Singtel associate Bharti Airtel’s profit misses as 5G roll-out begins

Singtel said in August it would trim 3.3 per cent of its direct stake in Bharti Airtel to raise about $2.25 billion. PHOTO: REUTERS

MUMBAI – Singtel associate Bharti Airtel reported a lower-than-expected quarterly profit, spurring India’s No. 2 wireless operator to make a case for higher tariffs as it rolls out 5G services across the country..

The carrier, led by billionaire Sunil Mittal, posted a 90 per cent jump in net income to 21.5 billion rupees (S$367 million) for the quarter ended Sept 30, according to a filing on Monday, but missed the average profit of 25.44 billion rupees estimated in a Bloomberg survey. 

Analysts were expecting the profit to more than double after baking in the impact of two rounds of tariff hikes – August and November 2021 – that were fully reflected in the latest quarter and not in the year-ago period. Higher forex losses dented its bottom line, brokerages wrote after the earnings.

Revenue rose 22 per cent to 345.3 billion rupees, while total costs advanced 17 per cent to 169.3 billion rupees compared with the same period last year, the filing said.

Bharti saw its revenue from South Asia mobile services drop 27 per cent to 695 million rupees, while capital expenditure inched up.

“We are now rolling out 5G and are confident that Airtel 5G Plus will deliver the best experience in India while being kinder to the environment,” Mr Gopal Vittal, Bharti’s chief executive for India and South Asia, said in a post-earnings statement on Monday.

He added that Bharti management was “concerned” about the low return on capital employed due to the world’s lowest prices. 

“Given the large investments required to drive digital adoption in India, we believe there is a need for tariff correction,” Mr Vittal said in the statement.

Singtel said in August it would trim 3.3 per cent of its direct stake in Bharti Airtel to raise about $2.25 billion, which it will use to finance its 5G operations and expansion.. Singtel is expected to own an effective stake of 29.7 per cent in Bharti Airtel after the deal and have a net gain of about $600 million.

Bharti’s tepid earnings come weeks after Indian telecom carriers kicked off their speedier 5G networks, promising to revolutionise everything from gaming to manufacturing and healthcare. In a country of a billion-plus people who are rapidly switching to smartphones, 5G may also decide who dominates the digital era.

Bharti, which has not announced its 5G investment or tariffs, intends to offer 5G services in urban centres by 2023 and go pan-India in 2024.

Meanwhile, bigger rival and sector leader, billionaire Mukesh Ambani’s Reliance Jio Infocomm, plans to invest US$25 billion (S$35 billion) to roll out the world’s most affordable 5G services across India by December 2023.

India’s telecom sector has shrunk to just three private sector players – Reliance Jio, Bharti and, smallest of the trio, Vodafone Idea – after Mr Ambani’s upstart unleashed a bruising tariff war in 2016.

The oligopolistic market structure has meant that tariff hikes by any other operator are usually followed on by others.

Bharti, which received as much as US$1 billion from Google’s Alphabet in January, spent 430.8 billion rupees in August in a government-conducted auction of airwaves to gear up for providing 5G services. BLOOMBERG

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