Airtel Profits Reduce By 63% As Customers Spending Less On Data, Voice

Airtel has seen a decline in its quarterly profits as its costs rose and revenue per user remained flat.

Net profit fell 62.7% sequentially to Rs 283.5 crore.

This is well below the Rs 604-crore consensus estimate of analysts.

Figures And Highlights

• Operating profit rose 4.8% to Rs 13,189 crore. 
• Margin expanded to 49.1% from 48.9%. 
• Average revenue per user (ARPU)—the amount an operator earns per subscriber per month—rose to Rs 146 from Rs 145. 
• Overall expenses rose 3.4% to Rs 13,873.3 crore and finance costs increased 9.5% to Rs 4,225.7 crore. 
• Access charges grew 3.3% to Rs 1,616.7 crore

Flat ARPU And Dwindling Customer Spending

ARPU remained flat due to the effect of free recharges offered to low-income subscribers.

ARPU is an important metric which influences an operator’s marginal profits.

During the lockdown, the telco saw a reduction in number of recharges along with moderation in overall wireless subscribers and fewer upgrades by 2G subscribers to 4G network.

It was dealt an additional blow due to lack of smartphone shipments in the first quarter.

Increase In User Base

Airtel’s 4G subscriber base increased 2.8% quarter-on-quarter to 18.44 crore.

Most of the business came from its home business segment- 2.85 lakh in the last 3 months through June to 33.5 lakh.

Increase In Prepaid Tariffs

All major telcos in India will also raise tariffs as the economy is showing signs of recovery along with a receding impact of the second wave of the pandemic.

Airtel is no different as it also increased the prices of its postpaid plans by 20-50% and entry-level prepaid schemes by over 60% to boost ARPU.

Airtel removed its entry level Rs 49 prepaid plan and has revised it to Rs 79- a 60% hike.

The plan has an added benefit of “four times more outgoing minutes of usage to customers along with double data.”

Impact On Customers And Revenue

With these rate changes, its revenue could go up by 3% and operating income by 10%.

Customers should not be negatively affected either since Indian tariffs are well below global benchmarks.

Airtel, Vodafone All Set To Hike Prepaid Plans By Upto 30%; Airtel Already Raise Prepaid Tariff