Bharti Airtel net profit falls 28%

Leading telecom player Bharti Airtel on Wednesday reported a 28 per cent fall in its first-quarter net profit, hit by losses in its African operations and investment in 3G networks in India. Net profit for the three months through June fell to Rs 1,215 crore, from Rs 1,682 crore in the same quarter last year.

Revenue, however, went up by 39 per cent to Rs 16,975 crore from Rs 12,244 crore. Income before taxes dropped to Rs 1,719 crore, from Rs 2,072 crore, on account of higher interest outgo (Rs 344 crore on the Africa acquisition) and 3G investments in India and 3G licence fee amortization (Rs 159 crore). The effective tax rate also increased to 29.9 per cent because of a reduction in tax holiday benefits in India, which impacted the company’s net profit.

Bharti’s monthly average revenue per user (ARPU) in India fell 12 per cent to Rs 190, from Rs 216 in the same quarter last year. The average minutes of use per user stood at 445, down seven per cent from 480 in the previous corresponding quarter.

The ARPU for African operations saw a drop of two per cent on year to $7.3, compared to $7.2 in the year-ago quarter, while the average minutes of use per user saw a rise of 18 per cent at 121, against 103 in the same quarter last year.

Bharti’s shares on Wednesday touched a weekly low of Rs 413.10 on the Bombay Stock Exchange, but recovered to close at Rs 426.8, down 1.23 per cent.

Srishti Anand, an analyst with Angel Broking, said, “Bharti’s results were a mixed bag with revenues almost in line, but operating margins came in lower than expected. This was because MOU (average minutes of use per user) and ARPM (average rate per minute) slipped marginally to 445 and 0.428 paise/min. However, net profitability came in lower on account of higher tax rates and higher depreciation.”

Last year, Bharti acquired Zain’s Africa operations for an enterprise value of $10.7 billion. The operations are not profitable. The Africa and others losses stood at around Rs 300 crore.

“Bharti Airtel has started this fiscal on a stable note. Revenue growth has been steady across all geographies, with Africa recording a healthy sequential growth of approximately 6 per cent and an annual growth of 21 per cent,” Bharti Airtel chairman and managing director Sunil Bharti Mittal said. In India, the company’s efforts in the area of cost efficiencies had helped arrest the margin decline, he added. In July, the company had announced restructuring of its Indian and South Asian operations, aimed at streamlining businesses and reducing cost.

“The new customer facing organisation in India will see more agile and responsive teams in action. This will also give a fillip to growth in value-added services, broadband, digital TV and Airtel Money. Overall, FY12 promises to be an exciting year,” Mittal said.

Bharti spent $3.5 billion last year to acquire 3G and BWA spectrum. It is banking on data services to boost margins in a market where voice calls account for more than 85 per cent of the sector’s revenue. At the end of June, the company had a total subscriber base of 221.2 million in 19 countries across Asia and Africa.

ON RATES
In the analyst call, Bharti Airtel’s India CEO, Sanjay Kapoor, said, “In the past few quarters, the decline in tariffs has stabilised. The top few players continue to command bulk of market share. We have had a tough time with declining margins, high 3G costs. We still have not covered rural markets fully. As we speak, we have corrected tariffs in almost 19 circles.”