MUMBAI (NewsRise) -- Bharti Airtel posted a worse-than-expected 55% drop in quarterly profit, as India's largest mobile phone operator suffered a fall in revenue amid cutthroat competition from new entrant Reliance Jio.
Consolidated profit in the quarter ended in December was 5.04 billion rupees ($74 million), compared with 11.08 billion rupees a year earlier, the company said in a statement. Analysts had expected Bharti Airtel to report a profit of 10.46 billion rupees. Total sales fell 3.1% to 233.36 billion rupees.
"The quarter has seen turbulence due to continued predatory pricing by a new operator," Gopal Vittal, managing director and chief executive of Bharti Airtel, said in the statement. The lower charges for terminating a call at 0.14 rupees, well below the cost, has resulted in "a tsunami of minutes terminating into our network."
"This has led to an unprecedented year-on-year revenue decline for the industry, pressure on margins, and a serious impact on the financial health of the sector."
Bharti Airtel and smaller rivals Idea Cellular and the Indian unit of the U.K.'s Vodafone are facing stiff competition from Reliance Jio, backed by billionaire Mukesh Ambani's flagship Reliance Industries. Jio entered India's telecom market in September, offering free voice calls and ultra-low data tariffs. In December, Jio extended its free services until March forcing others to respond with matching offers.
The industry was hit by a double whammy after India's move to abruptly ban high-value bank notes in November led to a cash crunch in the economy. The cash shortage has resulted in a sharp fall in demand for pre-paid data and voice cards, which account for 95% of the country's total subscriber base.
"Incumbents attempting to ring-fence their valuable customers in a hyper-competitive environment are dropping data realizations," ICICI Securities said in a note earlier this month. "However, the elasticity benefits from these aggressive price cuts will be muted owing to deferment of discretionary data consumption by subscribers affected by inadequate currency in circulation."
The brokerage warns pricing pressure to continue into January-March owing to Jio's offer.
In the December quarter, Bharti Airtel said India mobile data revenue fell 3%, while mobile average revenue per user declined more than 10%. Data average revenue per user declined nearly 13%.
Meanwhile, the company is seeking to bulk up its war-chest against Jio's onslaught. Jio, which has so far invested $25 billion into the wireless venture, earlier this month said it is planning to raise an additional 300 billion rupees through a rights issue to fortify the network capacity.
Last week, Bharti Airtel said it is looking to raise an undisclosed amount through a bond sale. It is also looking to raise money through the sale of a "significant stake" in its tower infrastructure unit Bharti Infratel, in which it holds a 72% stake.
In a spectrum auction held in October, Bharti, the only Indian carrier to have a pan-India 4G network coverage other than Jio, spent 142 billion rupees to load up on additional airwaves. This was in addition to $1 billion it spent last year to acquire airwaves from smaller rivals.
The company had nearly 364.6 million customers across operations at the end of the quarter. Mobile broadband customers grew 22% from a year ago.
Bharti Airtel shares ended 0.95% lower in Mumbai trading, while the benchmark S&P BSE Sensex gained 0.95%.
--Dhanya Ann Thoppil