Bharti Profit Falls on Rising Network, Advertising Costs
May 05, 2011, 6:48 AM EDTBy Ketaki Gokhale
(Updates with closing share price in fifth paragraph.)
May 5 (Bloomberg) -- Bharti Airtel Ltd., India’s largest mobile-phone operator, posted a worse-than-estimated 31 percent drop in fourth-quarter profit after higher network costs and advertising expenses eroded margins.
Net income in the three months ended in March was 14 billion rupees ($314 million), New Delhi-based Bharti said in a statement today. That lagged behind the 16.3 billion rupees average of 10 analysts’ estimates compiled by Bloomberg.
Bharti, controlled by billionaire Sunil Mittal, more than doubled advertising spending after the introduction of third- generation mobile-phone services and number portability lifted competition in a country with 15 service providers. Slowing growth in the world’s second-largest cellular market prompted Bharti to expand overseas with its purchase of the African assets of Kuwait’s Mobile Telecommunications Co. last year.
“All the operators have been increasing their spending, and that’s one thing that will keep margins under pressure for now,” said Archit Singhal, an analyst at Jaypee Capital Services Ltd. in Mumbai. He rates Bharti’s shares “neutral.”
The shares fell 3.2 percent, the biggest drop since Jan. 27, to 357.90 rupees at the 3:30 p.m. close of trading in Mumbai. The benchmark Sensitive Index, or Sensex, fell 1.4 percent.
‘Young Population’
Spending on sales and marketing more than doubled to 18.3 billion rupees in the quarter from 7.57 billion rupees a year earlier, the company said. Access and interconnection charges jumped 85 percent to 21.4 billion rupees.
Sales rose 52 percent to 163 billion rupees after Bharti’s acquisition in Africa.
“In India, we have been focusing on building a robust 3G network to meet the increasing data needs of a young population,” Mittal said in the statement. In Africa, the company is “rapidly expanding network coverage, improving distribution width and increasing efficiency and productivity standards.”
Average revenue per user, a key metric of performance in the telecommunications industry, fell 12 percent in India to 194 rupees a month. In Africa, the figure was $7.20, the company said without providing a comparative number.
Bharti started the roll-out of third-generation wireless services in India this year that will allow it to boost revenue if data use and smartphones catch on among users.
Tariff War
Mobile-phone service providers are betting on the faster network to lure consumers to use more profitable services after call rates in India fell to half-penny a minute.
Japan’s NTT DoCoMo Inc. and Norway’s Telenor ASA set off a tariff war when they entered India with lower rates to win customers in a market that is forecast by researcher Gartner Inc. to exceed 993 million users by the end of 2014. India had 812 million mobile-phone accounts in March, according to the nation’s telecom regulator, lagging behind only China.
Bharti had 162 million subscribers in India as of March 31, according to the nation’s telecommunications industry regulator.
Debt exceeded cash and cash equivalents by 600 billion rupees as of March 31, up from 12.8 billion rupees a year earlier, the company said in its quarterly report.
The company, part owned by Singapore Telecommunications Ltd., plans to invest in expanding new businesses in Nigeria, Gabon, Zambia, Malawi, Niger and Uganda after the company completed its $10.7 billion cash and debt purchase of the African assets of Kuwait’s Mobile Telecommunications.
Bharti may invest $400 million in the Democratic Republic of Congo in the next three years, Antoine Pamboro, the company’s managing director in Congo, said Dec. 10. Bharti will invest 25 billion shillings ($300 million) in Kenya this year and start 3G services in the East African nation this year, Airtel Kenya Ltd. Chief Executive Officer Rene Meza said in January.
--With assistance from Malavika Sharma and Anto Antony in New Delhi. Editors: Anand Krishnamoorthy, Vipin Nair
To contact the reporter on this story: Ketaki Gokhale in Mumbai kgokhale@bloomberg.net.
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
