Airtel's profits weighed down by Africa acquisition, 3G

The company has raised tariffs in India to counter pressure on margins

The acquisition of Zain's operations in 15 African countries and investment in 3G spectrum in India continued to be a drag on the profits of India's Bharti Airtel in the second quarter, the company said on Wednesday.

Revenue for the quarter ended June 30 was 169.7 billion rupees (US$3.7 billion), up 39 percent from the same quarter last year. But net profit was down 28 percent to 12 billion rupees. The results were more or less a re-run of the last quarter when the company posted revenue growth of 51 percent, but net profit fell by 31 percent.

Bharti Airtel, India's largest mobile operator, acquired its African operations in a $10.7 billion deal in June last year. It also paid 156 billion rupees for 3G and broadband wireless licenses and spectrum in India. The company's debt at the end of the quarter was 600 billion rupees.

Profit before taxes dropped in the quarter mainly on account of a higher interest outgo as a result of the Africa acquisition and investments in 3G in India, and amortization of a 3G license fee, Manik Jhangiani, chief financial officer of the Bharti Group, said during a conference call. The tax rate also increased because of cuts in tax holiday benefits in India.

Bharti Airtel is in an investment phase in Africa and in 3G in India, and a decline in profits because of interest costs is expected for some quarters, said Kamlesh Bhatia, a principal research analyst at Gartner. The company is also going through a restructuring that should see it more centralized and benefiting from economies of scale across its operations in Africa and South Asia, he added.

The company had 221 million mobile subscribers at the end of the quarter, up 4 percent from last year. About 175 million of these subscribers were in India, Sri Lanka and Bangladesh, with Africa accounting for about 46 million subscribers.

To counter the impact of deep tariff cuts on margins in India last year, the company and some competitors raised rates recently. "The earlier tariff structure was not sustainable," said Sanjay Kapoor, CEO of Bharti Airtel's Indian and South Asian operations. The company does not expect subscriber numbers to fall as a result of the increases, as the need for communications is very high in India, he added.

With some newer competitors saddled with issues such as delays in meeting rollout obligations, and investigations into alleged out-of-turn allotment of 2G spectrum, the larger players once again have the power to decide pricing, Bhatia said. The smaller competitors do not have the coverage and quality of service to take a risk and also raise rates, he added.

The company expects strong growth in the number of 3G subscribers, as many people in the country already have 3G-enabled handsets, Kapoor said. The company did not, however, disclose the number of subscribers it has for its 3G services. The current focus is not on acquiring numbers but on building the ecosystem to provide a good 3G experience that will attract customers, Kapoor said. Outside its service areas, the company plans to expand its 3G customer base by roaming tie-ups with operators that have licenses in these other service areas.

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

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags business issuestelecommunicationtelephonyfinancial resultsBharti Airtel

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

John Ribeiro

IDG News Service
Show Comments

Essentials

Cygnett 2500 ChargeUp Pocket Lightning Portable Power Bank

Learn more >

Mobile

Exec

Budget

TerraCycle Zero Waste Box Pens and Markers Small

Learn more >

Back To Business Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Featured Content

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?