Bharti profit falls for 10th quarter
NEW DELHI: Bharti Airtel, India’s top telecoms carrier, posted its 10th straight quarter of profit decline as cut-throat competition squeezed margins, sending its shares to their lowest level in more than two months.
Bharti, controlled by billionaire Sunil Mittal, reported a sharply lowerthan-expected net profit of 7.62 billion rupees (Us$138mil) for its fiscal first quarter ended June. That was a drop of 37% from a year earlier.
Carriers in India have traditionally sacrificed profit margins to chase customer growth by offering one of the cheapest call prices. The operating climate grew more hostile after the Supreme Court decided to revoke all permits awarded to eight of Bharti’s rivals such as sistema and idea cellular in a scandal-tainted 2008 sale.
While competition for Bharti and Vodafone’s local unit may ease as the government cancels the licences of their smaller rivals, such as Telenor’s India unit, operating costs are set to rise for all carriers.
“For the sector, the pain is more from the regulatory perspective and it’s got its pluses and minuses,” said Srividhya Rajesh, a fund manager at Sundaram Mutual Fund.
“Because of the cancellation of the licences, a lot of the new players are going out of the market. To that extent, it’s positive for the incumbents, but at the same time, the charges, the fees that the government is demanding are going to hurt.”
The government is planning to hold a mobile airwaves auction in November, which is the last chance for carriers whose permits are set to be revoked to win those back.
Carriers have complained that the minimum bid price is too high, with Telenor and Sistema threatening to pulloutof India if the auctionbecomes too costly.
While bigger carriers such as Bharti are not affected by the court order, they are looking to buy more airwaves to feed their overstretched networks in the world’s second biggest mobile phone market.
“Telecom revenues in India have been depressed due to hypercompetition and recent regulatory and tax developments,” Bharti chairman Mittal said in a statement yesterday.
Margins were further hurt as call prices more than halved in a price war two years ago and have seen little recovery. Mobile data, which offers a higher margin than voice, is still at a nascent stage.
Operators including Bharti invested billions of dollars to buy 3G airwaves and build networks, but the premium services have been slow to take off, forcing the firms to cut data prices.
Bharti, nearly a third owned by South-East Asia’s top phone carrier Singapore Telecommunications Ltd, said yesterday it was considering an initial public offering of its telecoms tower unit, although the timing of the offering would depend on market conditions. — Reuters