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Bharti bets on tariff hike to reverse profit falls

Bharti bets on tariff hike to reverse profit falls
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First Published: Wed, Aug 03 2011. 07 27 PM IST
Updated: Wed, Aug 03 2011. 07 27 PM IST
New Delhi: Bharti Airtel is betting on tariff increases and data growth to boost earnings after posting its sixth straight quarterly profit fall on Wednesday.
Profit at the world’s no.5 mobile carrier by users have been strained by a vicious price war in the 15-player Indian market, losses at recent acquisitions in Africa and costs related to its Indian 3G network.
“From the call rates point of view, I think we have seen the bottom and big players like Bharti will be the major beneficiaries of the revival in pricing power,” said Jagannadham Thunuguntla, head of research at SMC Global.
“Africa will be a key element of growth for Bharti in the next one or two years. In the short term, the costs related to the acquisition will continue to weigh on the bottom line.”
With more than 850 million mobile connections, India is the world’s No. 2 mobile phone market after China and carriers have traditionally offered some of the world’s cheapest call rates in the dash for growth.
Bharti has extended the call price increase to all but three of India’s 22 telecoms zones, Sanjay Kapoor, chief executive of its South Asian operations, told analysts, adding it would take a few quarters to see the full benefit of the price increases.
Shares in Bharti, which reported a bigger-than-expected 28% fall in June-quarter profit to Rs 1215 crore ($274 million), fell 1.4% in a weak market. Bharti, valued at $37 billion, is up 19 % this year and is the best performer in the benchcmark index.
Bharti last year ventured into Africa when growth in India was slowing by acquiring most of the African mobile operations of Kuwait’s Zain. It now operates in 19 countries across Asia and Africa and had more than 221 million mobile users at the end of June.
But high costs in Africa have kept margins under pressure and it has yet to turn a profit there.
Bharti has outsourced networks and information technology operations and cut call prices to boost usage in its bid to replicate its low-cost, high-volume model in the continent.
Bharti’s revenue in Africa rose 6% from the previous quarter to $979 million (Rs 4378 crore), although high interest costs led to an overall Africa-related net loss of Rs 302 crore.
“All the needles are pointing in the right directions,” Manoj Kohli, chief executive of the company’s international business, said of the impact of the cost control measures the company has taken.
“You will see a steady improvement in EBITDA in coming quarters,” Kohli said.
3G bet
The company, which spent $3.5 billion in an Indian auction last year to buy 3G and broadband airwaves, is eyeing a pick-up in premium data services to boost margins in a market where voice calls bring in over 85% of the sector’s revenue.
Bharti, nearly a third owned by Southeast Asia’s biggest phone firm, SingTel , said quarterly revenue rose 39% to Rs 16975 crore. A Reuters poll of brokerages had expected net profit of Rs 1518 crore on revenue of Rs 16887.
Monthly average revenue per user, a key metric for telecom carriers, from Bharti’s Indian operations fell an annual 12% to Rs 190 for the quarter. Africa ARPU saw a drop of 2% to $7.3 but rose 2% from the previous quarter.
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First Published: Wed, Aug 03 2011. 07 27 PM IST