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Airtel Q2-FY12 Concall: Tariff Hike, 7M 3G With 25% Active, Africa, Gross Adds, 3G-ICR Arrangements

Editor’s Note: We know this is late, but we were waiting for a transcript to be published by Airtel. There isn’t one, so here’s our summary:

On Airtel‘s earnings conference call for the quarter ended September 30th 2011, Sanjay Kapoor- CEO India & South Asia said that the impact of increasing voice tariffs will be only noticed after the next quarter. He also clarified the company’s stance on 3G ICR arrangements, the decrease in contribution of data revenue and the hyperactivity in subscriber addition in the quarter, among others. Notes from the conference call:

Drop in mobile minutes: According to Airtel execs the quarter witnessed a subdued customer demand in line with the seasonality traditionally. There was a modest drop in mobile minutes but the company saw a sustained revenue growth.

Revision of tariffs: The company is moving from a low tariff regime and has revised voice tariffs. As subscribers move out from promotional plans, the impact of the hike will be apparent in the next few quarters. The company was vocal about other new players offering cheaper schemes such as 1 paise/second when the markets were ready for a price revision. Airtel categorically said that some new players were transacting at a 40%-50% discount over incumbents for pulling new customers resulting in high subscriber churns of more than 20% which were unviable.

3G services and subscribers: Airtel expanded its own 3G network in 200 cities and offered the service in 500 additional cities through Intra-circle Roaming arrangements with other operators. On the call, Airtel informed that there were 7 million customers who have been provisioned 3G services and out of the total 25%-26% use 3G data on a daily basis. The company also added that around 24 million subscribers use mobile internet services. 3G services were also being used for voice, the company clarified.

Impact of Inter Connect Regime arrangements on revenue: Although the company acknowledged that revenue from ICR was also considered before calculating factors like the ARPU, it declined to give any details saying that the arrangements are based on bilateral agreements. Reiterating the company’s stance on 3G ICR, Sanjay Kapoor said that the company was always vocal about tech agnostic deployment of 3G services and had sought a clarification from DoT before bidding, so there’s nothing at risk. He said that such arrangements are heathy in a country where there’s paucity of spectrum and that it gives way to competition and favours the exchequer. Kapoor refused to give the break-up of the net effect of ICR on revenue.

On Refarming of Spectrum: “This matter has been left aside for a debate n dialogue. As long as government has an equitable and fair policy we will be happy to abide,” said Kapoor.

Africa operations: The company recorded a subscriber growth of 21% YoY at 48 million subscribers. The company saw a 33% growth in topline. The minutes of use per subscriber also saw an increase of 14% over the same period with a revenue growth of 23%. The company added 2600 cell sites in the course of one year and 1000 sites in the last quarter. It has also acquired 3G license in all markets and has commenced 3G services in Congo Basin.

Airtel Money in Africa: In Kenya and Zambia, the two markets where Airtel Money had been rolled out, the company has registered 11.8 million customers. It has a reach of 800,000 retailers who also offer easy recharge.

On data as a percentage of revenue declining: Sanjay Kapoor mentioned that it’s just been roughly six months that 3G services were launched and it takes 5-6 years to establish a market. He said that there was an anomaly in the pricing of 3G data which was corrected during the last quarter. Although data usage is going up, the price correction resulted in the decline of data revenues.

On launching self branded phones to promote 3G usage: Kapoor declined to comment on the plans but said that Airtel was already selling the iPhone and other smartphone makers. He added that 60-65% of HTC phones launched with Airtel, while Airtel is the dominant player in the BlackBerry market with a 40%-45% market share.

Hyperactivity in gross adds: According to company execs the hyperactivity on gross adds, i.e addition of new subscribers even when revenue was declining, was due to a structural defect: “When a customer goes to buy prepaid minutes but comes back with a new SIM with bundled free minutes and uses those discounted minutes,” clarified the Airtel executive saying that it’s a case og good money chasing the bad money.

On review of termination charges being reduced from 20p to 10p: Kapoor answered that it wa an industry subject under deliberation and he’d rather not speculate.

On DTH business: Airtel mentioned that DTH is still in investment phase, although it has been ebidta positive in the last few quarters. A company exec also explained the reason for a decrease in subscriber addition during the last quarter: a lot of new connections were purchased in Q1 with the World Cup and other events, however the free previews are still on for the subscribers. The temporary flip in net addition of telemedia customers was due to some problem with the new integrated billing system.

On new VAS regulations: Airtel declined to comment and said that the industry is already conducting a dialogue on it. It did say that over the time many new channels including the mobile internet have come up for promoting VAS products.

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