Reliance Jio still wreaking havoc for Airtel; profits plunge 72pc

Bharti Airtel must be asking itself- 'When will this storm end?' We can answer that for you, sir- Not anytime soon. Airtel posted an abysmal 72 percent drop in quarterly profit yesterday, obviously missing analysts’ estimates, as Reliance Jio's unending kitty of offers and discounts continue to wreak havoc for rivals.

Collaterals of tariff wars

In the light of slashed tariffs to retain customers, Airtel's net profits plunged to Rs 373.4 crore in the March quarter from Rs 1,319.2 crore in the previous year, the company said. Total revenue too declined by 12 percent to Rs 21,934.6 crore, from Rs 24,959.6 crore in the same period last fiscal.

Last quarter too, Airtel posted a plunge of 55 percent in profits. "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," Bharti Airtel MD and CEO (India and South Asia) Gopal Vittal said.

Increased investments to handle floods of incoming calls  

According to the telco, the "tsunami" of incoming calls from Jio led to significant increase in investments to handle the incoming traffic. "The net result of this was a revenue decline of 7.1 percent in the fourth quarter even as Ebitda margins got eroded by 2.9 percent. 2016-17 saw a muted top-line growth of 3.6 percent as against the double-digit growth witnessed in preceding years," Vittal said.

Jio's Domino effect 

Besides, the company's net profit fell 37.4 percent to Rs 3,800 crore. Revenue rose 1.1 percent to Rs 95,468 crore. “The year was marked by several business and industry developments including the entry of a new operator in India, offering free voice and data, leading to an unprecedented wave of consolidation in the telecom sector in India,” the company said in its quarterly report.

The rise and rise of Reliance Jio's 

Mukesh Ambani's telecom venture Jio has changed the face of Indian telecom sector forever. Within six months of its official launch, Jio managed over 100 million users on the back of free voice and data services.

The offers forced incumbents to slash their prices to retain customers which led to annual revenue of Indian telecos declining for the first time since 2008-09 to Rs1.88 trillion in 2016-17 (from Rs1.93 trillion the previous year).

Any ray of hope?

Well, though, Jio has finally started charging its customers but its still very aggressive offering services at rock-bottom prices. As to how Airtel fought back- the total data used on Airtel’s network for the entire year went up by 47 percent to 733.1 billion MBs from 497.7 billion MBs in the previous year.

Obviously, this will continue for more time to come and we will have to wait and see how long can telecom industry bear with the predatory pricing.