India's biggest wireless company Bharti Airtel on Wednesday reported disappointing profits for the first quarter. Bharti's Q1 profit after tax (PAT) fell 13 per cent to Rs. 1,215 crore from Rs. 1,400.7 crore in the last quarter (QoQ).
The net profits were way lower than expectations of Rs. 1,480 crore. The decline was on account of higher interest costs on loans taken for Africa business and 3G rollout. Net profit stood at Rs. 1,681.6 crore in the same period last fiscal (YoY). Also Read (Operating profits in Africa to rise in coming quarters: Airtel)
Also, the effective tax rate for Q1 increased to 29.9 per cent, mainly due to a reduction in tax holiday benefits in India, which hurt net profit.
Income before taxes dropped to Rs. 1,719 crore in Q1, FY'12 from Rs. 2,072 crore in Q1, FY'11, mainly on account of higher interest outgo (Rs. 344 crore on the Africa acquisition) and 3G investments in India and 3G license fee amortisation (Rs. 159 crore).
Last year, Bharti Airtel acquired Zain Telecom's Africa operations for $10.7 billion to become the world's fifth largest mobile operator.
India and South Asia revenues were up by 11.9 per cent year-on-year at Rs. 12,631 crore, while Africa revenues stood at $979 million (up by 6 per cent vis-a-vis Q4, FY'11).
However, Bharti posted strong growth in sales. Total revenues rose 4.2 per cent to Rs. 16,974.9 crore in Q1 against Rs. 16,293 crore in the last quarter (QoQ). Analysts expected revenues at Rs. 16,844.6 crore. The EBITDA margins rose marginally to 33.6 per cent against 33.4 per cent in the last quarter. Total sales were, however, up by over 38 per cent against Rs. 12,285.6 crore in Q1, FY'11 (YoY).
Bharti's average revenue per user fell to Rs. 190 from Rs. 194 in the last quarter. The average minutes of usage in the first quarter also declined 1 per cent to 445 against 449 in the last quarter.
Commenting on the earnings, Bhavesh Gandhi, Telecom Analyst at IIFL said, "Revenues are in- line but profits are much below estimates... How Africa revenues scale up and the margin upside there will determine profitability in the next 2-3 quarters."
Reacting to the results, Bharti stocks fell 4 per cent, but recovered to close with a little over 1 per cent loss. "At CMP post results we recommend a hold on the stock with not more than 8-10 per cent upside from these levels," Mr Gandhi said.
Mr Sunil Bharti Mittal, Chairman & Managing Director, Bharti Airtel Limited, said, "Bharti Airtel has started this fiscal year on a stable note. Revenue growth has been steady across all geographies, with Africa recording a healthy sequential growth of approximately 6%, and annual growth of 21%. In India, the Company’s efforts in the area of cost efficiencies have helped arrest the margin decline. The new customer facing organization in India will see more agile and responsive teams in action. This will also give a fillip to growth in value added services, broadband, digital TV and Airtel money. Overall, 2011-12 promises to be an exciting year of transformation."
The company's overall customer base stood at 230.8 million across 19 countries.
The net profits were way lower than expectations of Rs. 1,480 crore. The decline was on account of higher interest costs on loans taken for Africa business and 3G rollout. Net profit stood at Rs. 1,681.6 crore in the same period last fiscal (YoY). Also Read (Operating profits in Africa to rise in coming quarters: Airtel)
Also, the effective tax rate for Q1 increased to 29.9 per cent, mainly due to a reduction in tax holiday benefits in India, which hurt net profit.
Income before taxes dropped to Rs. 1,719 crore in Q1, FY'12 from Rs. 2,072 crore in Q1, FY'11, mainly on account of higher interest outgo (Rs. 344 crore on the Africa acquisition) and 3G investments in India and 3G license fee amortisation (Rs. 159 crore).
Last year, Bharti Airtel acquired Zain Telecom's Africa operations for $10.7 billion to become the world's fifth largest mobile operator.
India and South Asia revenues were up by 11.9 per cent year-on-year at Rs. 12,631 crore, while Africa revenues stood at $979 million (up by 6 per cent vis-a-vis Q4, FY'11).
However, Bharti posted strong growth in sales. Total revenues rose 4.2 per cent to Rs. 16,974.9 crore in Q1 against Rs. 16,293 crore in the last quarter (QoQ). Analysts expected revenues at Rs. 16,844.6 crore. The EBITDA margins rose marginally to 33.6 per cent against 33.4 per cent in the last quarter. Total sales were, however, up by over 38 per cent against Rs. 12,285.6 crore in Q1, FY'11 (YoY).
Bharti's average revenue per user fell to Rs. 190 from Rs. 194 in the last quarter. The average minutes of usage in the first quarter also declined 1 per cent to 445 against 449 in the last quarter.
Commenting on the earnings, Bhavesh Gandhi, Telecom Analyst at IIFL said, "Revenues are in- line but profits are much below estimates... How Africa revenues scale up and the margin upside there will determine profitability in the next 2-3 quarters."
Reacting to the results, Bharti stocks fell 4 per cent, but recovered to close with a little over 1 per cent loss. "At CMP post results we recommend a hold on the stock with not more than 8-10 per cent upside from these levels," Mr Gandhi said.
Mr Sunil Bharti Mittal, Chairman & Managing Director, Bharti Airtel Limited, said, "Bharti Airtel has started this fiscal year on a stable note. Revenue growth has been steady across all geographies, with Africa recording a healthy sequential growth of approximately 6%, and annual growth of 21%. In India, the Company’s efforts in the area of cost efficiencies have helped arrest the margin decline. The new customer facing organization in India will see more agile and responsive teams in action. This will also give a fillip to growth in value added services, broadband, digital TV and Airtel money. Overall, 2011-12 promises to be an exciting year of transformation."
The company's overall customer base stood at 230.8 million across 19 countries.
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