Bharti Airtel net dips on lower mobile phone use

Last Updated: Wed, Feb 08, 2012 20:00 hrs

India’s largest private telecom company, Bharti Airtel, on Wednesday reported an eighth straight quarter of decline in net profit — sending its share down 6.6 per cent — on lower mobile phone use by customers.

It posted a 22 per cent drop in its third quarter consolidated net profit at Rs 1,011 crore, due to higher interest costs and taxes. Revenue rose 17 per cent to Rs 18,477 crore, from Rs 15,772 crore a year earlier.

But the world’s fifth-largest mobile carrier by subscribers saw a silver lining in its Africa business. Its African margins improved to 26.7 per cent, from 19 per cent in the year-ago quarter, while losses in the region came down to Rs 260 crore, from Rs 525 crore. Revenue from the region rose 16 per cent to Rs 5,357 crore.

Africa reported positive operating cash flow for the first time, said Manoj Kohli, the company’s chief executive for international business. Bharti Airtel acquired Kuwait’s Zain African assets in 2010. Kohli said the company was moving steadily towards achieving target of $5 billion in revenue and $2 billion in earnings before interest, tax, depreciation and amortisation from Africa by March 2013.

During the three months through December, tax provisions rose to Rs 560 crore, from Rs 340 crore a year ago, mostly due to higher tax rates in India, where some tax concession schemes in parts of the country had expired, Bharti Airtel’s CFO B Srikanth, said.

The shares closed 6.6 per cent down at Rs 354 on the Bombay Stock Exchange.

“In the near-term, the company will face pressure due to high loan repayments costs and competitive pressure in the Indian market, but turnaround in Africa business will drive its performance in the medium to long-term,” said R K Gupta, a fund manager at Taurus Mutual Fund.

Interest expenses increased to Rs 800 crore, from Rs 600 crore a year earlier, because of refinancing of loans taken to pay for third-generation bandwidth in 2010.

Average revenue per user (ARPU) in India fell 16 per cent year-on-year (y-o-y) to Rs 187. But on a sequential basis, it was up by two per cent. Average minute of use per user declined by seven per cent y-o-y to 419. But sequentially, it was down by one per cent. In Africa, ARPU stood at $7.1, a decline of three per cent on a yearly basis, while average minute of use per user rose four per cent to 125.

Bharti Airtel had raised mobile tariffs in India by as much as 20 per cent last year. “We have started to see some benefits from the increase in tariffs,” said Sanjay Kapoor, the company’s chief executive for India and South Asia.

When asked about the Telecom Regulatory Authority of India (TRAI)’s move to intervene in rates, he said, “I think it is confusing and dichotomous. On one hand, we conduct auctions in the market place, where all operators go and bid. And on the other side, we want to fix prices for what gets sold. If we need to fix prices then those spectrum have to be given at nominal prices. Both are absolutely at conflict with each other.”

Last week, the Supreme Court ordered cancellation of the 122 licences issued in January 2008 and directed Trai to frame new rules and auction the 2G spectrum. Bharti, however, refused to comment on whether it would like to participate in the auction.

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