Bharti Airtel profit slides 37 per cent on higher costs amid stiff competition
MUMBAI, India - Bharti Airtel's quarterly profit fell a worse-than-expected 37 per cent in rupee terms on rising costs and brutal price pressure in India's highly competitive telecom market, company statements showed Wednesday.
India's largest wireless operator said net income for the April-June quarter was 7.62 billion rupees ($141 million), down from 12.2 billion rupees ($272 million) a year earlier.
Revenue for the quarter was 193.5 billion rupees ($3.6 billion), up 14 per cent in rupee terms from 169.7 billion rupees a year ago.
Analysts polled by FactSet expected net income of 12.1 billion rupees on sales of 195.6 billion rupees.
"Telecom revenues in India have been depressed due to hyper-competition and recent regulatory and tax developments," chairman and managing director Sunil Bharti Mittal said in a statement. "I am happy to note that, despite these adverse developments, Airtel has kept its focus on network expansion, market investments, superior customer experience and new product innovations."
All that has come at a cost, however, which Bharti hasn't been able to pass on to customers.
Operating expenses rose 20 per cent from a year ago, even as pricing — especially for high-value data services — slipped as companies fought for market share.
Average revenue per user in India, Bharti's main market, fell 3 per cent in rupee terms from the year earlier quarter. Revenue per minute for voice customers slipped 1 per cent from a year earlier. Data revenues per customer fell 10 per cent in rupee terms from the prior quarter, while revenue per minute for data customers fell 14 per cent. Year-ago data was not available.
Revenue per user in Africa, where Bharti has been gaining market share, fell 10 per cent from a year ago in dollar terms.
"Currently, it is difficult to see major improvement in Bharti's domestic business anytime soon as significant cut has been taken by the companies of 3G tariffs and lot of regulatory uncertainties are prevailing," Angel Broking analyst Ankita Somani said in an email. "Bharti has yet to turn the African operations profitable."
India's telecom sector, once a darling of foreign investors, has been plagued by uncertainty since a 2008 scandal over spectrum pricing. The Supreme Court revoked 122 licenses in February, and now the government plans to reauction the spectrum at prices operators say are too high and ratings agency Fitch ranks as among the most expensive in Asia.
India's fractured telecom sector is widely expected to consolidate when the auction rolls round later this year. Three small operators — Etisalat, Videocon and Swan Telecom — have already exited the market, with more cash-strapped companies expected to follow.
Bharti — and top rival Vodafone — didn't have their licenses revoked and are expected to benefit from the consolidation.
But Bharti is also exposed to high spectrum pricing. Analysts expect Bharti and Vodafone to pick up more spectrum at the upcoming auction to ease their overstretched networks. Bharti could also be hit by additional regulatory fees and will have to face the new spectrum pricing when its licenses come up for renewal in fiscal 2014-2015, according to Fitch.
Bharti is also vulnerable to the falling rupee, as 70 per cent of its debt is U.S. dollar denominated and most is at variable rates, according to Motilal Oswal Securities in Mumbai.
The stock closed down 6.6 per cent in Mumbai trade.
Bharti has 261 million customers in 17 countries.