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Airtel Q4-FY13 Concall: 3G Subs Up 135% YoY, Airtel 4G & Declining VAS Revenues


Airtel had reported total revenues of Rs 20,448 crore and net profit or Rs 509 crore for the quarter ending March 31, 2012. It had 6.39 million 3G customers and 43.49 million total mobile Internet connections for the quarter. More on that here. Here are some notes from Airtel’s investor conference call:

– Manoj Kohli, MD & CEO International at Bharti Airtel informed that this quarter has not been up to their expectations due to various circumstances but noted that company restructuring is now complete and the company has also completed all its major investments in product launches like 3G and Airtel Money among others and it expects the next quarter to be significantly better.

On 2G Auctions: Little or no response to the February spectrum auctions has led to a bit of rationality in the operator economics, with few operators exiting the market and a few operators limiting themselves to selective circles in India. There is still however hyper competitions, despite the passive consolidation taking place, leaving somewhere around at least 10 operators per province, which is at least double of what we see in the rest of the world.

On Regulatory Uncertainties: Regulations continue to be in a dynamic stage for the industry, with several issues like spectrum auction, license extensions, one-time fees, 2G issues, 3G ICR issues sitting in some form of judicial process in the country.

The quality of customer base and the quality of the customer acquisition has improved due to the joint efforts of operators and regulators through  first-time acquisition rules. This has resulted in reduction of selling and distribution expense wastage in India, which has a direct impact on operating margins.

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– Data customers now represent 23% of the Airtel’s customer base in India and the 3G customer base has increased by 135% year-on-year. The company has 3G licenses in 13 circles and 4G license in eight circles.

On Airtel 4G service: Airtel has 4G service in Kolkata, Pune and Bangalore and has recently extended the service to Chandigarh and its suburbs. Airtel got four circles from Qualcomm in May 2012, however the plans for Delhi and Mumbai are not fixed yet and are expected to be fixed soon. The company however did not disclose the number of 4G subscribers.

Airtel says that it is very difficult to offer ubiquitous coverage in 4G network since 2.3GHz spectrum has a penetration of about 300-350 metres, which is very difficult to work with. Also, the device ecosystem is very nascent since there is no 4G compatible handset in the market, due to which it is largely selling dongles or routers.

However, Airtel noted that all device players are working on addressing this issue but the earliest 4G handset is expected to be available only by the end of this year (Note: Airtel had previously partnered with Huawei to launch a 4G compatible handset Ascend P1 LTE last October, as indicated by a NDTV Gadgets report, however the handset doesn’t seem to be available in the Indian market yet).

Data Volumes increasing in Africa: In Africa, data volumes saw a 23% growth quarter-on-quarter, crossing the 3 billion entry mark in the last quarter itself and the company has 14.5 million subscribers who use some form of data connection. The company has 3G license in 13 regions in Africa. Last month, Airtel acquired Warid Uganda to strengthen its position as the second largest operator in Uganda with a customer base of around 7.5 million and a market share of nearly 40%. Airtel believes that the forthcoming year will be the year of consolidation in Africa.

VAS Revenues Declining: Airtel has taken a hit on VAS revenues due to several corrective steps like bring consent in-house and getting dual consent from customers. The impact was quite sharp since it was one of the first telcos to implement these steps. TRAI has mandated telcos to implement dual consent by end of June and the company has implemented 80%-90% of it across their platforms.

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While its VAS revenues have eroded, Airtel noted that there is currently no evidence which suggests that SMS revenues are being cannibalized by OTT (Over The Top) apps.

On Airtel Money: Airtel has launched Airtel Money in 17 markets and extended its 3G service to 14 markets in the last 12 months, due to which its non-voice revenues have picked up. Non-voice revenues includes revenues from data, SMS, music, ring back tones, and Airtel Money among others. Airtel Money has also picked up quite well in a few African markets including Kenya, Tanzania, Uganda and the company believes that both data and Airtel money will be significant revenue streams in the next 12 months.

DownloadAirtel Q4-FY13 Conference Call Transcript

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