New Delhi: Bharti Airtel, India’s top mobile operator, is on Thursday expected to report its quarterly profit rose by nearly a fifth on an expanding user base, but the focus will be on merger talks with South Africa’s MTN.
MTN and Bharti are in exclusive talks until 31 July over a complex deal that could lead to a full merger, creating a leading global wireless group with more than 200 million subscribers and combined revenue of $20 billion.
Reliance Communications, which trails Bharti in terms of subscribers, should see its quarterly net profit fall 11.6% from a year earlier, a second straight drop, as its free voice services to some users and expansion weigh on costs.
Lower call tariffs and expanding networks have helped Indian mobile operators add more than 10 million mobile subscribers per month, making it the fastest-growing wireless market in the world.
“The subscriber growth cycle is by no means over and given improving cash flows and earnings visibility, Bharti and Reliance Communications should outperform,” Nomura analysts led by Sachin Gupta wrote in a note last week.
India had 415.25 million mobile users at the end of May, second only to China’s 687 million. Consultancy Gartner expects India to have 771 million users by 2013.
Bharti added a record 8.4 million users between April and June, taking its total to 102.4 million.
In contrast, China’s mobile industry is slowing. China Mobile, the world’s largest wireless carrier, reported a slight decline in subscriber additions in June from May, amid strong competition.
Years of cut-rate competition in India has, however, started to affect some players. With new telecom operators launching services and the country set to start mobile number portability, tariffs are seen under pressure.
“Competition-driven price concerns could create stock price volatility in the near term. However, dislodging incumbents will likely be a stretch for newcomers,” Nomura analysts said.
A cut in the call termination charges companies pay each other for domestic calls should impact Bharti and Idea Cellular, analysts said, while an appreciation in the rupee against the dollar should provide relief for the companies on their foreign currency debts.
Risks facing the sector include the possibility of high bids in a coming global auction of radio waves for advanced third-generation (3G) services.