UPDATE 1-India's Bharti Q2 net up 13 pct, lags f'cast

* Sept qtr net 23.21 bln rupees vs 20.46 bln year ago

* Chairman says ready to face challenges from competition

* September qtr ARPU drops 24 pct on year to 252 rupees

* Shares rise 3.5 percent after results, turn negative (Adds details, share price)

NEW DELHI, Oct 30 (Reuters) - Bharti Airtel Ltd (BRTI.BO), India's top mobile operator, reported a 13 percent rise in quarterly profit that lagged analysts' estimates as increasing number of low-paying users and competition from rivals weighed.

Bharti, whose tie-up talks with South Africa's MTN (MTNJ.J) failed in September for a second time, denying it access to vast new markets and revenue streams, is facing tremendous competition at home.

"In the near-term, we are ready to face challenges posed by heightened competition," Bharti Chairman Sunil Mittal said in a statement. "We are confident of emerging winners."

Four new firms, including ventures of Telenor (TEL.OL) and Etisalat (ETEL.AD) are set to start operation this year and existing firms are scrambling to sign up users before then by drastically dropping call charges.

Analysts say Bharti, which has more than 23 percent of India's 470 million-plus mobile subscribers, will be forced to match rival's prices to retain its market share but any such move would mean sacrificing revenue and earnings growth.

A new per-second billing plan from sixth-ranked Tata Teleservices [TATASL.UL] helped it add more users than Bharti in the September quarter, and a move by second-ranked Reliance Communications (RLCM.BO) to cut all call charges to 50 paise (U.S. 1 cent) a minute is seen disrupting sector's growth.

Shares in Bharti, India's seventh-most valuable firm with a market value of about $25 billion, were down 0.2 percent at 311.50 rupees by 0441 GMT, having risen as much as 3.5 percent earlier, in a Mumbai market that had gained 1.6 percent.

New Delhi-based Bharti, in which Southeast Asia's top phone firm SingTel (STEL.SI) owns more than 30 percent, said net profit rose to 23.21 billion rupees ($495 million) under U.S. accounting rules in its fiscal second-quarter ended September from 20.46 billion reported a year earlier.

Revenue rose 9 percent to 98.46 billion rupees from 90.20 billion.

A Reuters poll of 11 brokerages had forecast a net profit of 24.41 billion rupees on revenue of 103.55 billion for Bharti, which added 8.1 million mobile users in the quarter to reach a total of 110.5 million at end-September, 43 percent higher from the year-ago quarter.

Average revenue per user fell 24 percent to 252 rupees in the September quarter from a year earlier, as more than half of its new users came from rural areas, where customers tend to spend less than in urban areas.

Average minutes of usage fell an annual 15 percent to 450 minutes.

EBITDA (earnings before interest, taxes, depreciation and amortisation) margin, a key gauge of profitability, was at 42.1 percent, compared with 41 in the year-ago quarter.

Bharti shares have lost nearly a quarter in October, while second-ranked Reliance Communications is down by almost a third in the face of the price war. Bharti shares gained 4.4 percent in the September quarter, underperforming the broader market. ($1=46.9 rupees) (Reporting by Devidutta Tripathy; Editing by Lincoln Feast, Jarshad Kakkrakandy)