Small BusinessCompetition, price war take toll on Airtel
Increasing competition and declining mobile call rates have taken a toll on the earnings of the country’s largest telecom operator, Bharti Airtel, which has posted 2.3 per cent growth in its net profit at Rs 2,209.8 crore for the third quarter ending December 31, 2009, against Rs 2,159.3 crore in the same quarter in December 2008.
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The revenues rose by only 1 per cent to Rs 9,772.2 crore against Rs 9,633.4 crore in the corresponding quarter of the previous year.
The impact of the price war and the fact that over half a dozen new players have got into the market was reflected in the flat growth in revenues of the mobile business and the Ebitda (earnings before interest, taxes, depreciation and amortisation) fell by 3 per cent.
The key parameters are down. The average revenue per user (ARPU) fell by 9 per cent in the reporting quarter over the previous quarter ending September 30, and so did average minutes of use per user (went down 1 per cent). The average rate per minute also dropped by 8 per cent, from 56 paise in September-end to 52 paise in December, reflecting the price war.
Worse, the company is getting a smaller share of the incremental new additions due to new players in the marketplace. During the reporting quarter, Bharti’s share of net additions was 15.9 per cent of the total mobile additions, compared to 23.5 per cent in the previous quarter. And the churn rate — the percentage of subscribers who shift to competitor networks — for prepaid users has gone up from 4.6 per cent in September-end to 6.5 per cent in December.
Experts say the lower growth in revenues was due to a combination of factors — the delayed response of the company to the one second, one paisa pulse rate challenge kicked off by Tata Teleservices and others, the ban in mobile services in Jammu & Kashmir (were it has a 65 per cent market share) and also the loss of subscribers due to blocking of numbers which were using Chinese mobile phones without an IMEI number.
However, Group CEO Manoj Kohli said: “In a hyper-competitive situation, which we are witnessing in the industry, we have retained our revenue market share at 32 per cent and have a strong Ebitda margin at 40 per cent, which shows our strong performance.”