Friday October 30, 8:15 PM
India's Bharti profit up but warns of tougher times
Top Indian mobile phone firm Bharti reported a lower-than-expected 13-percent rise in quarterly net profit on Friday and warned earnings could be hurt by a fierce price war in the fast-growing sector.
Bharti Airtel Ltd reported net profit for the three months to September of 23.21 billion rupees (495 million dollars) on revenues that rose nine percent to 98.46 billion rupees from the same period a year earlier.
Analysts had expected profits of around 24 billion rupees.
"With intense competition and irrational pricing in some pockets in the short term, we could see some impact" on earnings, said Akhil Gupta, deputy chief executive officer of parent company Bharti Enterprises.
The comments sent Bharti's shares plunging nearly seven percent or 21.5 rupees to a 52-week low of 290.55 before they retraced slightly to close at 292.15 rupees, down 6.38 percent.
The company -- whose plans to ally with South African cellular flagship MTN collapsed in September -- is facing cut-throat competition on its home turf.
India, the world's fastest-growing mobile market with 457 million wireless subscribers, has been attracting new entrants, heating up competition.
Four new mobile ventures, including Norways Telenor, plan to start up this year, prompting existing players to slash call rates in a race to win new subscribers beforehand.
"In the near term, we are ready to face the challenges posed by heightened competition," said Bharti chairman Sunil Bharti Mittal in a statement.
Bharti's shares, which hit a 52-week high of 990 rupees in May, have been sinking amid concerns over declining revenue growth as a result of lower paying customers and more competition.
"The aggressive tariff cuts are impacting growth and the total pie of the industry," said Himanshu Shah, telecoms analyst at Religare Securities,
Bharti announced it had 113.4 million customers at the end of September, a jump of 42 percent over 12 months. It added 8.2 million new customers in the second quarter.
But average revenue per user or ARPU -- a key industry measure of profitability -- fell 14 percent during the quarter from a year earlier to 989 rupees.
The drop reflects Bharti's increasing dependence on lower-spending customers in rural areas as it pushes deeper into India's hinterland in search of subscriber growth and call rates, which are among the world's cheapest.
Bharti had a 23.5-percent market share of wireless subscribers at the end of the quarter, figures showed.
"We continue to maintain our market leadership position in the mobile segment despite ever-increasing competitive intensity," said Mittal.
The plan by Bharti to ally with MTN to generate a powerful source of new revenues and create an emerging market telecom giant fell apart after South Africa's government said it feared MTN might lose its "national character".
"MTN is behind us," said Gupta, adding Bharti was open to all acquisition possibilities, focusing on emerging markets.
He added Bharti could be interested in a stake in Kuwait-based Zain Telecom but emphasised there is "nothing on the horizon."
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