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Airtel Q3-FY12 Concall: Vanishing Telemarketers, Churn, VAS Decline, Data Growth

Airtel reported consolidated revenues for the quarter were Rs 18477 crore, up 17.1% over the previous year, and up significantly from Rs 17276 crore the last quarter. In addition, it reported a decline in the contribution of SMS and non-voice to total revenues in India, an increase in ARPU to Rs 186.85, alongwith an increase in rate per minute to 44.56 paise. More on that here. Notes from the conference call (with some statements paraphrased):

2:50 PM: It was pertinent for us in the quarter when we increased prices for stability, and for the price change to be accepted. We will be competitive, and will keep altering on the basis of the ground reality.

2:52 PM: On churn – yes it did creep up, and it has creeped up for the whole industry. There are operators with more than 22-23% per month. It is a function of the rotating, multi and dual SIMs in the market, and brought about the hara kiri of hyper competition in the market. We are cognisant of the churn not going up significant, it becomes a box business rather than a perpetuity business. We’re in control of the churn, and much better than anyone else in the market.

On non -voice, as far as data is concerned, we’re seeing uptends month on month, on 2G and 3G. 3G is growing each month. On the traditional VAS, there are two unique phenomenon. The TRAI has recommended tight norms on how you sell and promote in the market. We are among the first companies to adopt these stringent measures in our marketing capabilities. The revenues tend to tank quickly and then it comes back. Much of the tanking got over in the last 4-5 months. The second phenomenon that hit was with SMS limited to 100, now increased to 200. Hopefully, going forward, we hope to see more relaxation. Dependance on P2P SMS has grossly declined in the last couple of years.

3:04 PM: From a seasonality perspective, this quarter is for Telemedia as what Q2 is for Mobile. The DND guidelines were introduced, so the telemarketing fraternity reduced by a large number because of the government regulations. We made a significant migration on the composite billing system, and while migrating, there were hiccups, and a short term dip was caused. What will not come back is a small amount of loss of customers because of telemarketers vanishing.

3:08 PM: Revenue marketshare is of prime importance to us, and whatever has to be done to regain revenue marketshare will always be done. However, sometimes you take a short term hit to be more viable long term. Raising the prices was absolutely right and many of the large players saw merit in that. There are some smaller players who tried to capitalize on that arbitrage, but that was not successful.

3:20 PM: Manoj Kohli says that they’re gaining revenue marketshare in all markets in Africa. Some markets are responding slower, though. A lot of ideas are being tried.

3:21 PM: No comments on license cancellation, saying that it is sub-judice. On NTP-11, which is more like NTP-12, the deliberations are going on. (ED: Sanjay Kapoor is wrong about the license cancellation being sub judice)

3:27 PM: If you look at the India & South Asia margins – you have to take Mobile and segregate it into ex-Bangladesh. In Bangladesh, there are some one time provisions we have taken, and there is a meaningful change in the mobile margins overall. If you look at Telemedia, it is a robust business for us and has been performing at 44-45% EBITDA levels. Some discrepancies cropped up, some perpetual and some one off, and the DND issue. The biggest one impacting telemedia was the migration to a new billing system. When it comes to the enterprise services, the topline has grown but not contributed to the bottom line. We went through a bad incident in Mumbai because of a fire and had to take a charge because of that. We often take decisions on enterprise services between a CAPEX and OpEx model, and the EBITDA margin begins to deteriorate. Enterprise services business is lumpy, and you need to view it from an annualized basis.

3:32 PM: We don’t want to compete with handset manufacturers, and launch branded handsets (in reference to a question on Idea launching 3G handsets). Just like there are 14 operators in the mobile space, there are 25 players in the handsets space, and if 25 players cannot bring the prices of 3G handsets down, then… The risk associated with it has to be kept in mind. You can play with 1-2 models at best, and god forbid if you’re stuck with inventories. You need to derisk, and we’re staying away. In future, who knows?

Note: The Economic Times reports that Airtel wants to participate in the 2G auctions. They would want that, wouldn’t they? Meanwhile, Uninor wants only the new telcos to be allowed.

3:35 PM: Collectively, there will be 32-33 million data users. As the proliferation of devices happens, these are going to upgrade. The 3G device pool is still very small. The base is very low, and it will take time for things to catch up.

There are enough and more customers in the market, who will not be using Data and 3G. With every passing day, the percentage of users on 3G and using 3G handsets is going up. There are enough and more iPhone users in this country who don’t use data often.

Note: We missed the first part of this concall, and will update when there’s a replay available. 

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