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    • Bharti Profit Disappoints Due to One-Time Forex Fees – BNN Bloomberg
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    Bharti Profit Disappoints Due to One-Time Forex Fees – BNN Bloomberg

    Umito Posted on

    (Bloomberg) – Bharti Airtel Ltd. announced a lower-than-expected quarterly profit as gains from tariff increases failed to offset the drag caused by one-off charges due to foreign exchange losses.

    India’s second-largest mobile operator, led by billionaire Sunil Mittal, nearly tripled its net profit to 35.9 billion rupees ($427 million) for the quarter ended September 30 compared with the same period of the last year, according to a document filed Monday. However, it remains below the average profit of 43.98 billion rupees estimated by analysts surveyed by Bloomberg.

    The operator incurred a one-time expense of Rs 8.54 billion for the quarter due to net foreign exchange loss due to currency devaluation of the group’s units. Revenue rose 12% to 414.73 billion rupees, slightly beating estimates. Total costs also jumped 12% to 196.3 billion rupees, the filing said.

    Average revenue per user, or ARPU, for India operations was Rs 233, up 10% from the previous quarter. We are far from the 300 rupees mark that Bharti has been talking about for a while as the minimum necessary for the financial stability of telecom operators.

    The latest quarterly results are expected to be on a weak basis. Last year’s September quarter profit was also affected by a one-off expense due to an adverse court ruling in India and foreign exchange losses due to the devaluation of the Nigerian naira.

    “The progress of the pricing repair is in line with our expectations for increased ARPU and SIM consolidation. We reported an industry-leading ARPU,” Chief Executive Gopal Vittal said in the filing, without commenting specifically on foreign exchange fees this quarter.

    Vittal has been appointed vice-chairman of Bharti while Shashwat Sharma has been appointed managing director and chief executive officer, according to a company filing. Both will assume their new roles from January 1, 2026.

    Key information

    • This mediocre performance highlights the persistence of exchange rate risks for the mobile operator, even though it benefited from higher rates that came into force at the beginning of July.
      • Tariffs for users have been increased in tandem with industry leader Reliance Jio Infocomm Ltd. and its smaller rival, Vodafone Idea Ltd. in the oligopolistic Indian market which has only three private sector wireless operators.
    • While ARPU increased, Bharti’s user base in India decreased by 0.7% to 406.5 million users compared to the previous quarter. Reliance Jio reported a user base of 478.8 million and ARPU of Rs 195.1 for the September quarter.
    • Mobile revenues in Africa fell 1.2% from last year to 101.6 billion rupees, showing continued challenges. Bharti’s profits were hit several times after the devaluation of the naira in June 2023, as Nigeria sought to remove currency controls that were distorting its economy.
      • Airtel Africa’s organic revenue growth could reach 15% in fiscal 2025 and beyond, following a 21% gain in 2024, John Davies, an analyst at Bloomberg Intelligence, wrote in a note from October 25. A floating Nigerian naira will likely provide long-term support, reduce uncertainty and facilitate cross-border transactions, Davies wrote.
    • A battle of billionaires looms as Elon Musk controls Starlink’s plan to deploy satellite broadband internet in India. Reliance Jio and Bharti are wary of Starlink getting cheap spectrum and undermining their terrestrial wireless phone networks.
    • Brokerage HSBC raised its price target and upgraded Bharti shares this month, citing home broadband as the “next big growth opportunity for telcos” with a potential market of 7 billion dollars.
    • Bharti said on September 30 that it had paid $1 billion upfront to India’s telecom department for spectrum acquired in 2016, in a bid to clear high-cost deferred liabilities. Indus Towers Ltd. became a unit of Bharti during the quarter after the latter’s stake exceeded 50% following a share buyback.

    Market reaction

    • Shares of Bharti surged 19.1% in the September quarter, compared to a 6.7% rise in the benchmark S&P BSE Sensex. The stock has soared 61% this year, making it the second biggest gainer on the Sensex this year.
    • The earnings were announced after the close of trading hours in India.

    Get more

    • Mobile services revenue in India: 248.4 billion rupees, +19% year-on-year
    • The total user base was 563.2 million users, including foreign subscribers; down 0.8% q/q
    • Ebitda margin unchanged over one year at 53.1%
    • Net debt $26.3 billion, +8.2% q/q
    • Capital expenditure 76.75 billion rupees, -17% year-on-year

    –With the help of Anirban Nag.

    (Updated with details throughout.)

    ©2024 Bloomberg LP

    Umito
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