Bharti’s home woes ease; Africa margins are a worry

Bharti’s home woes ease; Africa margins are a worry

New Delhi: India’s top mobile operator Bharti Airtel signalled stability in its India operations after a cutthroat pricing war but losses from its Africa business raised concerns about its turnaround strategy.

Bharti’s quarterly profit fell by a more-than-expected 27%, weighed down by the effects of a price war in its core Indian market, and analysts said lower margins in Africa could hit overall profitability in future quarters.

“The India operations look stable in terms of ARPU, but we expect this to rebound," said Shristi Anand, analyst at Angel Broking. “But profits from Africa are very low and they may be garnering market share there at the cost of overall profit turnaround."

Bharti, 32% owned by Southeast Asia’s top phone firm SingTel, acquired the African telecom assets from Kuwaiti group Zain in June in a $9 billion deal, making it the world’s fifth-biggest mobile operator.

The outlook for Bharti and rivals has improved as phone call prices have stabilised after last year’s vicious war in the 15-player Indian telecom market hit earnings.

There have been no big price cuts since April, after call prices in India tumbled to as low as 0.4 US cents a minute, with most of the price declines taking place in the second half of 2009.

Bharti’s founder, billionaire Sunil Mittal, who started his career selling bicycle parts, saw an opportunity in telecom in the mid-1990s when India was opening up the sector for private participation.

Bharti began with just one licence to operate a mobile network in Delhi and has grown to become the No. 1 player.

Bharti said it will launch 3G services across India in the current quarter.

The outlook for the telecom sector, in which Bharti competes with Reliance Communications and the Indian unit of Vodafone, has improved as prices have stabilised and carriers have geared up to launch higher-margin advanced services.

After spending $24 billion this year to grab 3G licenses and wireless broadband radio airwaves, the sector is gearing up for the commercial rollout of 3G that would facilitate faster Internet browsing and premium services such as video calling.

Earlier this month, Tata Teleservices, India’s No 4 mobile carrier, became the first private operator to launch 3G services in some areas.

Results Lag

Bharti said net profit including its African operations fell to Rs1,661 crore ($374 million) under international accounting standards for its second quarter ended September from Rs2,263 crore a year ago.

Revenue rose 47% to Rs15,215 crore.

A Reuters poll of 12 brokerages had forecast net profit of Rs1,836 crore on revenue of Rs15,270 crore for the firm, which now operates in 19 countries across Asia and Africa.

In India, Bharti accounts for more than 21% of the mobile market with its 147.7 million customers.

Its consolidated Ebitda (earnings before interest, taxes, depreciation and amortisation) margin, a key gauge of profitability, was at 33.7%.

Bharti’s average revenue per user (ARPU) in India fell 20% to Rs202 in the September quarter from a year earlier as more than half of its new users came from less affluent rural areas. Minutes of usage were at 454 minutes per user, up 1% from a year earlier.

Shares in Bharti, valued by the market at $28.6 billion, rose as much as 3% initially after the earnings announcement but later turned negative.

The stock is up just 1.6% this year, lagging the broader market’s nearly 20% gain. Bharti’s stock jumped about 39% in the second quarter versus a 13% rise in the 30-share benchmark index.