Bharti Airtel Ltd., India's largest mobile services provider, said quarterly profit more than halved after an old rival, Reliance Industries, launched free wireless services and the full impact of the government's demonetisation drive became apparent on profit and loss accounts.
New Delhi-based Bharti's third quarter consolidated net profit fell to 503 crore rupees versus 1,108 crore rupees in the year ago quarter. The number was below even the lowest estimate at brokerages. Net Sales fell 5 percent to 23,335 crore rupees, also below expectations. Other parameters of operating earnings and margins were also below par.
Bharti faced the full onslaught of Reliance JiO's free services that were launched on September 1st for an initial period of three months. Reliance promised free unlimited calls and super fast speeds to access the internet, triggering a price war with existing rivals such as Bharti, Idea Cellular and Vodafone Plc as they fought back to retain crores of customers. The bruising war, which continues, was visible on stock prices of Idea that slumped as much as 29 percent to a 5-year low of 66.30 rupees a share. Bharti, which has a nationwide network, slipped 10 percent as it was relatively better placed to fend off Reliance JiO.
Then came the government's back breaking demonetization drive that temporarily swatted economic demand in November and December. The government's move to remove the legal tender status of the 1000-rupee and 500-rupee notes, amounting to 86 percent of the currency float, put the brakes on all discretionary spending as citizens focussed on basic survival. India's mobile sector was badly hit as nearly 90 percent of the users are on pre-paid connections that require frequent recharges and that too in cash.
Bharti fell 1 percent to 316.20 rupees on the National Stock Exchange in contrast to the 1 percent rise on the main index, Nifty.