Bharti Airtel profit hit by tough competition in India

A worker cleans a Bharti Airtel logo inside its shop in Kolkata February 2, 2011.

NEW DELHI (Reuters) - Bharti Airtel Ltd (BRTI.NS) disappointed investors with its eighth straight quarter of falling profit as the world's No.5 mobile carrier by users was buffeted by fierce competition from rivals in its home market.

Bharti, controlled by billionaire Sunil Mittal, on Wednesday reported net profit for the three months to December fell 22 percent from a year earlier to 10.11 billion rupees despite a 17 percent rise in revenue, as it was hit by higher tax, interest expenses and depreciation and amortisation.

Profits of Indian mobile carriers have been squeezed by ferocious competition in an industry crowded with more than a dozen players. Market leader Bharti and some of its rivals raised call prices by about a fifth in the middle of last year, the first increase in at least two years.

Shares in Bharti, nearly a third owned by Southeast Asia's biggest phone firm, SingTel (STEL.SI), closed 6.5 percent lower, their biggest one-day drop in 21 months, wiping off nearly $2 billion in value and erasing gains made after a court ruling last week ordered the cancellation of some rivals' licences.

"In the near-term, the company will face some pressure due to high loan repayments costs and competitive pressure in the Indian market, but turnaround in Africa business will drive its performance in the medium to long-term," said R.K. Gupta, a fund manager at Taurus Mutual Fund, which owns Bharti shares.

Bharti, which ventured into Africa in 2010 by acquiring most of the African operations of Kuwait's Zain (ZAIN.KW) in a $9 billion debt-funded deal, said it was on track to meet its performance goals there.

Older mobile carriers such as Bharti and Vodafone's (VOD.L) local unit are seen as major beneficiaries of a court ruling to revoke licences issued in a scandal-tainted 2008 sale, which is expected to accelerate a shakeout of an industry that has long been seen as ripe for consolidation.

Competition in India is "still very intense, Sanjay Kapoor, Bharti Airtel's chief executive for India and South Asia, told reporters after the results announcement. Other telecoms companies operating there also include Reliance Communications (RLCM.NS) and Idea Cellular (IDEA.NS).

"Even if some of these players were not to be there, the market is still very competitive," he said.

In Africa, Bharti is "moving steadily" towards its goals of achieving $5 billion in revenue and $2 billion in operating profit in the financial year that will start on April 1, said Manoj Kohli, chief executive for international operations.

African revenue rose 16 percent to $1.06 billion in the quarter and margins grew to 26.8 percent from 19.1 percent a year earlier, although they still lag the 34.4 percent margin from India and South Asia as high costs weigh.

MISSES ESTIMATES

A Reuters poll of brokerages had expected net profit of 13.45 billion rupees on revenue of 184.54 billion rupees for New Delhi-headquartered Bharti, which had 243 million total customers as of end-December, including 233 million mobile customers, in 19 countries across Asia and Africa.

Bharti has missed market profit forecasts for eight quarters in a row.

Consolidated revenue rose 17 percent to 184.77 billion rupees. Tax provisions in the quarter rose to 5.6 billion rupees from 3.4 billion rupees a year earlier, while interest expenses rose to 8 billion rupees from roughly 6 billion rupees.

Monthly average revenue per user, a key metric for telecom carriers, fell an annual 6 percent for Bharti's Indian operations but rose 2 percent from the September quarter. ARPU from the African operations fell an annual 2.7 percent.

Average minutes per user in India fell 7 percent on the year and 1 percent from the previous quarter, which Goldman Sachs analysts wrote implied "negative elasticity" due to the call price increase last year.

Bharti's Kapoor told analysts on a conference call that the company was "absolutely convinced" that the price increase was a right move.

Bharti, which last year launched 3G services in India, is betting on a pickup in usage of premium data services to boost margins, although 3G growth across the industry in India has lagged expectations. Kapoor said 27 percent of Bharti's 3G subscribers were using the services regularly.

(Writing by Sumeet Chatterjee; Editing by Muralikumar Anantharaman and Erica Billingham)