Bharti Airtel's earnings performance buoys telecom sector

By Devidutta Tripathy

NEW DELHI (Reuters) - Mobile market leader Bharti Airtel Ltd's improving domestic operating performance raised hopes that the battered sector is taking a turn for the better even as the company posted a 14th consecutive quarter of falling profit.

Bharti Airtel, nearly a third owned by Southeast Asia's top phone carrier SingTel , reported consolidated net profit fell about 10 percent to 6.89 billion rupees, hit by foreign exchange losses due to the weaker rupee and continued losses at its African operations.

But its stock jumped as much as 8.4 percent as investors were heartened by growth in key metrics such as average revenue per user and rates per minute as competition cools following a years-long price war in the crowded India cellphone industry.

"Things should be looking up as far as the sector is concerned in terms of earnings," said K.K. Mital, a portfolio manager at Globe Capital Market in New Delhi.

However, regulatory uncertainty remains a worry for an Indian mobile market that is the world's second-biggest by users. Bharti and others face several regulatory headwinds in Indian including high spectrum prices and a government demand that they pay billions of dollars in spectrum surcharges.

GRAPHIC: Bharti Airtel results http://link.reuters.com/xaq99t

Still, Bharti and rivals such as Vodafone Group Plc's Indian unit and Idea Cellular are benefiting from easing competition as several smaller players were forced to shut or scale back after a court invalidated their permits.

The bigger carriers have in recent months raised prices by cutting discounts. Vodafone India earlier this month reported 13.8 percent growth in service revenue on better-than-expected growth in minutes and rate per minute.

The "market seems to be coming to some kind of rationality," Sarvjit Dhillon, chief financial officer at Bharti Airtel's parent, told reporters after the earnings release on Wednesday, adding regulation was "still an issue".

By 1.29 p.m. Bharti shares were trading 5.8 percent up. Rivals Idea Cellular and Reliance Communications jumped 4.2 percent and 1.8 percent, respectively. The two companies report earnings on Thursday.

Bharti's net profit of 6.89 billion rupees beat the 6.57 billion rupees average estimate of analysts, according to Thomson Reuters I/B/E/S. Revenue for the quarter rose an annual 9 percent to 202.6 billion rupees, missing analyst expectations of 211 billion rupees.

Bharti, which entered Africa in 2010 with a $9 billion acquisition, has yet to make its operations there profitable and the debt it took on to fund the purchase has weighed on its earnings.

The company's African operations continued to lose money, with Bharti's international business reporting a net loss of 7.03 billion rupees before exceptional items. The African operations were hurt by regulatory changes and political unrest in some key markets, Bharti said.

Average revenue per user (ARPU), a key metric for mobile carriers, rose 4 percent sequentially for Bharti's Indian operations to 200 rupees a month and total minutes of use in India grew 2 percent from the previous quarter. African ARPU fell 7 percent sequentially to $5.5 per month.

Bharti, which recently sold a 5 percent stake to a Qatari investor, said its net debt had fallen to $9.8 billion from $10.7 billion at the end of March.

(US$1 = 60.3625 rupees)

(Additional reporting Aradhana Aravindan in MUMBAI and Patturaja Murugaboopathy in BANGALORE; Editing by Matt Driskill)