Bharti Q1 net profit falls 32%

Bharti Q1 net profit falls 32%

New Delhi: The focus for Bharti Airtel will be to maintain profit margins as a vicious price war recedes, after India’s top telecoms firm reported quarterly profit fell by a third.

Facing tough competition in a crowded home market, Bharti is betting on opportunities in Africa, where the mobile penetration level at 32% is less than India’s 54% and there are fewer competitors.

Bharti’s results included its new African operations, which were on its balance sheet for only 23 days in the quarter ended June. Bharti acquired the business from Kuwaiti telecoms group Zain for $9 billion in June and became the world’s fifth-biggest mobile operator.

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 -- there were no big price cuts in April-June.

“The key concern for investors is whether the company will be able to maintain its margins. The tariff war seems to be over and most of its impact is already priced into the stock," Sonam Udasi, head of research at IDBI Capital, said on Wednesday.

“We believe the company can keep its margins. There could be better cost management going forward and the company will also look to unlock value from its tower business," he said.

Some analysts say the worst may be over for pricing in the Indian telecoms sector, which has attracted operators including Japan’s NTT Docomo and Russia’s Sistema.

Bharti, in which Southeast Asia’s top phone firm SingTel owns just over a 32% stake, said industry economics do not allow any further price cuts.

Bharti said it is still looking at an initial public offering of its tower unit.

Bharti’s Ebitda (earnings before interest, taxes, depreciation and amortisation) margin, a key gauge of profitability, was at 36.9% in April-June, compared with 41.3% a year earlier.

By 1034am, Bharti shares were down 0.4% in a flat Mumbai market. The shares had earlier risen as much as 3.5%.

Bharti, with about 137 million users in India, controls more than 21% of the market of 635 million. It also offers services in Bangladesh and Sri Lanka, though the operations are much smaller than India.

Africa growth

Bharti now faces the taks of integrating and turning around its acquisition of telecoms operations in 15 African countries.

“Over a period of a year or so, we think Bharti will start benefitting from the Zain deal," Udasi said.

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

Bharti started with just one licence to operate a mobile network in Delhi and has grown to become the Indian market leader.

Bharti said net profit fell to Rs1,682 crore under international accounting standards for its first quarter ended June, from Rs2,475 crore a year ago.

Derivatives and exchange fluctuations led to a loss of Rs216 crore in the first quarter as the dollar strengthened against the rupee. Bharti had a forex gain of Rs279 crore a year earlier.

Total revenue rose to Rs122.31 crore from Rs104.14 crore.

Bharti shares, valued at about $27 billion, fell about 16% in Apri-June but have jumped about 24% since end-June. Rival Reliance Communications reports quarterly results on Friday.

The company’s average revenue per user fell 22.7% to Rs215 in April-June but minutes of usage rose 0.4% to 480 minutes.

Bharti said it would acquire Telecom Seychelles Ltd, a group firm, in a deal that has an enterprise value of $62 million.