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Thursday, August 21, 2014  

Bharti Q2 profit slumps 30% on stiff competition
NEW DELHI/MUMBAI Top Indian telecommunications carrier Bharti Airtel will struggle to improve its profits in the coming quarters amid an uncertain regulatory environment in its home market after the company reported its 11th consecutive quarter of profit decline with margins pressured by intense competition.

Bharti on Wednesday reported its consolidated net profit fell 30 per cent from a year earlier to Rs7.21 billion for the three months to September, despite a one-off gain of Rs2.39 billion from an outstanding dispute over inter-connect charges.

Bharti said revenue for the September quarter rose 17.4 per cent from a year earlier to Rs202.7 billion.

Competition is seen abating in the world’s second-biggest mobile phone market after a court order revoked the permits of several smaller carriers, which is a positive for market leaders Bharti and the local unit of Vodafone Group.

India’s leading carriers, however, face the risk of paying out billions of dollars in regulatory fees over the next few years with the government planning to impose a surcharge on airwaves held by them and also due to reallocation, or switching, of their superior quality spectrum when their permits are renewed.

“The worry remains regulation,” said Vivekanand Subbaraman, a telecommunications analyst at PhillipCapital India. “The regulatory concerns have overshadowed operating performance,” he said, adding Bharti could continue to see its margins eroding. India is planning to levy more than $5.5 billion in surcharges on airwaves held by older telecom companies, from which Bharti’s payout is estimated to be just under $1 billion.

There is also a plan to replace superior quality airwaves of companies, including Bharti, with relatively inferior quality airwaves when their permits are renewed starting in late 2014, which will significantly push up the carriers’ capital expenditure apart from paying for the replacement airwaves.

“With consolidation happening, I think tariffs will have to correct (increase),” Sanjay Kapoor, chief executive for Bharti’s India and South Asia operations, told a news conference after the results were released. “(But) you cannot go and raise prices in isolation.”

Revenue from voice calls accounts for about 85 per cent of Indian carriers’ revenue, with mobile data still at a nascent stage. Operators launched high-speed 3G networks last year, but less than 5 per cent of the more than 900 million customers have subscribed to the premium services.

Losses in its Africa operations widened to Rs5.39 billion from Rs4.27 billion a year earlier. But operating margins in Africa improved to 27.1 per cent from 26.4 per cent a year ago. For its India and South Asia operations, margins dropped to 32.7 per cent from 36.1 per cent a year earlier.

Reuters
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