When Bharti Airtel announced its quarterly results for Q1, the highlight of the company’s results was the profits in its Africa operations. But, it perhaps hides a bigger story of problems for Bharti in the domestic business. Here are 3 immediate challenges.
ARPUs have fallen sharply…
The above ARPU chart of Bharti is enough to tell the story. The Average Revenue per User (ARPU) is down from Rs.196 to Rs.105 in the last 8 quarters and it could be some more time before the ARPUs bottom out. Reliance Jio already enjoys a much higher ARPU of Rs.135 and that is a distinct benefit for Jio. The Jio price war is still far from over and that only means that the pressure on pricing will stay for some more time to come. This halving of ARPUs is likely to continue placing a drag on profitability and the leeway on pricing is unlikely to change for now. Profits will remain under pressure!
Dipping revenues…
If you look at the break up of revenues of Bharti, then the largest chunk of 60% still comes from mobile services. But it is this segment that is putting pressure with a (-18.8%) negative growth. The digital business and the towers business have shown positive growth. But, that is unlikely to be significant enough to compensate for the sharp fall in mobile revenues for Bharti.
Vodafone merger through…
The immediate challenge for Bharti is that the Vodafone-Idea merger has been approved. Together they will create a $23 billion company with the largest share of customer ownership. Bharti is already trailing far behind Jio in terms of ARPUs and the consolidation in the telecom industry is only likely to put further pressure. Africa may be showing green-shoots but the real worry for Bharti Airtel may be at home! ©
