"We are bearish on Bharti Airtel. At this juncture, we would avoid this company owing to industry competitiveness and consolidation going on in the telecom sector," says Akash Jain, Vice-president, Equity Research at Ajcon Global Services.
We are bearish on Bharti Airtel. At this juncture, we would avoid this company owing to industry competitiveness and consolidation going on in the telecom sector. We believe, only strong players can survive in this industry and are confident that sunny days are over for this company and expect a consistent decline in profitability.
As expected, the company witnessed weak Q4FY18 result. At operating level, the EBITDA declined by 7 percent (down 12 percent year-on-year) at Rs 7,034 crore against Rs 7,587 crore QoQ, while the operating margin came in at 35.8 percent, down from 37.3 percent QoQ. The margin was reported at 36.4 percent in Q4 of FY17.
Its India revenues were reported 13 percent lower YoY at Rs 14,796 crore, while the India EBITDA is reported at Rs 5,237.2 crore, down 22 percent YoY. The operating margin is reported at 35.4 percent, down 390 basis points year-on-year.
The company posted a 77.8 percent fall in fourth-quarter profit on Tuesday, as pricing pressure in the telecoms sector after the entry of an upstart rival continued to hurt India's top mobile carrier.
Net profit recorded at Rs 82.9 crore in the quarter ended March 31, lower than Rs 373 crore a year earlier, the company said. Revenue fell 10.5 percent to Rs 19634 crore, hit by the telecom regulator's decision to cut international termination charges.
“The telecom industry continues to witness below cost, artificially suppressed pricing. Industry revenues were further adversely impacted this quarter due to the reduction in International termination rates. Our strategic investments in data capacities, innovative digital content through Airtel TV, customer friendly bundles and upgrade programs led to the highest ever mobile data customer additions of 15 Mn during the quarter. Usage parameters remained robust on a YoY basis, we saw data and voice traffic grow 584 percent and 55 percent respectively," Gopal Vittal, MD and CEO, India & South Asia, said in a statement.
Talking on outlook ahead, Vital said, “In line with our goal of building market leading 4G networks, with best in class speeds and capacity; while supporting the Digital India initiative, we have ended the financial year with our highest ever capital expenditure of Rs 24000 crore. We intend to continue the rollout momentum next year as well”
Key highlights of Q4FY18 result
a) Overall customer stands at 413.8 million across 16 countries, up 12.1 percent Y-o-Y excluding divested units.
b) Consolidated total revenues at Rs 19634 crore, down 5.4 percent Y-o-Y on an underlying basis.
c) India revenues down 7.5 percent Y-o-Y on an underlying basis; Africa revenues up 10.7 percent Y-o-Y.
d) Mobile data traffic grows to 1,616 Bn MBs in the quarter; growth of 505 percent Y-o-Y.
e) Africa EBITDA margin at 35.9 percent, up 10.3 percent Y-o-Y.
f) Consolidated EBITDA at Rs 70.34 crore.
g) Consolidated EBITDA margin at 35.8 percent, down 0.6 percent Y-o-Y.Disclaimer: The author is Vice-president, Equity Research at Ajcon Global Services. The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.