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Friday May 3, 2013

Bharti Airtel sees comfort in price trend

Bharti posts a worse-than-expected 50% year-on-year drop in net profit to 5.09 billion rupees (US$94mil). — EPA Bharti posts a worse-than-expected 50% year-on-year drop in net profit to 5.09 billion rupees (US$94mil). — EPA

NEW DELHI: Top Indian mobile carrier Bharti Airtel Ltd's subscriber growth and usage trends along with easing competition suggest the worst may be over for the industry, even as the firm recorded its 13th consecutive quarter of falling profits.

Bharti, Vodafone Group Plc and Idea Cellular Ltd have gained market share in recent months as smaller rivals either shut or scaled back operations after a court order revoking permits, giving the big carriers greater pricing power in a country with some of the world's cheapest call rates.

Still, regulatory uncertainty clouds the outlook for the industry, as does the expected launch later this year of 4G services by conglomerate Reliance Industries Ltd, which would mean a new rival with serious financial clout.

Bharti, the world's fourth biggest cellular carrier by customers, posted a worse-than-expected 50% year-on-year drop in net profit to 5.09 billion rupees (US$94mil) for its fiscal fourth quarter to end-March, capping a third straight year of declining profit for the New Delhi-based company.

Analysts had expected the firm, controlled by billionaire Sunil Mittal, to report net profit of 7.41 billion rupees, according to Thomson Reuters I/B/E/S.

For the full year ended March, Bharti made 22.76 billion rupees, its smallest annual profit in seven years.

Bharti shares fell about 5% soon after the results were released, before recovering into positive territory.

“The fact is that pricing is becoming more stable; that's a positive going forward,” Gopal Vittal, Bharti's India chief executive, told reporters yesterday.

While earnings were hit by higher interest costs and a tax charge as well as continued losses in its Africa operations, several operating indicators showed improvement.

Average revenue per user (Arpu) in its core India operation was 193 rupees during the quarter, up 4% from the prior three months, while total volume of minutes sold grew 5%.

Market share gains along with the cull of competitors may embolden the big operators to cut discounts further and even raise voice-call prices in a market that has not seen any meaningful price increases since a bruising price war in 2009.

Bharti Airtel and Idea Cellular raised call prices in January by withdrawing discounts.

“There is a lot of room for cutting the discounting offers. Under-the-line price hikes will continue to happen,” said Karan Mittal, an analyst with ICICI Direct in Mumbai. - Reuters

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