Airtel's India business is back in the black after a very long time
- One of India’s largest telecom operators has seen profit for the first time in at least two years.
- A part of the 13% fall in average revenue per user (ARPU) was made up by the savings on access charges that
Airtelwould have to pay Vodafone Idea and Reliance Jio.
- It will be interesting to see what the share market reacts to today, May 18 – a decline in ARPU or the first profit after many quarters.
The profit after tax (PAT) of ₹456 crore is the first positive figure after eight consecutive quarters of losses for Sunil Mittal’s company. Even if the exceptional (one-time) items and tax are removed, at ₹165 crore, this is the profit for the company since September 2017.
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What makes this rebound to a green bottomline even more interesting is that Airtel’s average revenue per user (ARPU) has fallen by nearly 13%.
Airtel’s ARPU in the preceding quarter was ₹166, which has now fallen to ₹145. Out of the total fall of ₹21, Airtel has reported that ₹20 is due to the abolishment of interconnect usage charges (IUC).
IUC is the cost that one mobile operator pays to another operator for carrying calls. So, if you call from a Jio number to an Airtel number, Airtel would receive money from Jio for carrying the call.
However, just like Jio or Vodafone Idea paid Airtel to connect to its network, Mittal’s company had to pay them for those calls that went the other way. Therefore, it made up for some of that lost revenue in money saved in the access charges. That amounted to nearly ₹1,300 crore (nearly four times the net profit).
Other income – refers to income derived from unrelated activities like interest, rent, sale of assets or anything that is not directly the main business of the company – also helped Airtel boost its bottomline by another ₹1,300 crore.
Airtel’s share price has lost 4% in five straight days of decline ahead of the earnings. It will be interesting to see what the market reacts to today, May 18 – a fall in ARPU or the first profit in many quarters. Remember, the India business is worth more than two thirds of the revenue.
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