Bharti Airtel scrip today plunged over 4 percent as the company’s net profit declined 37 percent for the first quarter ended June 30, 2012 — the tenth straight quarterly fall.
Following the disappointing set of numbers, the shares fell 4.4 percent to Rs 280.85 on the BSE. On the NSE, the scrip lost 4.49 percent to Rs 280.60.
The stock was the worst performer among the BSE 30 blue-chip Sensex scrips in the early trade.
Bharti Airtel’s net profit fell 37 percent to Rs 762.2 crore for the first quarter ended June 30, 2012 against Rs 1,215.2 crore in the same period last fiscal, the company said in a statement. Even the African operations, where revenues grew 31.5 percent, continued to struggle, posting yet another quarterly loss, this time of $121.6 million.
Brokerage IDFC in a note today said Bharti Airtel’s headline numbers are weak with domestic volume growth of just 3.9 percent while pricing fell 2.6 percent, sequentially. The brokerage addED margins in domestic business as well as African business are weak.
IDFC expects some pressure on the stock in the short-term on back of Q1 results.
Sachin Gupta, Asian Telecom Research at Nomura told CNBC-TV18 that Bharti’s performance is definitely lower than expectations. He also does not expect a significant improvement in the company’s domestic business soon. In fact he is relatively bearish on Indian telcos from operationalpoint of view and also because of regulations. “I don’t think these results are going to win too many friends in the near-term,” he said.
As Reuters columnist Jeff Glekin points out, “Overcrowding is forcing prices to rock bottom, and uncertain regulation is preventing consolidation. More data usage will be a boon,” he said.
Jagannadham Thunuguntla, head of research at SMC Global,told the Financial Times that Bharti’s continuing difficulties with the African operations it bought for $10.7billion from Zain in 2010 were disconcerting.
Total revenues were, however, up by 14 percent to Rs 19,350 crore in the quarter against Rs 16,975 crore in Q1 FY’12, marked by 31.5 percent growth in Africa and 44.2 per cent increase in mobile data revenues from India.
Bharti said the new TRAI guidelines on combo packs hit revenues. The hike in service tax impacted revenues by 2 percent, the company added.
“Telecom revenues in India have been depressed due to hyper-competition and recent regulatory & tax developments,” chairman Sunil Bharti Mittal said.
While competition for Bharti and Vodafone’s local unit may ease as the government cancels the licences of their smaller rivals, such as Telenor’s ) India unit, operating costs are set to rise for all carriers.
“Because of the cancellation of the licences, a lot of the new players are going out of the market. To that extent, it’s positive for the incumbents, but at the same time, the charges, the fees that the government is demanding are going to hurt,”Srividhya Rajesh, a fund manager at Sundaram Mutual Fund told Reuters.
Global brokerage firm UBS said India mobile margins have deteriorated. Bharti results show inability to pass service tax increase in the quarter. Africa margins have also declined, which is a negative surprise.
According to Motilal Oswal, Bharti’s contingent liabilities have increased significantly during FY12 largely due to increased tax-related disputes. “Contingencies increased 81% YoY to Rs 550 crore in FY12,” said the brokerage. Moreover Bharti faces significant demands from government related to various tax, duties etc. The brokerage continues to have a buy rating on the stock with a target price of Rs 370 based on 7.5x FY14 EV/EBITDA for India & South Africa business
Technical analyst Sudarshan Sukhani too is of the view that Bharti is a long-term investment. In an interview with CNBC-TV18, he said ” If you are a long-term investor, hold on to the stock; do not worry about these 10% up and down movements.”
With inputs from PTI