February 8, 2012 / 7:11 AM / 7 years ago

Bharti profit disappoints; Africa provides silver lining

NEW DELHI (Reuters) - India’s Bharti Airtel Ltd (BRTI.NS) disappointed investors by posting its eighth straight quarter of falling profits as the world’s No. 5 mobile carrier by subscribers was hit by higher tax and interest costs, though its nascent but key Africa business improved.

A man speaks on his mobile phone in front of an advertisement for Bharti Airtel along a road in Jammu February 8, 2012. REUTERS/Mukesh Gupta

Shares in Bharti, nearly a third owned by Southeast Asia’s biggest phone firm SingTel (STEL.SI), fell as much as 6.5 percent on Wednesday, losing the gains of the past week made after a court ruling cancelling the licenses of some competitors was seen as benefiting Bharti.

Profits of Indian mobile carriers have been squeezed by ferocious competition in the domestic market, which has more than a dozen players. Market leader Bharti and some of its rivals raised call prices in the middle of last year, the first such increase in at least two years.

Bharti, which ventured into Africa in 2010 by acquiring most of the African operations of Kuwait’s Zain (ZAIN.KW) in a $9 billion debt-funded deal, said it was on track to meet its performance goals in Africa.

“In the near-term, the company will face some pressure due to high loan repayments costs and competitive pressure in the Indian market, but turnaround in Africa business will drive its performance in the medium to long-term,” said R.K. Gupta, a fund manager at Taurus Mutual Fund, which owns Bharti shares.

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Bharti, controlled by billionaire Sunil Mittal, posted a 22 percent drop in consolidated net profit to 10.11 billion rupees ($206 million) for its fiscal third quarter ended December, from 13.03 billion rupees a year earlier. Revenue rose 17 percent to 184.77 billion rupees.

Brokerages had expected a 3.2 percent rise in net profit to 13.45 billion rupees on revenue of 184.54 billion rupees for the New Delhi-headquartered company, which had 243 million customers at the end of December in 19 countries across Asia and Africa.

Its margins are weaker in Africa than in India due to high costs and Bharti has yet to turn a profit on the continent, although its operating performance is improving. Africa revenue rose 16 percent to $1.06 billion in the quarter.

Bharti is “moving steadily” towards its fiscal 2013 goals of achieving $5 billion in revenue and $2 billion in EBITDA (earnings before interest, tax, depreciation and amortization) from Africa, Manoj Kohli, Bharti Airtel’s chief executive for international operations, told reporters.

COURT RULING

India’s older mobile carriers such as Bharti and Vodafone’s (VOD.L) local unit are seen as major beneficiaries of the court ruling last week to revoke licenses given to newer companies in a scandal-tainted 2008 sale.

The ruling is likely to accelerate the winnowing of an industry that has long been seen as ripe for consolidation.

Fierce competition, exacerbated by the wave of new licenses issued in 2008 by telecoms minister Andimuthu Raja, who is now in jail awaiting trial over the auction, has prevented carriers from turning rampant user growth in India into big profits.

Bharti said monthly average revenue per user (ARPU), a key metric for telecom carriers, from Bharti’s Indian operations fell an annual 6 percent to 187 rupees for the October-December quarter. Africa ARPU was nearly flat at $7.1.

Its tax provisions in the quarter rose to 5.6 billion rupees from 3.4 billion rupees a year ago, mostly due to higher tax rates in India where some tax concession schemes in parts of the country have expired, Chief Financial Officer B. Srikanth said.

Interest expenses rose to 8 billion rupees from roughly 6 billion rupees year earlier, partly due to the expense of refinancing loans taken to pay for 3G spectrum bought at a costly 2010 auction.

Shares of Bharti, which has a market value of $29 billion, report, were down 5.3 percent by 1:49 a.m. ET, lagging a rising Mumbai market .BSESN.

($1=49 rupees)

Writing by Sumeet Chatterjee; Editing by Ranjit Gangadharan and Muralikumar Anantharaman

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