(Bloomberg) -- Bharti Airtel Ltd. reported a larger-than-expected quarterly profit as new users, rising data consumption and one-time gains helped India’s No. 2 wireless carrier beat back the continuing pain in its Africa business.
The firm, led by billionaire Sunil Bharti Mittal, saw a 158% jump in net income to 41.6 billion rupees ($496 million) for the quarter ended June 30 compared with the same period last year, according to a filing on Monday. That beat the average 36.61 billion-rupee profit estimated by analysts surveyed by Bloomberg. It also posted a one-time gain of 7.35 billion rupees.
The latest quarterly earnings are coming on a low base since the last year’s June quarter profit was dragged down by a massive forex loss following the devaluation of the Nigerian naira.
Revenue rose 2.9% to 385.1 billion rupees in the latest quarter, missing analyst estimates, as the surge in the company’s India business was offset partially by the drag in its Africa units. Total costs climbed 5.4% to 188 billion rupees, the filing said. India mobile average revenue per user, or ARPU, was 211 rupees.
“The industry saw much needed action on tariff repair, which is positive for industry’s financial health amid ongoing large network capex,” Managing Director Gopal Vittal said in a post-earnings statement. “We continue to believe that industry needs over 300 rupees ARPU at the minimum for financial stability.”
Key Insights
- The robust profit breaks the streak of the last four quarters when Africa business weighed down Bharti earnings and made the operator miss net income estimates on forex pain after the Nigerian naira was devalued in June 2023. Africa mobile services revenue fell 15% to 96.4 billion rupees in the June quarter but was more than made up by the 10% rise in India mobile service revenue.
- Elevated fuel prices and cost inflation, partly driven by forex movements, may also dent Ebitda margin slightly for Airtel Africa PLC, Bloomberg Intelligence Analyst John Davies wrote in a July 25 note.
- The solid earnings add to the tailwinds with brokerages already buoyant on the wireless carrier’s prospects after it raised mobile tariffs by as much as 20% from July 3 in tandem with bigger rival Reliance Jio Infocomm Ltd. and smaller Vodafone Idea Ltd.
- The long-awaited tariff hikes have become a coordinated move by the operators. With only three private sector firms left in the Indian telecom sector, no operator can raise prices unless others do too or they risk losing users to rivals.
- The latest tariff increase may lift ARPUs but the 300-rupee-mark may not be hit in the next two years, according to analyst consensus estimates.
- Bharti had a base of about 409 million subscribers in India as of June 30, a rise of 6.9% from last year. Investors are now watching for traction in 5G customer additions and any management commentary on monetization initiatives. Sector leader Reliance Jio, by comparison, has a larger user base of 489.7 million but a lower ARPU of 181.7 rupees.
- In June, the carrier bought 97 megahertz of telecom airwaves for $820 million, emerging the largest buyer of spectrum in an otherwise tepid India auction.
Market Reaction
- Bharti shares surged 17.5% in the June quarter, surpassing the 7.3% climb in S&P BSE Sensex. The stock has climbed 42% this year.
- Earnings were announced after the close of India trading hours.
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- Mobile data consumption up by 26% y/y, consumption per customer at 23.7 GB per month
- Total user base was about 567.56 million, including overseas subscribers
- Ebitda margin 51.8% vs. 52.7% y/y
- Net debt $24.3 billion, -0.8% q/q
- Capital expenditure 80.07 billion rupees, -24% y/y
--With assistance from Advait Palepu.
(Updates with details throughout.)
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