Bharti Airtel's profit down on investments, competition

Bharti Airtel's African operations continue to make losses, while competition heats up in India

Bharti Airtel's profit continues to be weighed down by the cost of debt it took on to make investments in 3G spectrum in India and to acquire the African operations of Zain.

The company also blamed low margins on its African operations and tariff wars in India for a 31 percent year-on-year decline in its net profit in the quarter ended March 31.

India's largest mobile operator reported on Thursday that its revenue for the quarter was 162.6 billion Indian rupees (US$3.6 billion at the exchange rate on the last day of the quarter), up 51 percent from the same quarter last year. But net profit fell to 14 billion rupees from 20 billion rupees in the same quarter last year. While its Indian operations made profit of 18 billion rupees, its Africa operations lost over 4 billion rupees.

The figures for the quarter ended March 31 are not, however, strictly comparable to those in the same quarter last year, because they include the results from Bharti Airtel's acquisition in June last year of Zain's operations in 15 countries in Africa.

The Africa operations of Zain were already losing money when Bharti Airtel acquired them, said Kamlesh Bhatia, a principal research analyst at Gartner. The company is putting together an organization to take advantage of the economies of scale that the African and South Asian operations can bring to the company, he said.

Bhatia was, however, unwilling to forecast when Bharti Airtel would show profit growth. The company still has to make some more investments in its operations, he said. The company's management has the expertise in emerging markets that will be required to turn around the operations in Africa, he added.

Bharti Airtel acquired its African operations for an enterprise value of $10.7 billion in June. It also paid 156 billion rupees for 3G and broadband wireless licenses and spectrum in India. As a result of these investments, the company's debt has soared to 599.5 billion rupees at the end of the quarter, from 23.9 billion rupees in the same quarter last year.

Bharti Airtel's revenue from operations in India, Sri Lanka, and Bangladesh was up by 11 percent from the same quarter last year.

In the company's fiscal year ended March 31, revenue at 594.6 billion rupees was up 42 percent from a year earlier. The company said that profits had dipped by 33 percent to 60.4 billion rupees.

The company had 212 million mobile customers across 19 countries, but more than 162 million of these customers came from India, where the company is struggling with falling average revenue per user (ARPU). Competition among operators has pushed down monthly ARPU by 12 percent to 194 rupees in the quarter, from 220 rupees per month in the same quarter last year.

Airtel Africa had 44 million customers in 16 countries at the end of the quarter, adding 2.1 million customers in the quarter.

The company has also rolled out 3G services in over 21 cities in India, but these investments are unlikely to start earning large revenue for the company soon, as the 3G market is still nascent in India, analysts said.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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John Ribeiro

IDG News Service
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