Airtel pulls off better show than Idea in September quarter

KOLKATA: Bharti Airtel has turned in a stronger performance than Idea Cellular in the seasonallyweak September quarter as recent results suggest the market leader has stolen a march over the No. 3 carrier on several fronts, including margin expansion, pace of growth of its India wireless business, Ebitda growth levels and cost management.

Analysts and industry insiders said the No. 1 carrier is better positioned than any other incumbent to counter newest operator, Reliance Jio Infocomm, in the coming quarters when the real impact of the latter’s 4G launch is likely to intensify.

Gopal Vittal, managing director-India & South Asia at Bharti Airtel, had said during Wednesday’s earnings call that the mobile carrier had a clear 12-18 months lead on 4G roll outs, which combined with its spectrum advantage, allowed it stay way ahead of the rest of the market to compete with Jio.

Kotak Institutional Equities backed the view, saying the strong 19% year-on-year Ebitda (earnings before interest, taxes, depreciation and amortisation) growth of Airtel’s India wireless business to Idea’s 2% reflected the timing difference in mobile broadband roll outs of the two companies in addition to Airtel’s improved cost execution. Deutsche Bank said Airtel had turned in "a more resilient performance" than Idea in the September quarter, adding that Airtel's India Ebitda margin at over 42% is at a six-year high.

Bank of America-Merrill Lynch said Airtel’s India wireless operations grew faster (8%) year-onyear than Idea’s 7%, and the latter’s 2% contraction in voice minutes, quarter-on-quarter, was also steeper than the market leader’s modest 0.5% levels.

Though a mix of seasonality and the ‘Jio effect’ saw both incumbent carriers reporting reduced profits, analysts at Credit Suisse said. Airtel had managed to “retain margins unlike Idea”.

While Airtel’s Ebitda margin grew 2.4 percentage points sequentially to 38.4%, Idea’s fell nearly 6 percentage points to 30.5% in the quarter to September.

Brokerage J P Morgan, in fact, said the latest earnings numbers suggested that Idea’s superior performance relative to Airtel over the last two years “had been reversed”. “Revenue growth for both (companies) is slowing down amid slow data growth, but Bharti is still outperforming Idea on data revenue growth,” JP Morgan said.

Idea Cellular reported an on-year deceleration in data revenue growth to 19.2% in the September quarter, while Airtel’s grew at nearly 24%, but was still much below the 60% levels scaled a year ago.

Brokerage HSBC expects negative data growth in the coming quarters, given the freebies being offered by Jio, but expects Airtel to benefit from market-share gains in the medium term, although it warns things could “get bumpy” if Jio continues with freebies.