Reliance Jio impact: Airtel may post its first quarterly loss in 15 years, says report

The first inkling of bad news in the offing for Bharti Airtel came in January this year. The country's leading telco's net profit for third quarter of the last fiscal had dipped 39 per cent to Rs 306 crore. Though the company had seen its net profits steadily falling over the past six straight quarters, this was reportedly its smallest profit in four years.

But now it seems that Airtel might actually post a loss - for the first time in 60 quarters - in its upcoming Q4 results. It had last reported a quarterly loss of around Rs 7 crore back in December 2002. According to The Economic Times, brokerage Kotak Securities projects Airtel to report a consolidated net loss of Rs 380 crore for the quarter ended March 31, 2018.

This, too, can be attributed to Reliance Jio's disruptive market moves. A few months ago, it had seemed as though the Mukesh Ambani-led company was done with its cut-throat pricing, having gained a sizeable market share - squeezing out several players in the bargain - and reportedly eyeing an IPO in the future. But, on the contrary, Jio slashed prices again in January.

The new pricing strategy, the impact of the recent 43 per cent drop in international termination charges and continuing ARPU downtrading are all expected to cause a sharp revenue decline for Airtel as well as the other incumbents in the last quarter of 2017-18. "We expect a 10 per cent quarter-on-quarter and 15 per cent year-on-year drop in consolidated Ebitda [for Airtel] at Rs 6,700 crore despite healthy trends for Africa operations," said the Kotak report, adding that Airtel's home broadband segment is already feeling the impact of Jio's imminent commercial launch, while the DTH business grappled with an increase in content cost during Q4FY2018.  

"Jio is trying to squeeze all the players in the telecom sector. The new-entrant is getting into content production as well as in the telecom infrastructure space. They own a lot of the parts of the ecosystem. Bharti Airtel has been the only player that has the financial depth to fight, and perhaps, even the Vodafone-Idea combine. It is going to be a three-player market, which is very interesting. However, this is not a great time to be a shareholder," Deepak Shenoy, Founder, Capital Mind told ET Now.

So, is there any good news at all? According to a recent Motilal Oswal report, "Since January 2018, telecom service providers have once again turned to market share gains at the cost of profitability. The sector might continue to see aggressive pricing for the next 12 months, leading to market share losses for the smaller players (15% currently) as well as Vodafone-Idea until the merger settles down...Once the three large players - Bharti, Vodafone-Idea and RJio - have similar network capability and financial wherewithal, focus should shift back to profitability. We now expect this to happen only in FY20, later than we had believed earlier." But it is a silver-lining nonetheless.