The Mint Report for 02 February 2011

The Mint Report for 02 February 2011

India’s former telecom minister is behind bars. On Wednesday, the CBI arrested A. Raja in connection with the second-generation spectrum scandal. A spokesperson for the agency said Raja was taken into custody over irregularities in the allocation of spectrum licenses. The CBI also arrested former telecom secretary Siddharth Behura.

And while the government may have hoped Raja’s arrest would mollify opposition parties, the BJP has dismissed it as being too little, too late. Raja is, of course, a member of the DMK, a key ally of the Congress party. He’s accused of selling second-generation spectrum at below market prices, causing a massive loss to the government.

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And in another big telecom story on Wednesday, Bharti Airtel announced its quarterly earnings. The company’s net profit tumbled a greater than expected 41% to Rs1,303 crore. The fall came despite a 53% rise in revenues to Rs15,756 crore. Bharti’s third quarter profits suffered largely because of some one-time costs. These include currency fluctuations, spectrum payments, and money spent on Airtel’s extensive re-branding effort.

Meanwhile, the third quarter numbers also suggest there’s promise for Bharti’s African operations. The company’s revenues from the continent went up 8.7% to $911 million.

The company says it has cut tariffs in ten of the 16 African nations it operates in. But Manoj Kohli, the head of international operations said this was largely a corrective to overpricing by the previous operator, Zain. Bharti bought Zain’s African operations for a total of $10.7 billion back in June. Shares of Bharti zipped up 2.75% on the BSE to close at 323.25.

Meanwhile Hero Honda has also reported a fall in its third quarter earnings. Net profit fell 20% to Rs429 crore. That’s on a 34% increase in sales to Rs5,162 crore. Customers are still lapping up Hero Honda’s bikes, but rising raw material costs means those bikes are now more expensive to manufacture.

The company’s operating margin for the third quarter was at just 11.17%. That’s compared to its average of about 14%. Just last week, Goldman Sachs downgraded Hero Honda and Mahindra and Mahindra to “sell" because of the lower margins. Stocks of the company plunged 5.27% on the BSE to 1,523.05.