Bharti Airtel said its voice services in India face sustained pressure, as reflected in its fourth-quarter results, as it is unable to raise tariffs the way it would like to since smaller rivals offer calls at much cheaper rates.
India’s No. 1 mobile phone operator is trying to find a “sweet spot between driving minutes growth and call rates,” Gopal Vittal, managing director & CEO for India & South Asia, said on an earnings call.
He said “voice prices needed to improve” but the company would “closely watch competition, especially marginal operators,” before taking the plunge.
Airtel’s India CEO spoke to analysts Wednesday, a day after saying there was a 2.4% sequential dip in voice revenue per minute (RPM) during the fourth quarter ended March, apart from a fall in voice average revenue per user.
The company’s fourth-quarter net profit rose 31% on year thanks mainly to data revenue growth and was below Street expectations of a minimum 55% increase. Continued weakness in its Africa business was a drag on consolidated numbers. Airtel shares fell 3.3% to Rs 387.50 at the close on the BSE on Wednesday, underperforming the broader markets.
Analysts at Credit Suisse believe raising voice tariffs would be a challenge. Bharti had refrained from cutting prices and was seeing positive growth, but this has changed in the current quarter as the company has seen a decline in voice RPM,” analysts at the Swiss brokerage said, adding that in recent discussions, Airtel had attributed “its tariff action to increased competitive intensity.”
o. 3 carrier Idea Cellular also reported a 3% quarter-on-quarter decline in voice RPM Tuesday.Global CFO B Srikanth said Airtel’s deferred spectrum liability for airwaves acquired in the 2014 auctions was pegged at Rs 14,000 crore along with an add-on 10% interest component.
The company’s deferred spectrum liability linked to the March 2015 auctions would be Rs 17,800 crore, which would come into play once the airwaves are allocated. “A 10% interest on such liability would be capitalized till the spectrum is put to use,” said Srikanth. Vittal said Airtel is looking to launch 4G services in key markets such as Delhi, Karnataka, Andhra Pradesh and Tamil Nadu later this year.
The Sunil Mittal-headed telco plans to move away from its current 3G intra-circle roaming pacts by the year-end. “We expect our current 3G ICR arrangements to gradually come to an end once our own 3G spectrum allocations happen by the year-end,” Vittal said in response to analyst queries.
