* Consolidated net profit at 7.21 bln rupees vs 7.46 bln
* Revenue rises 17 pct, one-off gain aids revenue and profit
* Risk remains on regulatory fees, spectrum reallocation
* Bharti is worst performer on benchmark index this year
(Adds details, comments from analyst, company, graphic link)
By Devidutta Tripathy and Aradhana Aravindan
NEW DELHI/MUMBAI, Nov 7 Top Indian
telecommunications carrier Bharti Airtel Ltd will
struggle to improve its profits in the coming quarters amid an
uncertain regulatory environment in its home market after the
company reported its 11th consecutive quarter of profit decline
with margins pressured by intense competition.
Bharti, controlled by billionaire Sunil Mittal, on Wednesday
reported its consolidated net profit fell 30 percent from a year
earlier to 7.21 billion rupees ($132.5 million) for the three
months to September, despite a one-off gain of 2.39 billion
rupees from an outstanding dispute over inter-connect charges.
Competition is seen abating in the world's second-biggest
mobile phone market after a court order revoked the permits of
several smaller carriers, which is a positive for market leaders
Bharti and the local unit of Vodafone Group Plc.
India's leading carriers, however, face the risk of paying
out billions of dollars in regulatory fees over the next few
years with the government planning to impose a surcharge on
airwaves held by them and also due to reallocation, or
switching, of their superior quality spectrum when their permits
"The worry remains regulation," said Vivekanand Subbaraman,
a telecommunications analyst at PhillipCapital India. "The
regulatory concerns have overshadowed operating performance," he
said, adding Bharti could continue to see its margins eroding.
India is planning to levy more than $5.5 billion in
surcharges on airwaves held by older telecommunications
companies, from which Bharti's payout is estimated to be just
under $1 billion.
There is also a plan to replace superior quality airwaves of
companies, including Bharti, with relatively inferior quality
airwaves when their permits are renewed starting in late 2014,
which will significantly push up the carriers' capital
expenditure apart from paying for the replacement airwaves.
Rising costs of airwaves should mean an increase in call
tariffs, but a highly competitive market has forced companies to
keep call prices low. Bharti raised call prices by about a fifth
last year, but was later forced to pare the increase in some
zones as it lost market share to competition.
"With consolidation happening, I think tariffs will have to
correct (increase)," Sanjay Kapoor, chief executive for Bharti's
India and South Asia operations, told a news conference after
the results were released. "(But) you cannot go and raise prices
Revenue from voice calls accounts for about 85 percent of
Indian carriers' revenue, with mobile data still at a nascent
stage. Operators launched high-speed 3G networks last year, but
less than 5 percent of the more than 900 million customers have
subscribed to the premium services.
"We're starting to see traction in data," said Sarvjit
Dhillon, group chief financial officer at Bharti Airtel's parent
company. Bharti's mobile data business grew 77 percent during
the September quarter from a year earlier, it said.
Shares in Bharti, valued at about $19 billion, were down
more than 1 percent by 0651 GMT in a positive Mumbai market. The
stock is down more than a fifth this year to be the worst
performer among the components of the benchmark index.
REVENUE BEATS ESTIMATES
Bharti, nearly a third owned by Southeast Asia's top phone
carrier Singapore Telecommunications Ltd, said revenue
for the September quarter rose 17.4 percent from a year earlier
to 202.7 billion rupees.
Analysts had expected net profit of 7.46 billion rupees on
revenue of 196.02 billion rupees, according to Thomson Reuters
Bharti in 2010 ventured into Africa at a time when growth in
its home market had started showing signs of saturation. The
company, which bought money-losing operations in 15 African
countries for $9 billion, has yet to turn a profit there.
Losses in its Africa operations widened to 5.39 billion
rupees from 4.27 billion rupees a year earlier. But operating
margins in Africa improved to 27.1 percent from 26.4 percent a
year earlier. For its India and South Asia operations, margins
dropped to 32.7 percent from 36.1 percent a year earlier.
Monthly average revenue per user, a key metric for
telecommunications carriers, fell 4 percent from the previous
quarter to 177 rupees for its Indian operations. In Africa, ARPU
fell 2 percent sequentially to $6.4.
($1 = 54.4350 Indian rupees)
(Editing by Matt Driskill)