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Profits Plunge: Telecom companies declare third-quarter results

March 01, 2012
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Indian telecom operators continued to register declining profits during the quarter ended December 2011. Regulatory uncertainties and stiff competition, combined with high costs related to 3G investments and rollouts, continued to exert pressure on company bottom lines. Amongst the operators, Reliance Communications (RCOM) recorded the sharpest decline of around 61.25 per cent in its net profits. Meanwhile, Bharti Airtel registered its eighth consecutive quarter of profit drop. The only silver lining for the operator was its performance at the global level, particularly that of its African operations.

On the other hand, for the UK-based Vodafone Group, the growth in revenue from its Indian operations outperformed its global business. While the Vodafone Group registered a 2.3 per cent decline in its revenue from £11.89 billion for the quarter ended December 2010 to £11.62 billion for the corresponding quarter in 2011, the revenue from its Indian operations grew by 6.3 per cent from £963 million to £1.02 billion during this period.

Companies like Tata Communications, Tata Teleservices (Maharashtra) Limited (TTML), GTL Limited and GTL Infrastructure Limited witnessed higher losses during the quarter ended December 2011.

tele.net takes stock of the financial performance of key telecom companies…

Bharti Airtel

Bharti Airtel reported a 22.41 per cent decline in its net profit from Rs 13.03 billion in the quarter ended December 2010 to Rs 10.11 billion in the corresponding quarter of 2011. The decline is being attributed to higher depreciation and amortisation costs related to the company’s 3G operations. The operator also claims that higher interest costs and tax provisions have led to a higher-than- expected drop in quarterly profits.

Bharti Airtel’s revenue increased by 17.1 per cent to Rs 184.76 billion for the reported quarter as against Rs 157.72 billion for the quarter ended December 2010. Revenues from its Indian operations, accounting for 71 per cent of the total revenue, grew by 12.15 per cent from Rs 117.34 billion to Rs 131.62 billion for the period under review. Bharti’s revenues from the flagship mobile business in India grew by 11 per cent from Rs 9.16 billion to Rs 10.18 billion. The company’s operating profit margin for the segment has been reported at 33.8 per cent during the quarter.

Bharti’s net debt stood at Rs 677.63 billion as on December 31, 2011. The company attributes it to the heavy borrowing for acquiring 3G licences in India and for funding the $10.7 billion acquisition of Zain in Africa.

However, Bharti’s African operations have been improving gradually with their proportion in the company’s total revenue increasing from 25 per cent for the October-December 2010 quarter to 29 per cent in the reported quarter. Revenues from the African operations grew by 32.2 per cent from Rs 40.53 billion to Rs 53.58 billion for the period under review while losses declined from Rs 5.25 billion to Rs 2.6 billion.

Reliance Communications

RCOM reported a 61.25 per cent decline in its net profit from Rs 4.8 billion for the quarter ended December 2010 to Rs 1.86 billion for the corresponding quarter in 2011. This is the tenth straight quarterly decline in profits declared by the operator. RCOM’s revenues stood at Rs 50.52 billion, a mere 1 per cent increase over the Rs 50.04 billion registered in the corresponding quarter in 2010. Of the total revenue, Rs 44.47 billion (almost 63 per cent) was contributed by the wireless segment. Earnings before interest, taxes, depreciation and amortisation (EBITDA) for the quarter under review stood at Rs 16.11 billion. The company’s EBITDA margin at 31.9 per cent was amongst the highest in the industry during October-December 2011.

Recently, RCOM has sought funding from the Industrial and Commercial Bank of China, the China Development Bank, Export Import Bank of China and other banks to refinance about $1.18 billion of foreign currency convertible bonds due for redemption on March 1, 2012. RCOM will benefit from an extended loan maturity period of seven years and interest at 5 per cent.

Going forward, RCOM aims to repay debt of Rs 367 billion by March 2013. Crucial to this will be the sale of its tower arm, Reliance Infratel, for an estimated Rs 150 billion and the Singapore-based listing of its undersea cable business, which could generate another Rs 75 billion.

The operator’s subscriber base stood at 150 million at the end of December 2011, second only to Bharti Airtel. Between October 2011 and December 2011, RCOM added 3 million subscribers, of which 2.8 million were 3G subscribers.

Idea Cellular

Idea was the first among telecom operators to announce earnings for the quarter ended December 2011. The company’s net profit dropped by 17.28 per cent from Rs 2.43 billion for the quarter ended December 2010 to Rs 2.01 billion for the corresponding quarter in 2011. For Idea, it is the third successive quarter to witness a drop in profits. The decline has been largely attributed to the fluctuation in the rupee against the dollar, and the company’s highly leveraged position on account of 3G investments.

The company’s revenues increased by 27.17 per cent from Rs 39.56 billion to Rs 50.31 billion. Idea witnessed an EBITDA of Rs 13.45 billion for the quarter under review with an EBITDA margin of 26.7 per cent. Its net debt stood at Rs 115.7 billion as on December 31, 2011 and the total capex guidance stood at Rs 40 billion.

As on December 31, 2011, the company’s subscriber base stood at 106.38 million, of which 2.25 million users availed of 3G services.

Tata Communications

Tata Communications’ net loss decreased from Rs 1.81 billion during the quarter ended December 2010 to Rs 1.53 billion in the quarter under review. Revenues from telecom and other services increased by 19.42 per cent from Rs 30.18 billion to Rs 36.04 billion during this period. Of the total revenue, Rs 17.27 billion (almost 48 per cent) was contributed by global voice solutions, followed by global data and managed services which contributed Rs 14.37 billion (almost 40 per cent). The company’s South African operations contributed Rs 4.36 billion to the total revenue. Undeterred by losses, Tata Communications has announced fresh investments of about Rs 22.5 billion in new product areas such as cloud computing, mobile broadband, submarine cables and data centre projects.

MTNL

Mahanagar Telephone Nigam Limited (MTNL) sank deeper into the red with higher losses for the quarter ended December 2011, which stood at Rs 9.29 billion as compared to Rs 6.71 billion for the quarter ended December 2010. The company’s total income also decreased by 8.81 per cent from Rs 9.51 billion to Rs 8.74 billion in the period under review.

The revenues from MTNL’s ailing landline business declined by 11.03 per cent from Rs 7.62 billion to Rs 6.78 billion. Meanwhile, the revenues from its wireless services grew by 10.42 per cent from Rs 1.63 billion to Rs 1.8 billion.

MTNL attributes these losses to its limited geographical footprint, covering only the Delhi and Mumbai circles. According to the company, the teledensity in these circles is already over 100 per cent and the competition from private operators is much higher.

Tata Teleservices (Maharashtra) Limited

TTML’s net loss during the quarter ended December 2011 almost doubled to Rs 1.44 billion as against a net loss of Rs 0.79 billion for the quarter ended December 2010. The company posted a 10.83 per cent increase in its revenue from Rs 5.63 billion in December 2010 to Rs 6.34 billion in December 2011. However, the total expenditure also increased to Rs 6.37 billion from Rs 5.91 billion. The EBITDA stood at Rs 1.36 billion for the reported quarter.

Through the fiscal year, TTML maintained a strong focus on its wireless broadband services and value-added services, with data revenues accounting for 32 per cent of the total revenue for the quarter under review.

The company’s customer base as of December 2011 stood at 15.54 million, showing a decline of 4.19 per cent as against 16.22 million subscribers in December 2010.

GTL Limited

GTL Limited announced its unaudited results for the quarter ended December 2011. The company recorded a net loss of Rs 1.02 billion for the quarter under review as against a profit of Rs 490 million during the quarter ended December 2010. The consolidated revenue declined by 27.13 per cent from Rs 8.81 billion to Rs 6.42 billion during the same period. The company reported an EBITDA of Rs 383.1 million for the quarter ended December 2011 as against Rs 1.42 billion for the corresponding quarter in 2010.

GTL Infrastructure Limited

GTL Infrastructure Limited reported a 14.05 per cent increase in its net revenue from Rs 3.06 billion for the quarter ended December 2010 to Rs 3.49 billion for the quarter ended December 2011. During this period, the EBITDA increased from Rs 1.77 billion to Rs 1.85 billion. The company’s net loss decreased from Rs 620 million to Rs 14 million.

Tulip Telecom

Tulip Telecom reported a near 4 per cent decline in net profit from Rs 817.4 million for the quarter ended December 2010 to Rs 784.8 million for the quarter ended December 2011. The decline in profits was primarily due to the high interest costs, which almost doubled to Rs 427 million from Rs 211.8 million during the same period.

The company’s revenues registered a 14 per cent increase from Rs 6.02 billion for the quarter ended December 2010 to Rs 6.87 billion for the quarter under consideration. Better utilisation of existing fibre assets also led to a marginal improvement in EBIDTA margins from 28.5 per cent to 29 per cent.

 
 
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