court cancelling 122 telecom licences in early 2012, the intensity of competition in the sector has come down a few notches. Bharti has seen average revenues per user rise from Rs 189 in FY12 to Rs 193 in the last fiscal. Data usage per customer has increased 75 per cent from 107 MB to 187 MB over the period. Data revenues grew 66 per cent to Rs 2,236.20 crore, accounting for 5.4 per cent of the total wireless revenues. Says Mittal: “Data is clearly emerging as the next growth wave for the industry. Going ahead, we will see a massive surge in demand. Our ambition is to be at the forefront of this data revolution, just like we led the voice era.” With data tariffs falling, it is going to account for a larger chunk of its total revenues.

The next few months are quite important for the company and the telecom industry as the government decides on the base price for spectrum auctions and the Department of Telecommunications comes up with guidelines for mergers and acquisitions. That could well be the decider for Bharti even as it completes two decades in mobile connectivity.

(This story was published in BW | Businessworld Issue Dated 04-11-2013)