* Net profit 5.09 bln rupees vs 7.41 bln rupees estimate
* Exec says pricing becoming more stable
* Shares fall as much as 5 pct before recovering
* Annual profit smallest in seven years
By Devidutta Tripathy
NEW DELHI, May 2 Top Indian mobile carrier
Bharti Airtel Ltd's subscriber growth and usage trends
along with easing competition suggest the worst may be over for
the industry, even as the firm recorded its thirteenth
consecutive quarter of falling profits.
Bharti, Vodafone Group Plc and Idea Cellular Ltd
have gained market share in recent months as smaller
rivals either shut or scaled back operations after a court order
revoking permits, giving the big carriers greater pricing power
in a country with some of the world's cheapest call rates.
Still, regulatory uncertainty clouds the outlook for the
industry, as does the expected launch later this year of 4G
services by conglomerate Reliance Industries Ltd,
which would mean a new rival with serious financial clout.
Bharti, the world's fourth-biggest cellular carrier by
customers, posted a worse-than-expected 50 percent year-on-year
drop in net profit to 5.09 billion rupees ($94 million) for its
fiscal fourth quarter to end-March, capping a third straight
year of declining profit for the New Delhi-based company.
Analysts had expected the firm, controlled by billionaire
Sunil Mittal, to report net profit of 7.41 billion rupees,
according to Thomson Reuters I/B/E/S.
For the full year ended March, Bharti made 22.76 billion
rupees, its smallest annual profit in seven years.
Bharti shares fell about 5 percent soon after the results
were released, before recovering into positive territory.
"The fact is that pricing is becoming more stable, that's a
positive going forward," Gopal Vittal, Bharti's India chief
executive, told reporters on Thursday.
While earnings were hit by higher interest costs and a tax
charge as well as continued losses in its Africa operations,
several operating indicators showed improvement.
Average revenue per user (ARPU) in its core India operation
was 193 rupees during the quarter, up 4 percent from the prior
three months, while total volume of minutes sold grew 5 percent.
Market share gains along with the cull of competitors may
embolden the big operators to cut discounts further and even
raise voice call prices in a market that has not seen any
meaningful price increases since a bruising price war in 2009.
Bharti Airtel and Idea Cellular raised call prices in
January by withdrawing discounts.
"There is a lot of room for cutting the discounting offers.
Under-the-line price hikes will continue to happen," said Karan
Mittal, an analyst with ICICI Direct in Mumbai.
Carriers, however, face several regulatory challenges,
including a government demand to pay billions of dollars in
surcharges for their existing airwaves.
India has also imposed penalties on Bharti, Idea and
Vodafone, saying they entered into "illegal" roaming pacts with
one another to provide 3G data services.
"Competition is the least of the headaches for this sector.
Now it is regulation that's an issue," said Phani Sekhar, a fund
manager at Angel Broking, which sold its Bharti stock last year.
Bharti, nearly one-third owned by Southeast Asia's top phone
carrier Singapore Telecommunications Ltd, said revenue
for the March quarter rose 9.2 percent to 204.48 billion rupees,
lagging estimates marginally. Operating margin improved to 31.7
percent from 30.6 pct in previous quarter.
The results came after a strong performance by Idea
Cellular, which last week reported its fourth straight quarter
of earnings growth.
Bharti, which ventured into Africa in 2010 with a $9 billion
acquisition of mobile phone operations in 15 countries, has yet
to turn a profit there. Africa ARPU in the quarter was $5.9,
down 5 percent sequentially, and Bharti said it expects cash
flow in Africa to improve as capital expenditure declines.
Bharti, which operates in 20 countries in Asia and Africa,
plans to spend up to $2.3 billion this fiscal year on its
networks, including about $600 million in Africa.
It also said on Thursday it would buy the remaining 30
percent stake in its Bangladeshi unit from Warid Group for an
undisclosed amount, and would continue to acquire minority
investor stakes in the overseas units it does not fully own.
In March, the company raised its stake in its Nigerian unit.