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Bharti: Going strong… - Views on News from Equitymaster
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  • Jul 24, 2003

    Bharti: Going strong…

    Bharti Televentures has declared positive results for 1QFY04. Its subscriber base (both fixed and cellular) has risen substantially from 1.8 m to 4.2 m over the corresponding quarter last year. The mobile segment which has contributed the highest chunk to its revenues has seen its subscriber base grow by 133% over the corresponding period. The fixed line segment has also risen by a healthy 106%. This increase in subscribers has helped it garner a market share of 25% in this quarter (22% in 1QFY03).

    (Rs m) 1QFY03 1QFY04 Change
    Sales 5,387 10,360 92.3%
    Other income 11 8 -27.3%
    Total income 5,398 10,368 92.1%
    Expenditure 4,006 7,472 86.5%
    Operating Profit (EBDIT) 1,381 2,888 109.1%
    Operating Profit Margin (%) 25.6% 27.9% -
    Interest (net) 621 632 1.8%
    Depreciation & Amortisation 1,242 1,956 57.5%
    Pre operating expense 208 - -
    Profit / (loss) before tax (679) 308 -
    Tax - - -
    Loss to minority shareholders 3 1 -66.7%
    Profit after Tax/(Loss) (676) 309 -
    Net profit margin (%) -12.5% 3.0% -
    No. of Shares (m) 1,853.0 1,853.0 -
    Diluted Earnings per share* - 0.7 -
    (* annualised)      

    Consequently, Bharti's revenues have almost doubled to Rs 10,360 m YoY led by the huge growth in subscriber base. The company has also managed to improve its operating margins backed by cost controls. If one compares the performance sequentially, Bharti's revenues were up 3% QoQ, but the June quarter operating margins are much lower than those seen in the March quarter. The implementation of the new interconnect regime saw tariffs take a hit. The rise in the company's revenues despite the fall in tariffs is therefore, commendable. However, operating margins have squeezed.

    The mobile segment contributed a hefty 63% to Bharti's revenues, whereas the fixed line segment accounted for only 15%. Other services including long distance telephony contributed the balance. The company has incurred capital expenditure of Rs 4.5 m during the quarter of which 73% was towards the mobile segment, 14% towards the fixed line segment and the balance towards long distance telephony and other services. Thus, depreciation provisioning was up 58% YoY.

    Segment Revenue (Rs m) 1QFY03 1QFY04 Change
    Mobility 4,056 6,566 61.9%
    Access 556 1,545 177.8%
    Long distance & Group Data Services 986 3,024 206.7%
    Total 5,598 11,135 98.9%
    Less: Inter segment eliminations 210 774 268.3%
    Income from Operations 5,387 10,360 92.3%

    Bharti has reported profits at the net level for a second consecutive quarter. This is an encouraging sign. According to the company, this improvement is an outcome of effective optimization of resources. While the tariff drops in the cellular segment have meant a fall in ARPUs, on the positive side, these have also meant higher volume growth. The company is making efforts to control its cost per minute. Together, these have led to increase in its profitability. The demand elasticity has enabled the company to protect its mobile segment revenues from lower tariffs resulting in an ARPU of US$ 12 per month which is 15% lower than that in 4QFY03. On the other hand, ARPUs from fixed line segment has increased to US$ 28 per month as compared to US $ 25 per month in 4QFY03.

    Reflecting the strength in its performance, in the last six months the Bharti stock has almost doubled to Rs 44 currently. FY04 is likely to be a year of strength for the company. With the TRAI looking at introducing a unified licence for all telecom services, the sector is likely to see further consolidation going forward. With Bharti being one of the key players on the Indian telecom scene, it is likely to benefit from any consolidation moves.



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