Can Airtel stage a 'pull-back'?

India's GSM giant Bharti Airtel is in a tizzy today. Once a flagbearer of India's telecom revolution, the telco major is now battling to transform itself from traditional voice telephony to data services provider. With spectrum constraints, Airtel's continued loss, coupled with shrinking consumer base in India's hyper sensitive telecom market is worrisome, feel analysts.

With continued profit dip in thirteenth consecutive quarter, from Rs 1,006 crore during same quarter last fiscal to Rs 509 crore in quarter that ended March 31, 2013, Bharti Airtel's Africa operations' losses, too, are now to the tune of Rs 485.70 crore during the same period. While the domestic picture remains murky, the double whammy brings overall opaque scenario about the world's fourth largest integrated telecom operator to the fore.

Bharti Airtel is already facing tremendous pressure from the regulator, and owes many a crore in disbursement to the government. The company's mobile permits are also due for renewal in 2014. Meanwhile, Singapore-based SingTel has already increased its stake to 32.25 per cent in India's ace telecom service provider, and is apparently in no mood to scale it.
The revival, by the way of FDI, however, is the only reprieve in sight to overcome capital crunch. Bharti Airtel selling 5% stake to Doha-based Qatar Foundation Endowment would, however, raise capital and improve balance sheet, while it wouldn't be of any significant help to ease its net-debt, which currently stands at around Rs 63,700 crore.

In an interaction with CIOL, Business&Market founder analyst, Deepak Kumar, said that the prevailing situation at Bharti Airtel was contributed by a multitude of factors, many of which might be seen as external to Airtel. He further added, "A hyper-competitive market and the government's exchequer-guided view towards airwaves auctions added a debt pressure."
Kumar, however, felt that there was no overnight cure to the existing situation, but added that by leveraging the existing assets in right manner and a more normalized distribution of investments into non-mobile divisions would yield long-terms benefits.

CMR Research & Consulting senior manager, Faisal Kawoosa, believes that decline doesn't mean that it would wipe off the entity. "Airtel is an important operator in the ecosystem. With persistent declines, Airtel should revisit and realign its offerings, be it in terms of geographies or products," he said.

Kawoosa feels that Bharti Airtel spreading fast and wide in not much greener telecom markets, like Africa, and the heavy spectrum fees for services that either did not pick as per expectations, or were not able to make high value business cases out of it, are the core issues leading to its decline.

Merely creating 'attractive' plans wouldn't fit the bill, he feels. "The survival would be led by its increased dependence on data services. The telco has to build entire ecosystem around data services and leverage it as a real business sense for India."

(First Published in CIOL)