Airtel Says Free Offers Will Adversely Affect Lenders, Government Revenue

In a veiled attack on newcomer Reliance Jio, telecom major Bharti Airtel on Wednesday said free offers by telcos would hit all stakeholders, including lenders, and government revenue.

"In the short to medium term, free offers will impact all stakeholders including government levies and taxes, lender with debt exposure of over Rs. 400,000 crores to the industry," Bharti Airtel Global Chief Financial Officer Nilanjan Roy said during company's earning call.

He alleged that "predatory pricing" by new operators has led to "unprecedented drop in the industry revenue table for the first time since its inception, jeopardising the financial health of poster child - the Indian telecom industry".

Bharti Airtel, India's largest mobile services provider, has reported its lowest profit in four years in the third quarter of FY2016-17 as demonetisation and intense competition from Reliance Jio hit revenues.

Consolidated net profit in October-December fell 54 percent to Rs. 503.7 crores as against Rs. 1,108.1 crores in the same period a year ago, the company said in a statement.

"To say that we are living in interesting time would be an understatement. In India, the continuation of free pricing by a new operator has led to tsunami of traffic to the network impacting overall data revenue and voice realisation," Roy said.

He said that the large number of incoming calls on Airtel's network have been due to anomaly in mobile termination charges.

Roy said that there have also been temporary impact of demonetisation along with larger impact of free offers.

Bharti Airtel's revenue fell 3 percent to Rs. 23,363.9 crores in the third quarter of FY2016-17. Mobile data revenue slowed to Rs. 4,049 crores due to "free voice and data offering by a new operator".

Data revenues at Rs. 3,087 crores de-grew by 3 percent. Mobile broadband customers increased by 22 percent. Mobile data revenues now contribute to 22.8 percent of the company's mobile revenues in India as compared to 23.1 percent in the corresponding quarter last year.

"We are also seeing slowdown in data indicator sequentially, more or less entirely, due to free offer by a new operator. for the first it has led to active decline in data customer base by 7.7 million and data usage down by 3.5 percent quarter and quarter and ARPU down 13 percent," Roy said.

He said that to combat free offers, Airtel has also come up with new plans giving high usage of voice and data to its customers.

Bharti Airtel MD and CEO for India & South Asia Gopal Vittal said there is lot of head room in the company's network to drive capacity utilisation.

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"Remember that in this business, larger investment you make is in spectrum. It is smaller investment on capex. Once you have put that investment then the cost of producing an extra megabyte of data is nothing," Vittal said.

He said that the telecom market is moving towards game of average revenue from a user.

"In the conext of playing an ARPU game we believe that bundled packs make lot of sense to lock in ARPU, deliver value," Vittal said.

The Indian arm of Airtel reported 9.3 percent year-on- year increase in customer base to 26.58 crore, close to 14 percent increase in voice call minutes and 28.3 percent increase in data usage.

However, tariff war triggered by Jio, led to 10.4 percent decline in the average revenue per user on its network to Rs. 172 from Rs. 192 during the period under review.

The revenue realisation of Airtel India from a minute long voice call reduced by 12.8 percent on year-on-year basis and from per megabyte of data it reduced by almost one-fourth to 17.97 paise from 23.77 paise a year ago.

Shares of Bharti Airtel closed at Rs 311.55 a unit, down by 1.52 per cent compared to previous close, at BSE today.