Bharti Q4 net up 37% on booming business

Bharti Airtel today reported a 37 per cent rise in net profit to Rs 1,853 crore and a 45 per cent rise in revenue to Rs 7,819 crore for the quarter ended March 31.

The company bagged a record 6.92 million customers during the quarter as India overtook the US to become the world's second largest market. Equally important, the average usage of Bharti Airtel's services rose 7 per cent to 507 minutes.

The stock market took a positive view of the numbers and the Bharti Airtel scrip closed the day at Rs 925.30 on the Bombay Stock Exchange, up 9.61 per cent from the previous close of Rs 844.20.

While the company's EBITDA margins were flat at 41.6 per cent, the margins in the mobile business declined 4 per cent because of accounting adjustments resulting from the hiving off of the tower business into a separate company. Average revenue per user also stayed stable at around Rs 357.

Bharti Airtel Joint Managing Director Akhil Gupta pointed out that the company has been able to increase its revenue by dropping tariffs between 3 per cent and 4 per cent this quarter, which helped in greater customer usage.

It also expanded its network to rope in new customers. During the period, Bharti increased its population coverage to 71 per cent from 68 per cent in the December quarter, added over 22,000 non-census towns in its network and covered over 100 towns across the country.

Some experts said that competition from over five to seven new players who are expected to roll out services could result in a tariff war and take its toll on Bharti Airtel's margins and profitability.

"I don't think they have a business case. One does not know when they will get spectrum. Many who were looking at arbitrage by selling the licence are now stuck with the merger policy," said Gupta.

He added that the company was not focused on EBITDA margins or average revenue per user but on operating expense as a percentage of revenue (currently pegged at 32 per cent) and capital productivity which is at 74 per cent.

Gupta said that the company had invested over $3.5 billion in 2007-8 and hopes to put in another $2.5 billion during the current financial year.

The money will be invested in expanding the population coverage of the company from 71 per cent to 80-85 per cent by the end of this financial year.