Bharti Airtel: telecom operation performance comparison in India v/s Africa

Telecom Lead India: is presenting
details of operations performance of Airtel in Indian and African mobile

Airtel’s consolidated telecom Capex reduced to INR 35,758
million in Q1 2012-13 from INR 43,483 million in Q1 2011-12.

Capex in India was INR 29,308 million (INR 24,705 million),
while telecom Capex in Africa was INR 6,450 million (INR 18,778 million).

Mobile services revenue in India was INR 106,848 million.
Africa’s mobile service revenue was $1,066 million.

While India business recorded net profit of INR 14,338
million (INR 15,167 million), Africa chipped in net loss of INR 6,993 million
(INR 3,016 million).

As on June 30, 2012, Airtel had an aggregate of 260.7
million customers consisting of 250 million mobile, 3.3 million telemedia and
7.4 million digital TV customers.

Its total customer base as on June 30, 2012 increased 13

The 250 million mark (wireless customers) is an important
milestone for the company.

During the first quarter, the company recorded revenues of
Rs 193,501 million, a growth of 14 percent.

Non-voice revenue contributed to approximately 26.6 percent
of the total revenues for the quarter.

The net income for the quarter was Rs 7,622 million
representing a y-o-y decline of 37 percent.

As on June 30, 2012, the company had a total of 20,892
employees. It reduced its employees around 1800 as compared with June quarter
in 2011-12.


Mobile Services

The company and the industry were adversely impacted by
restrictions on special tariff vouchers enforced by the Regulator in India. The
hike in service tax for April 2012 also rendered telecom services costlier.

The market continues to be characterized by hyper
competition despite the cancellation of 122 wireless licenses by the Supreme
Court in February 2012. The company is focusing all its attention in developing
the Data and VAS businesses, even while sustaining growth in overall minutes of

As on June 30, 2012, the company had 187.3 million GSM
mobile customers on its network of which number of 3G customers were 5.1
million. The average monthly churn for the quarter ended June 30, 2012 was 8.8
percent. Sustained hyper competition has driven this industry to become
structurally defective with abnormally high rotational churn. The industry is
witnessing high levels of gross customer additions resulting in net additions
of less than 10 percent. This has a significant bearing on the telecom
industry’s profitability.

During the quarter, blended ARPU was Rs 185 (US$ 3.4) per
month. The blended monthly voice usage per customer during the quarter was at
433 minutes.

The gross realization per minute during the quarter was 42.7
paisa. Voice ARPU was Rs 154 and Voice realization was 35.7 paisa per minute.
The company had 38.7 million Data (Mobile Internet) customers, of which 3.7
million used 3G services. Data ARPU came in at Rs 40, helped by average data
download of 112 MBs per user per month, and blended data realization rate of
35.3 paisa per MB. Value added services, which includes revenue from services
apart from voice, data & others viz. SMS, MMS, Ring Back Tones, Airtel
Talkies, Music on Demand etc. contributed to approximately 10.8 percent of the
total revenues of the segment.

Data and Value Added Services offer tremendous growth
potential, and the company is leading the  market development of these
services through innovations, sachet packs, mass advertising, deep penetration,
network expansion and market activation.

The handset ecosystem is also making significant progress,
with 3G-enabled phones especially smartphones riding a virtuous cycle of
affordability, scale and innovation.

The revenues for the quarter ended June 30, 2012 for mobile
services stood at Rs 106,848 million, a growth of 9 percent over the
corresponding quarter last year. The revenue from this segment contributed to
77.9 percent of the total revenues of India & South Asia.

Mobile revenues in India during the quarter were impacted by
two significant changes:

i) The Telecom Regulatory Authority of India (TRAI)
guidelines around processing fees restricted the sales of combo packs which
offered bundled service propositions to augment customer value. These
regulations have restricted the operators from free market pricing prevalent
hitherto. The net impact of these changes in this quarter was in the range of
Rs 2,500 Rs 3,000 million.

ii) The service tax hike from 10.3 percent to 12.36 percent,
effective 1st April 2012, caused all telecom services to become dearer by
nearly 2 percent, with the entire additional levy being passed through to the
exchequer. The service tax amount on the Company’s Mobile revenues has
increased from Rs 9,442 million in the previous quarter to Rs 11,594 million in
the current quarter. On one hand, this has adversely impacted the usage in
respect of value recharges; on the other, it has reduced the effective
realization on usage based vouchers.

Depressed revenues on account of unfavorable regulatory
interventions and taxation, coupled with enhanced market participation and
planned accelerated investments have impacted mobile profitability. Increased
aggression enabled 9 billion incremental minutes, despite the adverse impact of
the service tax hike partially neutralized by the positive usage impact arising
from processing fee reductions.

Capital Expenditure

During the quarter ended June 30, 2012, the company incurred
a capital expenditure of Rs 19,411 million in Mobile Services (including
investments towards launch of 4G services).

B2B Services India & South Asia

The revenues for the quarter ended June 30, 2012 for Airtel
Business stood at Rs 11,906 million, a healthy growth of 14 percent over the
corresponding quarter last year. The revenue from this segment contributed to
8.7 percent of the total revenues of India and South Asia.

During the quarter ended June 30, 2012, the company incurred
a capital expenditure of Rs 166 million in Airtel Business.


Mobile Services-Africa

Economic and currency headwinds are evident in key markets,
as a result of the eurozone crisis, slowing down of aid and grants, rising
inflation and political issues in some countries. With this in mind, the
company chose to accelerate the intensity of market operations to stimulate
more growth in the coming quarters.

At the end of the quarter ended June 30, 2012, the company
had 55.9 million GSM mobile customers on its network. During the quarter, the company
added 2.7 million customers. The ARPU for the quarter was US$ 6.5 per month.
The blended monthly voice usage per customer, during the quarter was 120

Non voice revenue, which includes revenue from services
other than voice i.e., Messaging & VAS (including SMS, GPRS, MMS, Ring Back
Tone, Airtel Talkies, Music on Demand), data, others etc. contributed to
approximately 12.9 percent of the total revenues of the segment.

The company added 150,000 selling outlets to touch 1.24
million outlets, and is all set to become Africa’s largest retailer by 2013.
The company’s exclusive airtel express outlets have crossed 1,000. The company
now offers its lowcost, innovative airtel money service in 12 African

The company has so far launched 3G in 7 countries with roll
out of 4,787 sites. The number of 2G sites has also increased by 22 percent to
15,439 over June 30, 2011.

Significant marketing investments were made in several
campaigns such as 3G, airtel money, airtel Rising Stars, Arsenal Football Club
sponsorship and Zambitious.

The company’s revenue in Africa grew by 17 percent over the
corresponding period last year. In Rupee terms, Africa revenue came in at Rs
57,586 million representing a strong growth of 32 percent over last year,
helping to lift the overall consolidated growth of the company.

Investments in network expansion, head start in 3G rollout,
the Rwanda launch, stepping up of marketing campaigns including airtel money
and distribution expansion resulted in a lower EBITDA compared to the previous
quarter ended March 31, 2012.

While the soft market conditions came in the way of revenue
growth in this quarter, the investments made during this period are
strategically placed in the right direction for long term growth and
profitability of the business in Africa.

The net loss for the quarter was significantly high at Rs
6,693 million, mainly due to the pressures on EBITDA, higher depreciation and
substantial finance cost including forex losses.

During the quarter ended June 30, 2012, the company incurred
a capital expenditure of Rs 6,450 million on its African operations.

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