Bharti Profit Misses Estimates on Spectrum, Interest Costs
November 06, 2011, 8:15 PM ESTBy Ketaki Gokhale
(Updates with shares in fifth paragraph.)
Nov. 4 (Bloomberg) -- Bharti Airtel Ltd., India’s largest mobile-phone operator, posted a 38 percent decline in profit, missing analyst estimates for a fifth straight quarter, as costs stemming from airwave purchases and debt offset higher sales.
Second-quarter net income fell to 10.3 billion rupees ($210 million) in the three months ended Sept. 30, from 16.6 billion rupees a year earlier, New Delhi-based Bharti said today. Profit missed the 13.1 billion-rupee median of 25 analysts’ estimates compiled by Bloomberg.
Bharti, which bid 156 billion rupees last year at auctions of airwaves to introduce faster wireless services, has started writing off the amount it spent to acquire the spectrum and paying higher interest on debt used to fund expansion. The mobile-phone carrier controlled by billionaire Sunil Mittal is also investing more in its Africa operations after buying assets on the continent from Kuwait’s Mobile Telecommunications Co.
“The results aren’t encouraging, but the stock is getting support from the optimism surrounding the new telecom recommendations,” Deven Choksey, managing director of K.R. Choksey Shares and Securities Pvt. in Mumbai, said by phone. “Being the largest player, they will benefit the most from any consolidation in the industry.”
Bharti rose 1.5 percent to 399.20 rupees as of 9:58 a.m. in Mumbai trading, compared with a 0.9 percent advance by the benchmark Sensitive Index, or Sensex. The stock has gained 11 percent this year compared with the Sensex’s 14 percent drop. Reliance Communications Ltd., India’s second-ranked mobile-phone company by subscribers, has declined 42 percent this year.
Rules for Mergers
India’s government aims to ease rules for mergers and acquisitions among mobile-phone service providers under a new policy it plans to adopt by next month, according to R. Chandrashekhar, secretary for telecommunications.
The Department of Telecommunications plans to have the new regulations, which also will fix a mechanism for pricing wireless airwaves, approved by the cabinet by Dec. 31, Chandrashekhar said in an interview yesterday.
The rule changes may trigger consolidation in a market where 15 mobile phone companies -- including Bharti and the local ventures of Vodafone Group Plc, Telenor ASA and NTT DoCoMo Inc. -- compete for subscribers, pushing call charges to one U.S. cent a minute.
3G Rollout
India’s wireless market is forecast by research firm Gartner Inc. to surpass 872 million active users by the end of 2015, compared with 609 million in August.
Revenue at Bharti rose 13 percent last quarter to 172.7 billion rupees, from 152.3 billion rupees a year earlier. That compared with the 174 billion-rupee median of 27 analyst estimates. Earnings before interest, tax, depreciation and amortization, or EBITDA, climbed 13 percent to 58.2 billion rupees from 51.4 billion rupees a year earlier.
“The rollout of 3G has resulted in higher amortization costs” with an impact of 1.64 billion rupees, Bharti said in the statement. Net interest costs also increased by 1.2 billion rupees, the company said.
“The implementation of 3G is increasing costs to some extent,” Abbas Merchant, an analyst at Jaypee Capital Services Ltd. in Mumbai, said before the earnings announcement. “Interest costs have risen because of the acquisition of Zain, and 3G amortization is also” damping earnings, said Merchant, who rates Bharti “buy.”
--Editors: Suresh Seshadri, Subramaniam Sharma.
To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
