Wednesday, August 11, 2010
NEW DELHI (AFP) - – India's top mobile phone firm Bharti Airtel said Wednesday its quarterly net profit slid 32 percent as it was hit by a "hyper-competitive" home market and foreign exchange losses.
The flagship company of Bharti chairman Sunil Bharti Mittal reported net profit for the first three months to June 30 dropped to 16.82 billion rupees (361 million dollars) from 24.75 billion rupees a year earlier.
Bharti, which has more than 20 percent of the Indian market, has been hit by cut-throat rivalry in the world's fastest-growing mobile market, where price wars among 14 operators have slashed rates to below a cent a minute.
But a top Bharti official said there were "encouraging" signs of emerging call-rate stability.
"I'd say the worst is over. Cutting rates further would be suicidal," Bharti Chief Executive Officer India Sanjay Kapoor told a news conference.
Growing market saturation and fierce competition on its home turf prompted Bharti earlier this year to extend its reach to Africa, where it paid 10.7 billion dollars for the African mobile operations of Kuwait-based Zain.
Mobile penetration in Africa is just over 30 percent, while in India it stands at 54 percent.
The slide in Bharti's fiscal first-quarter profit came despite a 17.4 percent increase in revenues to 122.31 billion rupees, lifted by new customers and partial earnings from its newly acquired African subsidiary.
"Our business in India and South Asia got off to a solid start with robust revenue growth," Mittal, Bharti's founder, said. "This reaffirms our conviction that leaders emerge stronger in a hyper-competitive market," he said.
But the company suffered a 2.2-billion-rupee foreign exchange loss amid foreign currency fluctuations. Average revenue per user -- a key profitability measure -- fell 23 percent year-on-year to 215 rupees.
The company's shares fell 1.4 percent to 319.70 rupees on the back of the results.
The silver lining was that Bharti showed a resurgence in traffic. Average minutes of usage during the end-June quarter rose by three percent to 480 minutes from the March quarter.
"I think the headwinds are behind us, the competition is becoming less fierce," said Harit Shah, telecom analyst at Karvy investment house.
India's telecom sector was under pressure in the quarter, paying a total of 23 billion dollars for licences for ultra-fast third-generation (3G) and broadband wireless radio airwaves.
Bharti's future profit growth will hinge a great deal on how well it integrates its acquisition of Zains assets, a move the company expects to complete by year-end, analysts say.
The purchase of Zain's Africa assets, renamed Bharti Airtel Africa BV, gave Bharti 36 million new wireless customers and vaulted it into the ranks of the world's top-five cellular players by subscribers, from 10th.
Bharti is seeking to make itself "the most loved brand" in Africa, said the company's international chief executive Manoj Kohli.
The trick for Bharti, which pioneered low-cost telecoms in India, will be to reduce Zain's high cost base and win subscribers, say analysts, and to get subscribers to talk more using lower tariffs.
Bharti is hoping to replicate in Africa the success of its "minutes factory" business plan -- a low-cost, high-volume model.
"They are trying to export the minutes factory -- that will be the main driver for them in Africa," said Shah.
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