Competition squeezes margins despite gaining subscriber market share from some of its smaller rivals

Top telecom company Bharti Airtel reported its 10th straight quarter of profit decline as competition squeezed margins despite gaining subscriber market share from some of its smaller rivals.

Bharti, controlled by billionaire Sunil Mittal, said consolidated net profit fell to Rs 762 crore for its fiscal first quarter ended June from Rs 1,215 crore a year earlier.

The total revenues were, however, up by 14 per cent to Rs 19,350 crore in the quarter against Rs 16,975 crore in Q1 FY’12, marked by growth of 31.5 per cent in Africa and 44.2 per cent increase in mobile data revenues from India.

“Telecom revenues in India have been depressed due to hyper-competition and recent regulatory and tax developments. Despite these adverse developments, Airtel has kept its focus on network expansion, market investments, superior customer experience and new product innovations,” Bharti Airtel Chairman and Managing Director Sunil Bharti Mittal said.

The company said the revenues in India during the quarter were impacted by two significant changes — Trai guidelines around processing fees which restricts the sales of “combo packs” and hike in service tax from 10.3 per cent to 12.36 per cent, effective April 1, 2012.

The hike caused all telecom services to become dearer by nearly 2 per cent, with the entire additional levy being passed to the exchequer.

Africa revenues grew by 31.5 per cent, driven by strong operational performance in the last year and favourable currency movements.

“However, economic and currency headwinds are presently evident in key markets as a result of the eurozone crisis, lower aid and grants, rising inflation and political issues in some countries.

“With this in mind, the company intensified market operations, advertising, network rollouts, as well as new growth initiatives such as 3G, airtel money and Rwanda,” the company said.

The company’s total subscriber base across mobile, telemedia and digital TV services in India, South Asia and Africa stood at 260.71 million at the end of June 2012.

Bharti dominated customer additions in the three months to June while its smaller rivals including Telenor’s India unit braced for a cancellation of their operating permits.

Bharti Airtel said on Wednesday its monthly average revenue per user in the country fell 2% to Rs 185 for the three months to June, from the previous quarter.

For its African operations, Bharti had an ARPU of $6.5 for the first quarter, down from $6.8 in the previous quarter.

Still, the market of more than a dozen players remains highly competitive, with most carriers in the once-booming sector languishing in the red.

The Supreme Court of India said it would revoke all permits awarded to eight of Bharti’s rivals such as Sistema and Idea Cellular in a scandal-tainted 2008 sale. The government is planning to hold a mobile airwaves auction in November before the permits expire.

Carriers have complained that the minimum bid price is too high, with Telenor and Sistema threatening to pull out of India if the auction becomes too costly.

Bigger carriers such as Bharti and Vodafone’s local unit are not affected by the court order, although they are looking to buy more airwaves to feed their overstretched networks in the world’s second-biggest mobile phone market.

Bharti, nearly a third owned by Southeast Asia’s top phone carrier SingTel, operates in 20 countries across Asia and Africa and is the world’s fifth-biggest mobile phone carrier by subscribers.

The company scrip were trading 1.43 per cent lower at Rs 289.60 on the BSE in early trade today.

Source: Business Standard

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