Jio Effect: Airtel Posts Smallest Quarterly Profit in Four Years Due to Price War

Reliance Jio free services and the resultant price war have led to Airtel, India’s largest mobile telecom operator, reporting its smallest quarterly profit in more than four years on Tuesday. The quarterly results are yet another marker of how Jio and its free services have changed the Indian telecom industry in less than a year of launch. Rivals Vodafone and Idea announced a $23 billion merger, and several major operators are slashing rates and launching customised plans to retain customers, against which Jio has filed a complaint with TRAI.

Airtel said its net profit plunged nearly 72 percent (71.7 percent to be exact) from a year earlier to Rs. 373 crores ($57.7 million) in the three months ended March 31, its fiscal fourth quarter, missing analysts’ forecasts of Rs. 528 crores. It was the company’s smallest quarterly profit since the December quarter of 2012, according to Thomson Reuters data. Revenue from operations fell 12 percent to Rs. 21,935 crores.

“The sustained predatory pricing by the new operator has led to a decline in revenue growth for the second quarter in a row. The telecom industry as a whole also witnessed a revenue decline for the first time ever on a full year basis,” said Gopal Vittal, MD and CEO, India and South Asia, Bharti Airtel, said in a statement.

“The deteriorating health of the industry was compounded by the tsunami of incoming voice traffic from the new operator as a result of which significant investments had to be made just to carry the incoming traffic on our network,” he added.

“Our long term commitment to provide the best experience to our customers continues to drive all our actions in every single aspect of the business. This belief coupled with brilliant execution of our people has led to acceleration in market share in an industry that is now rapidly consolidating,” Vittal said.

Reliance Jio began charging for its services in April, but analysts say low tariffs will continue to pressure industry revenues. Airtel’s average revenue per user for mobile services in India fell 8 percent from the previous quarter to Rs. 158.

Operating in 17 countries across Asia and Africa, Airtel said its revenue from African operations rose 2.6 percent on the same period last year at constant currencies. It has taken over Norwegian Telenor’s operations in six states in India as well in the past quarter.

“Acquisition of Telenor operations and Tikona’s business further strengthens the pan India spectrum footprint,” the company said in a statement.

Written with agency inputs

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