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Bharti Airtel stumbles on high income tax expense, misses quarterly profit estimate

India’s second-largest telecom carrier, helmed by billionaire Sunil Mittal, posted a 2.8% fall in net income to Rs 830 crores for the quarter ended 31 December 2021.

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Mumbai: Bharti Airtel Ltd.’s quarterly profit missed analyst estimates as the Google-backed wireless phone operator recorded a higher income tax expense and a jump in the profit share of non-controlling interest.

India’s second-largest carrier, helmed by billionaire Sunil Mittal, posted a 2.8% fall in net income to 8.3 billion rupees ($111 million) for the quarter ended Dec. 31, it said in a filing Tuesday. That missed the average estimate of 10.21 billion rupees profit from a Bloomberg survey of brokerages. The non-controlling interest in Bharti was apportioned 8.2 billion rupees — a jump of 156% — which led to the year-on-year dip in profit.

Revenue rose 13% to 298.7 billion rupees, beating estimates, likely boosted by two rounds of tariff hikes in recent months. While total costs only increased by 4.8% compared to the same period last year, income tax expense surged 126% and finance costs rose 8%.

“The full impact of the revised mobile tariffs, however, will be visible” in the March quarter, Gopal Vittal, Bharti’s chief executive officer for India and South Asia, said in a statement. He added that the tariff hikes had “gone down well” with users, allowing Bharti to have “industry leading” per-user revenue in the latest quarter.

Key insights

  • Bharti is seeking to improve its earnings through tariff hikes in the local market, hoping to get more out of extremely price-conscious users who are used to ultra-cheap wireless services due to a years-long tariff war between operators.
    • Bharti raised prices in August last year and then again in November by at least 20% in a bid to bolster its finances.
  • The operator in November said that the average revenue per user, or ARPU, needs to rise to 200 rupees and ultimately to 300 rupees for a sustainable business model that allows for investments in network upgrades and spectrum acquisition.
  • Alphabet Inc., which owns the Google search engine, announced last month that it will invest as much as $1 billion in Bharti, of which $700 million will go toward buying 1.28% stake in the carrier and the rest in a corpus for investment in the areas of devices, network and cloud technologies.
  • The Google funding gives Bharti firepower to bolster its 5G plans as well as take on bigger rival, Reliance Jio Infocomm Ltd. The Indian government will be auctioning airwaves this year for 5G rollout, implying the need for operators to bolster their war chest.
    • Speedier 5G services will be the next frontier for competition as Bharti and Mukesh Ambani’s Reliance Jio try to capture a bigger slice of this new market.
  • It raised $2.8 billion through a rights issue in October as well as prepaid some airwave-related government dues in December, as part of overall efforts to boost its finances. Bharti’s board also approved on Tuesday raising up to 75 billion rupees through bonds.
    • Bharti’s balance sheet is robust and generating healthy free cash flows which enabled the prepayment of dues, Vittal said in the statement. “Our enterprise, homes and Africa business continue to deliver strongly, with steady increase in contribution to the overall mix.”

Market reaction

  • Bharti shares slipped 0.7% in the December quarter when the benchmark S&P BSE Sensex fell 1.5%. The stock has recovered since to rise 3.7% in 2022.
  • Earnings were announced after the close of India trading hours.

Get more

  • India mobile ARPU was at 163 rupees
  • Bharti’s total subscriber base, as of Dec. 31, was 485 million, with almost 356 million users in India
  • Ebitda margin 49.9% vs. 45.9% y/y
  • Net debt at 1.59 trillion rupees
  • Capital expenditure slipped 11% y/y to 61 billion rupees
  • Other income 1.97 billion rupees vs. 492 million rupees y/y -Bloomberg

Also read: Google to pour Rs 7,500 crore in Bharti Airtel to boost India push, will buy 1.28% stake


 

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