Airtel Posts Lowest Q4 net profit in the last 4 years

Posted on May 12, 2017

One of India’s largest telecom service providers until recent times, Bharti Airtel, has seen a significant fall in its profits for the latest quarter, mainly due to tough competition from the much newer but much stronger subsidiary of Reliance Industries, Reliance Jio.

The issue:

Cell phones with at least basic internet access are becoming a need. From booking cabs and tickets to finding a doctor, a smartphone and a good connection are like a life saver for the millennial generation. This transformation in lifestyle ensured that the major players in the telecom industry continued to grow and thrive in spite of rising consumer complaints and deteriorating service quality. The red carpet entry of Reliance Jio at this moment of need has severely impacted the oligopolistic telecom industry, Airtel being a major victim.

The impact:

Airtel’s top line took a 12% hit in the recent quarter and its operating profit took a 13% y-o-y hit. For the second consecutive quarter, Airtel saw a huge fall of 72% in its Q4 profit compared to the 55% fall in the previous quarter. As a result, the stock price of Bharti Airtel has fallen by more than 2% in a day. However, Airtel is trying to put up a fight by slashing tariffs, trying to make the most of its recent acquisition, Telenor and by cutting down on capital expenditure by almost 40% y-o-y.

Strategic moves:

Reliance Jio has targeted the primary factor that impacts the buying decision – price. In addition to this, they are aggressively marketing their plans, collaborating with corporates, ensuring that the registration process is smooth and increasing the points of sale. It is capturing the market and getting people hooked so that they can juice them and generate revenues over a period of time.

The Big Picture:

The advent of Jio has made the internet accessible to everyone with a basic smartphone. It has also increased the usage of the internet among existing users. With easier and cheaper access, this is a stairway for e-commerce businesses to soar. It also paves way for higher informational efficiency, which has high potential to help the common man if used properly. However, its competitors like Read More Airtel have to up their game if they want to survive in this i

Airtel Posts Lowest Q4 net profit in the last 4 years