Airtel’s Q2 profit slips 37.5% YoY on one-time charge

Bengaluru: Telecom major Bharti Airtel reported a 37.5% year-on-year (YoY) drop in its consolidated net profit in the quarter ended September 2023, which was hit by the one-time charge it had to pay as interest on additional tax provision. Though its topline grew by 7.3% YoY, it too fell short of expectations, eroded by the 1.6% slip in its Africa revenue on account of the devaluation of the Nigerian Naira.

Airtel’s Q2 net profit plunged to Rs 1,340.7 crore, from Rs 2,145.2 crore reported in the same quarter last year. The profit decline is attributed to a one-time charge of Rs 1,570 crore the company paid as interest on an additional tax provision amount, after the Supreme Court recently released a new ruling on variable license fees (VLF), classifying it as capex and not revenue expenditure.

“This decision does not alter the total amount of VLF allowed as deduction over the license period but creates a timing difference wherein later years would have a higher deduction,” the company said in its earnings statement.

The consolidated net income before exceptional costs came at Rs 2,960 crore, up by 44.2% YoY, as per the company filing on Tuesday. Sequentially, net profit rose 37% from the Rs 1,520.2 crore registered in the preceding quarter.

In Q2 FY24, Airtel reported a revenue of Rs 37,044 crore, up from Rs 34,527 crore reported in the year ago period, “backed by strong and consistent performance in India operations,” the company stated. However, this revenue was down 1.06% from Rs 37,440 reported in the quarter before.

Though the India business bolstered the topline, the Africa earnings weighed in. Airtel’s India business saw a revenue growth of 10.9% YoY to Rs 26,995 crore, however, the company missed estimates of a double digit growth in global revenue, due to the devaluation of the Nigerian Naira, explained managing director Gopal Vittal.

A London Stock Exchange-polled analysts’ estimate had pegged Bharti’s revenue to come at Rs 37,959 crore in Q2 FY23. The results also fell short of the projections made by the stock broking firm Prabhudas Lilladher which estimated that the company’s adjusted net profit at Rs 1,534 crore in Q2FY24 - a fall of 29% YoY and 5% quarter-on-quarter (QoQ). “Earnings miss was on account of slightly lower revenue and higher minority interest,” said Swarnendu Bhushan, co-head of research at Prabhudas Lilladher.

In fact, the company’s mobile services revenue, driven by high paying 4G/5G customers, grew by 11% YoY. Airtel’s average revenue per user (ARPU) stood at Rs 203 in Q2, up from Rs 190 a year ago and Rs 200 last quarter. These numbers are remarkable above that of is peer with Jio’s at Rs 181.7 and Vodafone Idea’s Rs 142.

“If you look beyond Airtel's headline numbers, we can see that they are continuing to hold the fort in a rapidly evolving and highly competitive market. The marginal rise in ARPU is a particularly encouraging number, as in a competitive landscape where everyone is pricing to the bottom, ARPU is the first to fall,” said Utkarsh Sinha, managing director of boutique advisory firm Bexley Advisors.

Airtel's net subscriber addition in the last quarter was at 3.7 million, up from 3.2 million in the preceding quarter, while 4G/5G customer addition was at 7.7 million compared to 6.4 million in Q1. The company recorded the highest ever postpaid net additions of one-million subscribers in Q2 2024, informed Vittal.

“Our postpaid and home businesses continued their strong growth trajectory as we added the highest ever net adds in both these segments in any single quarter. Our performance is underpinned by a simple and consistent strategy of focusing on quality customers and delivering the best experience to them in a seamless digital way,” Vittal added.