Bharti Slumps as Profit Misses Estimates on Lower Phone Use: Mumbai Mover
Bharti Airtel Ltd. (BHARTI), India’s largest wireless operator, slumped the most in more than 1 1/2 years in Mumbai trading after unexpectedly reporting a profit decline because of lower mobile-phone use by customers.
The shares slid 6.5 percent, the most since May 2010, after New Delhi-based Bharti said third-quarter net income fell 22 percent to 10.1 billion rupees ($205 million). Profit was expected to rise to 13.9 billion rupees, according to the median of 25 analysts’ estimates compiled by Bloomberg.
Bharti’s Indian customers cut phone usage 7 percent in the quarter after the company raised call rates 20 percent in the country, where a price war sparked by the entry of Telenor ASA and NTT DoCoMo Inc. pushed tariffs to less than a penny a minute. Billionaire Chairman Sunil Mittal is rolling out third- generation wireless services and has expanded Bharti into South Asia and Africa to revive growth amid competition in the world’s largest wireless market after China.
“The minutes growth wasn’t very good -- it was actually bad,” said Naveen Kulkarni, an analyst at MF Global Securities Pvt. in Mumbai. “They will have to rejig their plans a bit, the kind of tariff hikes they’ve been looking at, and the reduction of promotional activities.”
Average monthly minutes of use per user in India fell 7 percent to 419 minutes in the three months ended Dec. 31, from 449 minutes a year earlier. The company’s India customer base increased 15 percent to 175.7 million, Bharti said.
Average revenue per user, a key metric of performance in the telecommunications industry, fell 6 percent in India to 187 rupees a month from 199 rupees a year earlier.
As many as 15 operators, including Vodafone Group Plc (VOD) and billionaire Anil Ambani’s Reliance Communications Ltd. (RCOM) compete to offer wireless services in India, which had a total of 894 million mobile-phone users as of December.
Earlier this month, India’s highest court canceled 122 mobile-phone licenses, including all the permits used by Emirates Telecommunications Corp. and Norway’s Telenor (TEL), saying the licenses, sold in 2008, weren’t acquired by legal means.
Bharti could benefit from the reduction in competition and a greater availability of spectrum in auctions.
“Competition is still very intense,” Chief Executive Officer Sanjay Kapoor told reporters in New Delhi. “We need to make sure the right price is offered to the customer, and the right choices are available to the customer.”
Third-quarter revenue rose 17 percent from a year earlier to 184.8 billion rupees. That matched the 184.6 billion-rupee median of 27 analysts’ estimates. Earnings before interest, tax, depreciation and amortization, or EBITDA, rose 19 percent to 59.6 billion rupees.
“Bharti’s subscriber additions are lower because they’re not in growth mode anymore, so incremental minutes growth is lower,” said Unmesh Sharma, an analyst at Macquarie Capital Securities in Mumbai. “It’s a sign of their maturity in the market.”
The average revenue per user for Bharti’s Africa operations fell to $7.10 a month, from $7.30 a year earlier.
The company started third-generation wireless services in India last year that will allow it to boost its revenues if data use and smartphones catch on among mobile phone users. The company paid the government 123 billion rupees for 3G wireless permits in 13 of India’s 22 telecommunication zones in May 2010, and another 33 billion rupees for licenses to offer broadband wireless service in four regions.
Bharti and Vodafone’s Indian unit raised prepaid call rates by 20 percent in some regions in July, their first tariff increases for the Indian market in two years.
Bharti has extended those rate increases to all regions in India, Kapoor said in a phone call with analysts on Nov. 4. Customers will be moved to the new price plans as their old plans expire, so the “full impact” of the price increase won’t be visible until the three months ending March 31, he said.
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