Bharti profit falls for 11th straight qtr as it faces new fees

NEW DELHI/MUMBAI Wed Nov 7, 2012 3:41pm IST

A labourer cleans a Bharti Airtel advertisement billboard installed on a truck in Kolkata November 19, 2010. REUTERS/Rupak De Chowdhuri/Files

A labourer cleans a Bharti Airtel advertisement billboard installed on a truck in Kolkata November 19, 2010.

Credit: Reuters/Rupak De Chowdhuri/Files

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NEW DELHI/MUMBAI (Reuters) - Top Indian telecommunications carrier Bharti Airtel Ltd (BRTI.NS) 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, controlled by billionaire Sunil Mittal, on Wednesday reported its consolidated net profit fell 30 percent from a year earlier to 7.21 billion rupees for the three months to September, despite a one-off gain of 2.39 billion rupees from an outstanding dispute over inter-connect charges.

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 Plc (VOD.L).

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.

GRAPHIC: Bharti Q2 results link.reuters.com/ged83t

India is planning to levy more than $5.5 billion in surcharges on airwaves held by older telecommunications 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.

Rising costs of airwaves should mean an increase in call tariffs, but a highly competitive market has forced companies to keep call prices low. Bharti raised call prices by about a fifth last year, but was later forced to pare the increase in some zones as it lost market share to competition.

"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 percent of Indian carriers' revenue, with mobile data still at a nascent stage. Operators launched high-speed 3G networks last year, but less than 5 percent of the more than 900 million customers have subscribed to the premium services.

"We're starting to see traction in data," said Sarvjit Dhillon, group chief financial officer at Bharti Airtel's parent company. Bharti's mobile data business grew 77 percent during the September quarter from a year earlier, it said.

Shares in Bharti, valued at about $19 billion, were down more than 1 percent by 12:21 p.m. in a positive Mumbai market. The stock is down more than a fifth this year to be the worst performer among the components of the Sensex.

REVENUE BEATS ESTIMATES

Bharti, nearly a third owned by Southeast Asia's top phone carrier Singapore Telecommunications Ltd (STEL.SI), said revenue for the September quarter rose 17.4 percent from a year earlier to 202.7 billion rupees.

Analysts had expected net profit of 7.46 billion rupees on revenue of 196.02 billion rupees, according to Thomson Reuters I/B/E/S.

Bharti in 2010 ventured into Africa at a time when growth in its home market had started showing signs of saturation. The company, which bought money-losing operations in 15 African countries for $9 billion, has yet to turn a profit there.

Losses in its Africa operations widened to 5.39 billion rupees from 4.27 billion rupees a year earlier. But operating margins in Africa improved to 27.1 percent from 26.4 percent a year earlier. For its India and South Asia operations, margins dropped to 32.7 percent from 36.1 percent a year earlier.

Monthly average revenue per user, a key metric for telecommunications carriers, fell 4 percent from the previous quarter to 177 rupees for its Indian operations. In Africa, ARPU fell 2 percent sequentially to $6.4. (Editing by Matt Driskill)

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Comments (1)
vjplusplus wrote:
I am not surprised, their customer service has gone from very good to vey poor. I have been an Airtel customer for ~7 years.I have summarized the chronology of events for disconnecting my Airtel number: 9945512985

1) May 13: Mail sent to Airtel for disconnection

2) May 16: Reminder mail sent to Airtel

3) May 17: Another Reminder mail sent to Airtel

4) May 17: Airtel Responds, unique service request number 43701474
(Please note the current unbilled amount as on 16-05-2012 is Rs.
149.90/-. The final bill will be generated on 20-05-2012.

5) Bill paid on time, using Autobebit from Citibank

6) Jun 20: Airtel generates a new bill (Bill No:790405954)

7) 23 Jun: Mail sent to Airtel to cancel the bill

8) 23 Jun: Airtel responds, Service Request number44340971. [Our team
will be contacting you by 03-07-2012, 09:30 AM]

9) Bill paid on time, using Autodebit from Citibank

10) July 9: Reminder Sent to Airtel to cancel bill and refund the amount

11) July 12: Reminder Sent to Airtel

12) July 15: Airtel Responds Unique Service Request number44734481
[Our team will be contacting you by 18-07-2012, 08:23 AM]

13) Jul 19: Reminder sent to Airtel

14) Jul 19: Airtel responds (Ours is a state of art billing system, no
overcharging)

15) Jul 20: Mail to airtel on question why was there a June bill when
as per 43701474, the final bill should have been raised on 20-May?

16) Jul 20: Mail from Airtel [Your number was suspended on 29-Jun. No
pending charges to this account]

17) Jul 21: Mail to airtel questioning why Airtel did not suspend the
connection in May? Why should I foot the June bill for the delay at
their end?

18 ) Jul 21: Response from Airtel [Service Request number 4484739 and
an apology]

19) Jul 23: Airtel sends the July bill [Bill number: 815458951]

20) Jul 24: Mail to Airtel to cancel the new bill and refund the
amount deducted for the previous bill

21) Jul 24: Airtel responds ‘Our team will contact you by 31-07-2012, 09:30 AM’

22) Jul 31: Reminder sent to Airtel

23) Jul 31: Mail from Airtel (Our team could not reach you? What is
your alternate Contact number)

24) Aug 1: Mail to Airtel with alternate contact number

25) Aug 1: Airtel responds (Unique Service Request number45061395. Our
team will contact you by 09-08-2012, 05:01 PM )

The issue is yet to be resolved till date. Now from an Airtel family, we have become an Vodafone family.

Nov 06, 2012 10:09am IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

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